Profits & Poverty: How The Private Sector Is Helping To Change The Fortunes of The Poor

AprilJune 2012
Also in this edition...

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A publication of the Asian Development Bank
How the private sector is helping to
change the fortunes of Asias poor
3URWV
& Poverty
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www.development.asia AprilJune 2012 Development Asia 1
WWW.DEVELOPMENT.ASIA
2012AsianDeve|opmentBank
ISSN1998-7528
ASIANDEVELOPMENTBANK
PUBLISHER
AnnQuon
MANAGING EDITOR
AndrewPerrin
SENIOR EDITOR
F|oydWha|ey
EDITORIAL ADVISOR
JoYamagata
ASSOCIATE EDITOR
MariaLizaSo|ano
COPY EDITOR
Caro|ineAhmad
RESEARCH
Apri|Lee
NgEnna
ShawnPang
SamanthaSeet
JamieTan
ART DIRECTOR
TonyVictoria
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important to Asia and the Pacic. It is pub|ished
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The Balance of Power
T
he combined budgets of the Asian Development Bank, the World Bank,
and every other development organization in the world make up just
a drop of the economic fuel needed to power billions of people into
greater prosperity. Those who work in development have long known
that the private sector must play a major role in the enormous economic change
needed to lift large numbers of people out of poverty.
But it is not that simple.
Though their motives may be admirable, private sector companies are not
created to help the poor and spur economic development. They are complex
entities that play by a different set of rules than development organizations.
Finding the right partnership between the private sector, the public sector, and
the development community is at the forefront of development work today. In
response, this edition of Development Asia takes a careful look at the role of the
private sector in development work and examines innovative strategies being
employed in the region.
In addition to examining the broad trends in Asia, we look at how Asian
companies have matured to the point that they are investing globally. They now
face the same challenges of economic and social responsibility that western
companies have grappled with for decades.
This edition also looks at the transition taking place from a focus on microlending
to an increase in microsavings programs. We also look at the increasing recognition
that the worlds poorthe Bottom of the Pyramidare a major market for
consumer goods. But should companies be selling cola, candy, and mobile phones
to people struggling to survive?
In our articles section, we look at the cruel reality that many poor countries
that discover vast mineral or energy resources end up less prosperous as a result.
We also examine the controversial theory of charter cities: setting up enclaves of
good governance in developing countries.
Our Reconnaissance section tries to keep us out on the edge. In this edition, it
looks at the increasing popularity of soap operas as agents for social change.
We hope this edition will give you a new perspective on private sector companies
and the role they play in society. Q
Ann Quon
Publisher
PUBLISHERS NOTE
Printedonrecyc|edpaper
2DevelopmentAsiaAril}une2O12 vvv.develomenl.asia
CONTENTS
YEAR V, NUMBER XIII, APRILJUNE 2012
FOCUS
PRIVATE SECTOR
DEVELOPMENT
6 THE BIG READ
BANKING ON BIG BUSINESS
Canrivalecomaniesdoabeller|ob
ofreducingoverlylhangovernmenls`
By John Otis
___________________________________
14 THE BIG PICTURE
BRIDGING THE GAP
Iublicrivalearlnershis(IIIs)
offeraneconomicallyviablesolulion
loinfraslruclureneedsvhenublic
fundsarelimiled.Desilesome
failures,IIIsconlinuelosreadacross
develoingAsia.
By Mark Blackwell
___________________________________
16 THE BIG VOICE
TAKING STOCK
DurreenShahnazlhinksinveslors
villbuyslocksincomaniesbasedon
socialimacl.Sheshouldknov.
By Floyd Whaley
___________________________________
20 GLOBAL ASIA
Asiancomaniesareusinglheir
nev-found hnancial mighl lo invesl
vorldvide,bullheyarenolalvays
velcome.
By John Otis
48 PROFILES IN DEVELOPMENT
A LEG UP
AdoclorinThailandhassenldecades
innovalingroslheliclimbssecially
designedforlheoor.
By Karen Emmons
___________________________________
50 RECONNAISSANCE
SOAP OPERAS FOR
SOCIAL CHANGE
Serialdramasbroadcaslonradioor
lelevisioncanbeaneffeclivevay
ofromolingsocialchangeallhe
grassroolslevel.
By Margot Pfeiff
___________________________________
DEPARTMENTS
4 OFF THE PRESS
Iresscliingsonglobalaffairsand
develomenlissues
___________________________________
5 ON THE WEB
Recommendedsilesonlhe
vorldvideveb
___________________________________
38 OFF THE SHELF
Musl-readbooksoneconomicand
develomenlloics
___________________________________
53 ON THE RECORD
Nolablequolesonglobalissues
26 TINY SAVINGS
Aflerlheenlhusiasmandlhen
loveredexeclalionsofmicrolending,
advocalesformicrosavingslakeamore
cauliousaroach.
By Marc Lerner
___________________________________
30 THE TRIPLE BOTTOM LINE
ComaniesinAsiaarereinvenling
lheconcelofcororalesocial
resonsibililybyullingeoleand
lhe lanel on ar vilh rohls.
By Floyd Whaley
___________________________________
34 POVERTY PROFITS
Thevorldsoorareincreasingly
beingvievedasalucralivemarkelfor
lherivaleseclor.Isilexloilalionor
longoverdue`
By Jade Lee-Duffy
___________________________________
ARTICLES
40 THE RESOURCE CURSE
Asian nalions are hnding billions in
oil,gas,andminerals.ulvillilmake
lhemoorer`
By Floyd Whaley
___________________________________
44 REPLICATING
HONG KONG, CHINA
Charlerciliessmallenclavesofgood
governanceindeveloingcounlries
aregainingsuorlers,bulsome
remainskelical.
By Shu-Ching Jean Chen
16 INVESTING FOR SOCIAL GOOD 40 WHEN WEALTH BECOMES A CURSE 44 CONSIDERING CHARTER CITIES
vvv.develomenl.asia Aril}une2O12DevelopmentAsia3
Contributors
Mark Blackwell has more than 20 years of
experience working for news organizations,
including the Hearst Corporation and
Capital Cities/ABC. He specializes in
information graphics.
Jade Lee-Duffy has worked
as a journalist in Hong Kong,
China for more than 10 years.
She is a regular contributor to
the South China Morning Post.
Karen Emmons is a Bangkok-based
journalist who writes on public health and
social issues.
Marc Lerner has been
based in Asia for more than
\HDUVUVWDVEXUHDXFKLHI
for The Washington Times
and later as senior editor for
the World Health Organization.
John Otis is the Colombia correspondent
for Time magazine, GlobalPost, and the
BBC/Public Radio International program
The World.
Margo Pfeiff is a Canada-based journalist
who worked as a special correspondent for
Readers Digest for 17 years.
Shu-Ching Jean Chen
is a contributing writer of
Forbes Asia. She also writes
news analysis regularly
for the Business Times in
Singapore. She was a managing editor of
CFO, published by The Economist Group.
Floyd Whaley covers the Philippines
for the International Herald Tribune and
The New York Times. He is the senior
editor of Development Asia and operates
Asia Editorial Services.
Letters to the Editor
Iublicolicylhalmakesaheallhy
lifeslylechoicelheeasychoicecanhel
crealeamoreequilable,heallhy,and
roserousregion.
Pilar Lorenzana-Campo, MEP
SeniorAssociale,Ilanningand
Develomenl
IublicHeallhLav&Iolicy
California,USA
Holistic Education
While it is wonderful to see the
accessibility of education increasing as
reported [Development Asia, AprilJune
2011], surely we need to move away
from the model of educating to
feed the industrial, mass production
machine. An all-round education of
head, heart and hands, is necessary to
produce imaginative thinkers who
can bring the societal change that is
so desperately needed. To paraphrase
Albert Einstein, to bring change we
cannot use the same type of thinking
that caused the problems in the
first place.
David Simpson
Teacher
Waldorf School, New Zealand
Email your comments to
lellersdevelomenl.asia
*Please include your full name and contact
information. Letters may be edited for space
and clarity.
Advocalingfor
IublicHeallh
TheheallhedilionofDevelopment Asia
(}ulyDecember2O11)lookedalan
unrecedenledchallenge:lhedouble
burdenofinfecliousandchronic
disease.Risingdiabeles,obesily,and
cancerralesnolonlyhaveveryreal
economiccosls,bul,ifleflunchecked,
lhrealenlheenlireregionssocial
equilyandlong-lermslabilily.
Hoveolelravel,lhefoodlhey
eal,andlheairandvalerqualily
inourneighborhoodsandhomes
conlribuleimmenselylolhevell-being
ofanycommunily.ulolicymakers
muslimlemenlmeasureslhal
imrovelhevayciliesfunclionlo
suorlbellerheallh.
nesuccessfulexamleoflhis
aroachislheSlaleofCalifornias
TobaccoTaxandHeallhIromolionAcl
of1998(Iro99).Sinceilsincelionin
1998,Iro99haslevieda25-cenllax
oneachackofcigarelles,aorlionof
vhichisdevoledlofundinglobacco
conlrolefforlsinlheslale.Theresulls
havebeenremarkable.Lslimales
arelhalIro99fundedrograms
havesavedmorelhanamillion
livesinCalifornia,and$86billionin
heallhcarecosls.
|TheIeolesReublicofjChina
alreadyrequiresenclosedublic
saceslobefreeoflobaccosmoke.
Iolicymakersacrosslheregionshould
considerbuildingonlhalaroach
vilhincenlivesandregulalory
mechanismsloincreaseaccesslo
heallhyfoodsandencouragehysical
aclivilyasvellasinlervenlionslhal
revenleasyaccesslofaslfood,
alcohol,andlobacco.
vvv.develomenl.asia
OFF THE PRESS
4DevelopmentAsiaAril}une2O12
Jobs Malaise
Whalvilloffsellheshrinkingof
vaslinduslries`Nevinduslries`
Well,vehavenev,digilalinduslries,
bul lhey are even more efhcienl lhan
reslruclured old induslries. Comare
GooglesslaffsizeloGeneralMolors,
even nov. Iacebook serves almosl a
billioneolevilhslafflhesizeofa
largenevsaer.Amazonemloys
farfevereolelhanlhebookslores
iluloulofbusiness.Solhosenev
induslries vill bring grovlh, rohl, and
veallh,bulnolmany|obs.Jeff Jarvis,
Guardian Unlimited, 30 January 2012
Just Sharing Space
Shared sace is nol a bad melahor for lhe vorld loday, a lace vhere lhe
old road signs serve lillle urose, searaleness is an illusion, and successful
navigalion deends on inlense avareness of every aclor, from Ianema lo
TehranbyvayofSoulhKensinglon.Roger Cohen, The New York Times,
2 April 2012
Achilles Heel of Emerging Markets
Country-Specific Censorship
Like Tviller ilself, il's lime for lhe Inlernel, and ils chiring classes, lo
grov u.. Tviller has laid dovn lhe rules by vhich il vill hold counlries
accounlable, and by vhich il vill hold ilself accounlable, al leasl vhen il comes
lo censorshi. They are so fair as lo be vilhoul recedenl, and if lhey are violaled,
lhe vorld resumably vill be able lo see lhe hyocrisy in an inslanl.
Paul Smalera, Reuters, 28 January 2012
Stunted Growth
Suose I asked you lo imagine a
courlroom in vhich a slern |udge
eers vilh indifference al a babyand
off-handedly condemns lhe infanl
eilherlodealhoralifeshorlerlhanher
eers, vilh oorer cognilive caacily,
morelikelihoodofdiseaseandless
abilily lo learn al school and earn as an
adull. f course, you vould say lhis is
unimaginable.Whal|udge,orhuman
being, vould do such a lhing` ul lhis
isvhalishaeningloaneslimaled
18O million children under lhe age of 5,
children vhose bodies and minds are
limiledbyslunling.United Nations
Childrens Fund Executive Director
Anthony Lake, TIME, 31 January 2012
Burgernomics
The cheaesl burger is found in India, cosling |usl $1.62. Though because
ig Macs are nol sold in India, ve lake lhe rice of a Mahara|a Mac, vhich is made
vilh chicken inslead of beef. Nonelheless, our index suggesls lhe ruee is 6O/
undercooked.The Economists Big Mac Index, which is based on purchasing-power
parity, 12 January 2012
Rising inequalily, lack of civic arlicialion, olilical aalhy, and a dearlh of good |obs, arlicularly for lhe young, comrise
lhe Achilles heel of emerging-markel counlries' currenl develomenl model. A Gallu oll on sub|eclive vell-being in Tunisia
and Thailand shovs lhal, vhile income levels and social condilions in bolh counlries imroved belveen 2OO6 and 2O1O, life
salisfaclion droed.Johannes Jtting, head of Poverty Reduction at the OECD Development Center in Paris, writing for Project
Syndicate on 12 February 2012
The ooresl of lhe oor seem lo have escaed lhe vorsl of lhe osl-2OO7
dovnlurn. ul lhe grovlh in lhe middling oor shovs lhere is much lo be done.
The Economist, 3 March 2012, on the new global poverty estimates from the World Bank
Number of Middling Poor Growing
ON THE WEB
Daily Developments
The Guardians Global
Development Report
http://www.guardian.co.uk/global-development
I
l is difhcull lo hnd consislenl coverage of develomenl
issuesinlhemainslreammedia.Moslma|ormedia
oullels cover lhe loic, bul only infrequenlly.
The excelion is lhe Uniled Kingdom nevsaer and
vebsile, The Guardian. Inaarlnershivilhlheill&
Melinda Gales Ioundalion, The Guardian oerales a global
develomenl seclion of ils vebsile lhal offers daily udales.
The sile does nol merely louch on develomenl issues,
bul il is dedicaled lo lhem. In addilion lo slraighl nevs
slories, if offers odcasls, a Tviller feed, video, holo
galleries, and inleraclive infograhics. Il also includes a
handy overviev of lhe Millennium Develomenl Goals and
a seclion devoled lo develomenl dala vilh a useful search
funclion.
Al lhe hearl of lhe sile is lhe Ioverly Mallers blog,
vhich brings in guesl vrilers lo discuss issues across a
broad seclrum of develomenl loics. Recenl osls have
included, India's educalion malaise has all lhe hallmarks
of a develomenl disasler, and Cily migralion as a
develomenl roblem` Il's lhe ullimale urban mylh.
Anolher very inleresling, and rare, fealure of lhe sile is a
calendar of develomenl-relaled evenls. lhal is aclually
kel udaled! This may nol exisl anyvhere else on lhe veb.
Ior lhose vho use Gmail or Google Calendar, evenls can be
added lo your ersonal calendar vilh lhe click of a bullon.
The sile also has a seclion devoled lo sludenl resources,
an area lhal calures olher inleresling develomenl
informalion around lhe veb, a mobile version, and a
nevsleller lhal uls lhe sile's conlenls inlo your email inbox
on a regular basis.
Like all greal vebsiles, The Guardians Global Develomenl
reorl is dee, rich, and nuanced. The more you dig, lhe
more you hnd. Q
Surprising Choices
Yourtopia
http://www.yourtopia.net
W
hal is a develoed counlry` There are as many
ansvers lo lhal queslion as lhere are eole
lhinking aboul il. Nov, lhere is a nifly vebsile
lhal hels you delermine lhe ansver for yourself.
The vebsile, vhich vas develoed for lhe World ank's
As for Develomenl comelilion, asks a series of
queslions aboul elemenls of develomenl lhal you consider
moslimorlanl.
Ior examle, il asks: Whal is lhe relalive imorlance
you allach lo each one of lhe folloving: Lconomy. Heallh.
Lducalion. You assign a ercenlage lo each, relaled lo ils
imorlance. The sile valks users lhrough lhe full range of
develomenl indices, lelling lhem decide vhich are mosl
imorlanl.
The resull is a nalional develomenl rohle based on your
ersonal vievs of vhal is mosl imorlanl in sociely. In olher
vords, if you vere lhe leader of a counlry, lhis is vhal you
vould slress vhen il comes lo develomenl. Al lhe end of
lhe lesl, il lells users vhal counlry mosl closely reecls lheir
ersonalriorilies.
This can be slarlling, arlicularly vhen you discover your
ideal counlry is Cuba.
The urose of lhe exercise is hel users undersland
hov dala on Millennium Develomenl Goals (MDGs) is
organized and analyzed vhen |udging a counlry's rogress.
Generally, lhis rocess is exlremely comlex, bul lhe vebsile
resenls a user-friendly version.
Yourloia makes informalion aboul MDG rogress
arlicialive and fun, incenlivizing grealer ublic
engagemenl in lracking MDGs vhile relaining scienlihc
inlegrily, nole lhe crealors of lhe sile.
Anolher revealing asecl of lhe sile is lhal il illuslrales
hov dala can be maniulaled lo imrove lhe develomenl
reorl card of a counlry. y veighing and riorilizing
cerlain areas of develomenl over olhers, a counlry can
aear lo have made grealer rogress. Q
y Iloyd Whaley
PRIVATE SECTOR DEVELOPMENT: THE BIG READ
vvv.develomenl.asia 6DevelopmentAsiaAril}une2O12
A
I
I
W
henlheGovernmenlof
Afghanislan,vilhlhe
helofarivalemobile
nelvorkoeralor,
began aying olice ofhcers in var-
lornregionslhroughmobilebanking,a
funnylhinghaened:lheolicemen
lhoughllheyhadreceiveda3O/raise.
Heresvhy.Theolicemenreceived
credilsonlheircellhoneslhallhey
couldlalerredeemforcash.ecause
lherevasnovayforcommanding
ofhcers lo skim off bank noles, lhe
olicemen hnally received lheir lrue
vagesandvereslarlledbylhe
amounl.
Banking on Big Business
Can private companies do a better job of reducing poverty than governments?
Y}ohnlis
Thesyslemvassosuccessfullhal
lheMinislryofLducalionadoled
mobilebankingloayleachersin
1OAfghanrovincesadecisionlhal
cameaflerseveralcouriersverekilled
vhiledeliveringschoolayrolls.
Mobilebankingvillensurelhalno
minislryemloyeeloseshislifefora
dufe bag of cash, says Ra|iv Shah,
adminislralor of lhe Uniled Slales
AgencyforInlernalionalDevelomenl
(USAID), vhich is heling lo hnance
lherogram.
Afghanislansmobileaymenl
exerimenlilluslraleshovlhe
rivale seclor can bolh make rohls
andmakeadifferenceinoneoflhe
vorld's ooresl and mosl conicl-
affecledareas.Tradilionally,reducing
humanmiseryhasbeenvievedaslhe
burdenofgovernmenls,mullilaleral
develomenl banks (MDs), and olher
develomenlorganizalions.ulfora
varielyofreasons,exerlssaylhallhe
FREE-FLOWING FOR NOW Residents
of Hyderabad get potable water from a
tanker truck supplied by the government.
Opinion has been divided over whether
to let the private sector modernize
and manage Indias water distribution
system, a move that may raise prices.
laskvillincreasinglydeendonlhe
hnancing, lechnology, and knov-hov
ofrivalecomanies.
Takelhevilalissueofemloymenl.
Inaneravhenmanygovernmenlsare
dovnsizing,rivalecomaniesnov
rovide 9 of every 1O |obs in develoing
Asiannalions,accordingloInternational
Finance Institutions and Development
through the Private Sector.Asaresull
lhe ace of |ob grovlh and lhe qualily
ofemloymenlinlherivaleseclorare
cenlral lo develomenl, says lhe |oinl
reorlof31mullilaleralandbilaleral
develomenl hnance inslilulions in 2O11.
Wilhilsengineers,scienlisls,
lechnicians,andnumbercrunchers,lhe
rivalesecloralsocarriesadeebench
oflalenllhalcanhelgovernmenls
dream u beller ublic vorks ro|ecls.
Inaddilion,researchanddevelomenl
(R&D) budgels of rivale hrms far
oulslrilhoseofgovernmenls.Vikram
Mehla, chairman of Shell Comanies
inIndia,sayshiscomanysenlmore
on R&D in one year lhan all of India's
slale-ovned comanies combined over
lheasl5years.
Irivale comanies, such as ro|ecl
sonsors and consulling hrms, can
rovide lhe exerls, says arbara
Samuels, execulive direclor of lhe
Global Clearinghouse for Develomenl
Iinance, a non-rohl organizalion
devoledloexandingrivaleseclor
involvemenlindevelomenlrograms.
Ifeoledonlhavecleanvalerand
are gelling sick, lhe roblem isn'l |usl
gelling lhe money for a valer ro|ecl.
Ilsalsoaboulunderslandinglhe
lechnologies,lhedislribulion,andlhe
business models lo hgure oul hov lo
ay for lhal valer.
Iorlheasl2decades,rivale
comanieshavebeenvorkingvilh
governmenlslobuildhighvays,
overlanls,valersyslems,
lelecommunicalionsnelvorks,andolher
infraslruclurelhalcanhelooreole
moveulheeconomicladder.Hovever,
Asia needs many more of lhese so-called
ublicrivale arlnershis (IIIs),
If people dont have clean water and are getting
sick, the problem isnt just getting the money for
a water project. Its also about understanding the
technologies, the distribution, and the business
models to figure out how to pay for that water
Barbara Samuels, executive director of the Global Clearinghouse for
Development Finance
becauselhelackofinfraslruclurehas
becomeabolllenecklogrovlh,alhreal
locomeliliveness,andanobslacle
looverlyreduclion,accordinglo
Infrastructure for a Seamless Asia, a |oinl
sludyoflheAsianDevelomenlank
(AD) and lhe Asian Develomenl ank
Inslilulein2OO9.Ilrecommendslhal
Asiasend$8.3lrilliononinfraslruclure
belveen2O1Oand2O2O.
Virluallyeverycounlryinlhe
regionnovneedsmoreoverlanls,
exandedroads,valerlrealmenl
facililies, bridges, and orls, noles
lhereorlInfrastructures Unbalanced
Equation.Inmanycounlries,lheneeds
are already al crisis roorlion.
AsidefromboomingIeoles
Reublic of China (IRC), vhich has
beensendingalleasl7/ofgross
domeslicroducloninfraslruclure,
Samuels oinls oul lhal mosl Asian
governmenlssimlycannolayforlhe
long lisl of vilal ro|ecls on lheir lo-do
lisls and musl seek exlernal hnancing.
Asilhaens,lhemoneyisoullhere.
Amidlheeconomicslovdovns
in Luroe and lhe Uniled Slales,
mullinalional hrms are looking for
bellerrelurnsinAsia.Thalsone
reasonvhybelveennovand2O14,
Indonesiaexeclslhal$9Obillionof
aroosed$14Obillioninsending
oninfraslruclurevillcomefrom
rivale sources. In ils 12lh 5-year lan
(2O122O17), lhe Governmenl of India
forecaslslhalhalflhemoneyaboul
$5OObillionvillcomefromrivale
hnancing.
Iroonenlsoflheoverlaing
goalsofoverlyreduclionandrivale
rohls, such as Indian economisl CK
Irahalad,oinloullhesecomanies
may hnd a forlune al lhe bollom of
lhe yramid. The Uniled Nalions
Develomenl Irogramme (UNDI)
describeslhesearlnershisas
havinglheolenliallomovebeyond
hilanlhroyloamoresuslainable
aroach lo reaching oul lo lhe oor.
Yelforeveryuliflingchronicle
ofmobileaymenlslocosin
Afghanislan,lherearecaulionary
lales,suchaslhelavsuilslhaldelayed
lheoeningoflhenevinlernalional
lerminalalManilasmainairorlorlhe
cancelledconlraclslhalnearlyderailed
angkok's SkyTrain mass lransil ro|ecl.
Iradee Singh, vice-chairman and
managing direclor of ro|ecls for
IndiasInfraslruclureDevelomenl
Iinance Comany, feels lhal lrying
lomeshrivaleseclorinlereslsvilh
nalional governmenl goals can quickly
become a fruslraling, square-eg-
round-hole exercise. A blunl 2OO8 UN
reorlvarnslhalIIIsresenla
severeorganizalionalandinslilulional
challenge.
Indeed,roblemscancrouallhe
veryslarlvilhunrealislicexeclalions
amonggovernmenlsaboullheseed
vilh vhich ro|ecls can be lendered
and buill. Iublic ofhcials also come
under hre for corrulion, lack of
lransarencyinlherocuremenl
rocess,andcancellingconlraclsvilh
rivale hrms.
Comany execulives, meanvhile,
cancomeacrossasgreedyand
insensilivelolheurgenlneeds
andolilicalressuresfacedby
governmenls.Therehavealsobeen
ma|or backlashes over environmenlal
andlaborissues,faullyconslruclion,
andincreaseduserfeesforlransorl,
eleclricily,andvaler.
Il can very easily lurn quile horribly
vrong, says Mark Ralhbone, vho
leadslheinfraslruclureadvisoryleam
in Soulheasl Asia for IvC, lhe global
accounling and consulling hrm also
knovn as IricevalerhouseCooers.
flen,youhaveariverdividing
execlalionsbelveenlheublicand
rivale seclors lhal can'l be bridged.
Thal's vhere inlernalional hnance
inslilulionscanslein.Manyexerls
argue lhal MDs should de-emhasize
lendingandinsleadfocusonroviding
loanguaranleesandfeasibililysludies
vhileservingasadvocalesforgood
governmenllhekindsoflhingslhal
can make arlnershis ourish.
ThevorryIhaveislhalvevillnol
besuccessfuleilherfromagovernmenl
orabusinessslandoinlinreslarling
suslained grovlh in lhe region,
DeborahHenrella,grouresidenlof
Iroclor & Gamble's Asia and Global
Secially Channel, said al lhe 2O11
AsiaIacihc Lconomic Cooeralion
forum.ulIlhinkaloloflhalis
vilhinouroverifvevorklogelher
morecloselyinlherivaleandublic
seclors.
TRAGIC IRONY
Whenengaginglherivaleseclor,
develomenlexerlsfocuson
ilsolenlialroleinbuildingu
infraslruclurebecauseevenslighl
imrovemenlscanbringoulsized
benehls lo lhe oor. They nole lhal
valershorlages,overoulages,and
crumblingroadsunishlhedeslilule
farmorelhanlhemiddleclassand
richvhocanaffordbollledvaler,
generalors, and four-vheel-drive
vehicles.
Theooresleolearelheones
vhosufferlhemoslfromlhelack
ofinfraslruclureand,ironicallyare
lhe ones vho have lo ay more for
essenlialservices,says}oYamagala,
deulydireclorgeneralofADs
Irivale Seclor eralions Dearlmenl.
India's moslly governmenl-
conlrolledvalervorksisarime
examle. The anliqualed nelvork of
ies and urihcalion lanls is so
comromisedlhalhalfoflhecounlrys
lrealedvalerisloslloleakageand
lhefl.InlheslumsofDelhiandolher
cilies,lheeolevhocanleaslafford
lomuslbuyvalerfromlankerlrucks
oflen run by local mahas lhal la inlo
lineslhenilferandselllhevaleral
exorbilanlrales.
Iorlyercenloflhevalerisbeing
sold on lhe black markel, Vi|ender
Gula,anoosilionolilicianin
Delhi, lells reorlers. The valer maha,
lhe lanker maha, are earning billions of
rueesaslheeolecraveevenaglass
of valer.
Thegovernmenllackslhemoney
lomodernizelhesyslemlhanks,in
arl,losubsidizedlariffs.Thereis
nolradilionoflruecoslrecoveryfor
valer, and ofhcials fear a olilical
backlashiflheylryloraiselariffs.
Hovever, Singh argues lhal
lheroblemisnolnecessarilyan
unvillingnessloaybulralheran
unvillingnesslocharge.Heoinls
oul lhal Indians quickly adaled lo
rivalelymanagedlollhighvayslhal
havegreallyimrovedroads.
Mehla, lhe Shell execulive, agrees.
Indiassocielyisvibranl,dynamic,
and lhe eole are demanding, he
says. They are queslioning lradilional
concelsTheyareenlrereneurial
andlheyareclashingvilhaslalelhalis
slill hesilanl and susicious of change.
esides crealing hscal nighlmares for
governmenls,subsidiesraisebarrierslo
oulsideinveslmenl.Mehlaoinledoul
lhallheGovernmenlofIndiaisamong
lhevorldslargeslundervrilersof
elroleumroducls,aolicylhallills
lhe laying held in favor of slale-run
energycomaniesandgivesauselo
rivale hrms as lhey consider invesling
inlheseclor.
Inolhercases,lhegovernmenl
chargesnolhingbulusersgelvhal
lheyayfor.
neexamleislheslaleeleclricily
board in lhe slale of Iun|ab, vhich
offersfreeoverlooorfarmers.The
olicyhasdrivenlheboardlolheedge
ofbankrulcyvhilelhelackofublic
orrivaleinveslmenlinlhegridhas
HOMELESS IN KARACHI Even slight
improvements to infrastructure can
EULQJRXWVL]HEHQHWVWRWKHSRRUZKR
often suffer the most when a citys basic
servicessuch as water, power and
transportare dysfunctional.
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Thesebreakdovnsconlinueeven
asIndiaslelecomseclor,vhich
fealurescullhroalcomelilionamong
morelhanadozenrivalenelvork
oeralors,offerslheloveslmobile
hone rales in lhe vorld. Cuslomers,
vhooncehadlovailyearsforlhe
governmenlloinslalllandlines,can
novgelacellhoneconneclionina
mallerofminules.
Iorlheoor,dialingonamobileis
more lhan |usl a symbol of modernily.
Wilhbellercommunicalions,everyone
fromrickshavdriversloeasanl
farmers can vork more efhcienlly and
boosllheirearningover.
called il a lragic irony lhal far more
Indians have mobile hones lhan ush
loilels.
PATCHWORK DEVELOPMENT
AcrossAsia,lhousandsofIIIshave
formed since lhe 199Os. Reams of
rogressreorlshavebeenvrillen.
Case sludies abound. Yel, as India's
ongoingslrugglesdemonslrale,
makinglhemarriagevorkhasnol
becomemucheasier.
Lverybodyunderslandslhal
governmenlsneedloleveragelhe
rivaleseclor.ullheroblemis
imlemenlalion, Samuels says.
Avholerangeofissuesblocklhe
facloryfromvorking.Andifvedonl
mobilizelherivaleseclormore,ve
are going lo fail.
Some crilics say bolh lhe ublic
andrivaleseclorssufferfromlunnel
vision, vilh comanies eyeing rohls
andgivingshorlshriflloolilical
realiliesandgovernmenlsobsessing
aboulalronageandublicoinion
al lhe exense of economic efhciency.
Wilheachsideseakingilsovn
language,vilaldelailslhalhel
make arlnershis ourish gel losl in
lranslalion.
Thissilualioncanleadloselbacks
inevenlhemoslroserouscounlries
vhere IIIs are a lo riorily. Ralhbone
of IvC noles lhal lhe Governmenl of
Singaore crealed a handbook on hov
lhese ro|ecls should be rocured and
sayslheromiseofaielineofIII
lransaclionsallracledlegionsofforeign
exerls and consullanls lo lhe cily-slale.
ullheresullshavebeenmixed,
vilh high-rohle lriumhs as vell as
dismalfailures.Iorexamle,several
rivalecomaniessenllargesumslo
rovide re-qualihcalion submissions
lolhegovernmenllobuildanev
camus for lhe Nalional Universily of
Singaore. Hovever, in 2OO7 lhe III
vassuddenlycancelledvilhnoclear
exlanalion.Afevyearslaler,lhe
MinislryofLducalionulledlhelug
on a much-ballyhooed school III.
Critics say both the
public and private
sectors suffer from
tunnel vision, with
companies eyeing
profits and giving
short shrift to
political realities
and governments
obsessing about
patronage and
public opinion at the
expense of economic
efficiency
led lo frequenl over oulages and a
massivebacklogofalicalionsfor
nevconneclions.Inlhehoesofbeller
service, some farmers in Iun|ab are
novaskinglobebilled.
Thisilluslralesakeyroblemlhal
rivaleseclorarlicialioninublic
ulililiescouldaddress,saysLdgar
Saravia, lhe rogram manager for IIIs
in Lasl Asia and lhe Iacihc for lhe
Inlernalional Iinance Cororalion, a
branchoflheWorldank.
Therealilyislhalhavingnoservice
al a lov rice doesn'l hel very much,
hesays.
Long-lime oonenls of
rivalizalionconlinueloclaimil
vouldbedangerouslolransferconlrol
of nalural resources lo for-rohl
comanies,andnolelhallheresullis
oflenhigherrales.Andinsomecases
lheyhaveaoinl.
Walerisaneseciallyemolional
issuebecauseilisheldubyoor
eole and aclivisls alike as a life-
suslaining gifl of Molher Nalure.
Whalsmore,valerrivalizalionshave
alonghisloryoffailure.Inherbook
Water Wars,IndianaulhorVandana
Shiva vriles: Waler musl be free for
suslenance needs. Since nalure gives
valerlousfreeofcosl,buyingand
selling il for rohl violales our inherenl
righllonaluresgiflanddenieslhe
oor of lheir human righls.
IorIndiasoor,hovever,
mainlaining lhe slalus quo has meanl
scarcilyandhigherricesforvaler
lhal is oflen conlaminaled. Singh
oinlsoullhalresearchinlheeaslern
cilyofGanglokshovedlhaldueloa
dehcil of clean valer, residenls vere
sending2Olimesmoreonmedicinelo
lreal valer-borne illnesses lhan on lhe
valerilself.
Amidlhisdebaleovervhelher
lobringinlherivaleseclor,lhe
faclislhalvalerhaslargelybeen
rivalizedbulinformallyand
inefhcienlly, Singh says. Il is in lhe
hands of mahas and eole vho are
slealing valer.
fcourse,comarisonsare
roblemalic.Iorrivalecomanies,
lhecosls,comlexilies,andolilicsof
ugradingublicvalersyslemscan
befarmoredaunlinglhansellingu
amobilehonenelvork,alasklhal
usually requires far less governmenl
involvemenlandhasahisloryof
successinmanycounlries.
Slill, lhe slark conlrasl belveen
Indiasabundanceofcellhonesand
scarcilyofrunningvalerhascaughl
lheallenlionoflheinlernalional
communily. In a recenl reorl, lhe UN
vvv.develomenl.asia 1ODevelopmentAsiaAril}une2O12
Alolofeolelikemyself,vho
came lo Singaore lo vork on IIIs,
haveeilherleflorarefocusingonareas
oulside Singaore, Ralhbone says.
Illurnsoullhallhereisslillalol
ofconfusionaboulIIIs.Theyvere
inilially roosed as a hnancial
mechanismlolacegovernmenl
exendiluresofflhebalancesheels.
Whilelhishasrovedlobeauseful
hnancial slralegy for governmenl
ofhcials, il has oflen failed lo convince
averageeolelhallheyarelhemain
benehciaries.
Among governmenl ofhcials,
meanvhile,lhemolivesand
underslanding levels of IIIs vary,
saysMichaelarrov,direclorofADs
rivaleseclorinfraslruclureinveslmenl
oeralions in Soulh and Cenlral Asia
and lhe Caucasus.
Some counlries see il as a vay
ofgellingmoneylosolveublic
fundinggasralherlhanasavay
ofbringingvalueformoney,grealer
riskscruliny,andrivaleseclor
managemenl, arrov says. They
lhinkilsafreeride,asin:Welllel
lherivaleseclorlakecareofbuilding
someinfraslruclureforus.Theydonl
reallyunderslandlhecomlexilyof
a III or lhe concel of equilable risk
sharing and lhe long-lerm engagemenl
required.
Ior lheir arl, develomenl ofhcials
lookalonglimelovarmulolhe
concel,inarlbecausemanyoflheir
organizalionsverefoundeddecades
agoalalimevhenbiggovernmenl
rogramsveredeemedlhesolulionlo
manyoflheissuesfacinglheoor.
LvenaflerIIIsaresigned,lhe
lvosidessomelimesvorkalcross
uroses.Whenconslruclingloll
roads,forexamle,somegovernmenls
arereoccuiedvilhlayingdovn
asmanykilomelersofhighvayas
ossiblevhilerivaleconcessionaires
vill be engrossed in forecasling long-
lerm rohlabilily, arrov says.
Thenlhereslheroblemofliming.
Governmenlsareoflenchomingal
lhebilloourlheconcrele,cullhe
ribbons,andrealheolilicaloinls
aheadoflhenexleleclioncycle.ula
damn-lhe-loredoes aroach usually
crashes head-on vilh realily.
Ralhbone recalls consulling on
Singaore's Sorls Hub, vhich is
scheduledlooenin2O14vilh
indoorandouldoorsladiums,an
aqualic cenler, and a vasl shoing
mall. Governmenl ofhcials ushed lo
rocure lhe ro|ecl in 12 monlhs. The
lenderingrocessevenluallylook
6years.
Thoughlransarencyinavarding
hugegovernmenlconlraclsisoflen
called inlo queslion, Samuels argues
oullhalonerousrulesdesignedlo
revenlcorrulioncanalsohurllhe
abililylodeveloenougheffeclive
IIIs. She oinls oul lhal rivale hrms
somelimesrefuselobrainslormvilh
governmenlsaboulinfraslrucluredue
lorocuremenlruleslhalforbidlhem
from laler bidding on ro|ecls lhey
heledlodevelo.
If you've gol a lol of CLs in lhe
roomandyouasklhemvhylhey
arenolmoreengagedinsonsoring
infraslruclure ro|ecls lhal are going
lohelcounlriesdevelo,lheyllsay
ilsbecauseoflherocuremenlrules
asvellasaboulrisksandlhecoslsof
ro|ecl develomenl, Samuels says.
Governmenl ofhcials musl also
learn lo be |udicious in enlering IIIs,
according lo Nisha isval, assislanl
adminislralor for USAID's Asia
ureau. She says il can be ulifling
logelaknockonlhedoorfroma
rivalecomanylookingloforma
arlnershi.Donorscanbeexciledlo
leveragerivaleseclorresourcesand
caabililies.ulgovernmenlsneed
loensurelhallayersbringslralegic
valuelolhearlnershiandlhallhey
have a common ob|eclive lo reach lhe
counlryscoredevelomenlgoals.
verall,lheinlegrilybehindlhe
arlnershimuslbeaccounledfor.
y lhe same loken, ublic ofhcials
acrosslheboardneedlovork
lovardlhesameend.Mehla,lhe
Shell execulive, oinls oul lhal eighl
differenlminislriesdealvilhenergy
ro|ecls in India. They have lheir
bureaucracies,lheyhavelheirvesled
inleresls,andlheyoeralelhrough
lheir reseclive silos, he says.
To avoid so-called alchvork
develomenlvilhsomeregions
rosering vhile olhers ounder
cenlralgovernmenlsneedhelfrom
local ofhcials vho can be crucial
layers in acquiring land for ro|ecls
andullinginloracliceolicies
comingouloflhecailals.ullhelvo
sidesdonlalvaysseeeyeloeye.
Mehlaoinlsoullhalclashing
visionshelexlainlhegasinIndias
naluralgasielinesyslemlhalcovers
lhenorlhandvesloflhecounlrybul
nol lhe soulh. In Indonesia, Ralhbone
sayslhecenlralgovernmenloflen
differs vilh regional ofhcials over
riorilies.Thiscrealesissuesvilh
ro|ecl managemenl and rocuremenl.
Hislorically,ralherlhan5or1O
ro|ecls coming lo markel, all of vhich
arecruciallolheeconomicgrovlhof
Indonesia, vhal you see are 15O ro|ecls
cominglomarkelnoneofvhichis
veryvelldeveloedorunderslood
or able lo allracl rivale cailal,
Ralhbone says. He noles lhal lhe
silualionhasimrovedinrecenlyears.
Differenlregionsalsohavelheirovn
rules and regulalions. Singh describes
hisadvancevorkloavelhevayfor
alollroadacrosssixslalesinIndia.
ecauselherevasnolegislalionin
lacelhalexlicillyallovedIIIslo
oerale,allsixslalegovernmenlshad
lorevrilelheirlavs.Thalrocesslook
18 monlhs for |usl one slale.
Ialiencehoveveroflenaysoff.
Desilelheexlendedrocess,
Ralhbone says lhe Sorls Hub has
already ul Singaore on lhe ma as
a deslinalion for fulure high-rohle
alhlelicevenls.
Thevenueisvorldclassindesign
andfunclion,offersexcellenlvaluefor
money, and is on schedule, he says.
InIndia,manyoflhenevloll
roads are lurning rohls. When lhe
exressvay belveen Nev Delhi and
lhesalellilecilyofGurgaonvasbuill,
lannersforecasl12O,OOOvehicleser
dayvouldasslhroughilslollboolhs.
Today, lhe level of lrafhc is nearly lvice
lhalnumber.
Yel vhen lhe rohls resulling from
enl-u demand exceed execlalions,
arlnershiscanfrayasgovernmenls
allemllorenegolialeconlraclslosecure
abiggerieceoflheeconomicie.Thal
vas lhe case vilh ALS Kelanilissa, a
diesel-hred over lanl lhal sulies
1O/ of Sri Lanka's energy consumlion
needsandisovnedandoeraledby
ALS, a US mullinalional.
Thelanlbeganoeralingin2OO3.
ulvhenanevgovernmenlvas
svorn in, ofhcials claimed ALS vas
chargingloomuchforover.They
vanledlonullifylheconlracland
mandalelovereleclricilyrices.
Desilelhechallenges,lhe
Governmenl of Sri Lanka remains
commilledloursuingIIIs.The
GovernmenlsinlereslinIIIs
lo hnance selecled large scale
infraslruclure ro|ecls has been
rekindled, lhe World ank noles
onilsvebsile.TheGovernmenlis
novfocusingilsefforlsonsellingu
aframevorkloursueIIIolions
inmanyseclors.Aunilvilhinlhe
MinislryofIinancelodealvilhnev
inveslmenls is being crealed.
The case in Sri Lanka vas nol an
isolaledincidenl.Infacl,eversince
IIIsslarledforminginearneslin
lhe199Oslherehavebeenconlraclual
disules. A recenl IvC reorl on
infraslruclureoinlsoullhallhe
Asian hnancial crisis in 1997 led lo
lherenegolialionofslacksofIII
conlracls.Thisshakylegalenvironmenl
erodedlheercelionoflheslrenglhof
conlraclssignedvilhgovernmenls,lhe
reorlsays.
Throughmuchoflhe199Os,lhe
Americanovercomaniesand
lheLuroeanvalercomanies,for
examle,soughllorovidelheir
services lo lhe emerging counlries,
saysanolherreorl,Infrastructures
Unbalanced Equation.Yeldesilelheir
beslefforls,lheyalmoslalllefl,deely
fruslraled and hnancially damaged by
lheimenelrablebureaucracy,lheir
inabililyloenforceevenlhesimlesl
conlracls,ervasivecorrulion,
andlheingrainednalivedislruslof
foreign cailal.
According lo arrov, vhen rohls
fromIIIsslarlrollingin,governmenls
cansomelimeslosesighloflhehuge
risksrivalecomaniesassumedal
lheinilialslagesvhenlherevereno
guaranleeslhallheirarlnershis
vouldayoff.
Aflerlime,lhoserisksmayfall
avay, arrov says. ul lhen if lhe
governmenllrieslorericelhedeal
andclavbackmoreoflhecream,
lheymayendulosingalolmoreby
scaringrivaleinveslorsavayfrom
subsequenl deals.
Yelinmanyolherroblemcases,
dealscollaseddueloblunderson
lhe rivale side. A marquee examle
vasLnrons1992agreemenllobuilda
over lanl and liquehed nalural gas
lerminalinlheIndiancilyofDabholin
Masharashlra slale, a ro|ecl lhal vas
suosedlomeel3/oflhecounlrys
energyneeds.
BUMPER-TO-BUMPER7UDIFLVDWD
standstill at the 32-lane toll plaza
on Rao Tula RamPalam highway in
New Delhi, India. Motorists have quickly
adapted to privately managed toll
expressways in India.

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Infamousforilshubris,lhe
Houslon-based comany ignored
lheadviceoflheWorldank,vhich
refused lo hnance lhe ro|ecl on
lhegroundslhalilvasloobig,loo
exensive,andeconomicallyirralional.
Lnronlhennegolialedlheover
lanlconlraclvilhlheGovernmenlof
Indiainsecrelbecausebolhsidesvere
anxiousloavoidublichearingsand
scrulinybylhemedia,accordinglolhe
bookConspiracy of Fools.
ncegroundvasbroken,Lnron
failedlogivelocalsasenseof
ovnershibybringinginanIndian
comanyasacororalearlner.
Anolhercomanylasevaslo
overlooklheolilicaloosilion
vhilecullivalingcloselieslolhe
Maharashlraslalegovernmenl.The
slralegyblevuin1995vhena
coalilionofHindunalionalislsvon
slaleeleclionsandlhrealenedlocancel
lheconlraclslheousledgovernmenl
hadsignedvilhforeigncororalions,
suchasLnron.
The Dabhol over lanl hnally
cameonlinebulilvasamoney
loserfromlheslarland,amida
disuleoveraymenls,ilvas
closedin2OO1shorllybeforeLnron
hled for bankrulcy. Seaking lo
The New York Times, Suresh Irabhu, a
formerIndianoverminisler,said:
Thisvasaclassiccaseofvhalshould
never be done.
WORD TO ACTION
The Lnron hasco had a ma|or imacl
onIndia.Ilgavelheconcelof
rivalizalionabadnameandselback
modernizalionoflheIndianover
seclorbydameninglheenvironmenl
forforeigninveslmenl.Morelhana
decadeaflerlheDabhollanlclosed
dovn,4O/oflheIndianoulalion
hasyellobeconnecledlolhe
eleclricilygrid.
YelLricIoslel,lheassislanl
adminislralorforeconomicgrovlh,
agricullure, and lrade al USAID, oinls
oul lhal mosl ma|or hrms invesling
abroadlodaycomefromanolher
mold and have a differenl mind-sel
comaredvilhmullinalionalsinlhe
196Os.Lvenlhoughlheayoffmay
nolbeimmediale,hesays,lhese
hrms lake lhe nolion of cororale
socialresonsibililyexlremely
seriouslybecauselheyrealizelheir
conlribulions lovard lhe vell-being of
local oulalions can also benehl lheir
shareholders.
Thesebiggercomaniessomelimes
lake an amazingly long-lerm viev,
Ioslelsays.Iflheyareconlribuling
lorimaryeducalion,lheyknov
lhallheeolelheyarehelingmay
beemloyeesorcuslomersin5or
1O years' lime.
r,inlhevordsoflheInlernalional
Iinance Cororalion's Saravia: The
rivaleseclorhaslomakemoney.
ul if you are able lo align lhe rohl
incenlive vilh roviding efhcienl and
PARTNERSHIP GONE SOUR Some
publicprivate partnerships have not
worked out well. Right, operations at
the Ninoy Aquino International Airport
Terminal 3 in Manila have been hampered
by the legal battle between the Philippine
government and private contractors.
%HORZWKLVOHSKRWRVKRZVWKH(QURQ
power station in Dabhol in Masharashtra
state, India before it was closed in 2001.
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reliableservices,lhenyoucanhavea
vinvin.
In Viel Nam, for examle, Mars,
oneoflhevorldslargeslchocolale
manufaclurers,hasleameduvilh
lhe governmenl and lhe World Cocoa
Ioundalionlolraincocoafarmers
in lhe Cenlral Highlands. Iarmers
aregivenadviceoncullivalion,
harvesling,fermenlingandarerovided
vilhcocoaseedlings,oeninglhedoor
loavaslexansionoflhecro.
Similar ro|ecls in Africa and Asia
rovideglovingublicilyforMars
vhilehelingloinsureasleadysuly
of high-qualily cocoa lo make candy.
Lverylhingvedoisaboulsellinglhe
slage for lhe fulure, says Hovard-
Yana Shairo, global slaff ofhcer for
lanlscienceandexlernalresearchal
Mars.
In anolher olenlial vinvin, 12 US
comanies,includingMicrosofl,
Molorola, and Ihzer, recenlly
arlnered vilh lhe ei|ing governmenl
loincreaseaccessibililyloheallhcare
in lhe IRC. In announcing lhe deal
in }anuary 2O11, lhen US Commerce
Secrelary Gary Locke, nov US
ambassador lo lhe IRC, said lhe
III vould hel lhe IRC achieve ils
develomenlgoals,buloinledoul
ilvouldalsooenunevexorl
markels for US hrms.
noccasion,lhereisevenmoney
lo be made in comlex ro|ecls lhal
may seem like obvious hnancial
losers.Iorexamle,ooreole,al
hrsl, may be unable lo ay markel
ricesforvalerorlighls.Yelrivale
comanies may slill hnd lhe incenlive
lolayvaleriesandbuildover
lanls because lhese ro|ecls can
imrovelivingslandardsandhel
lransilion nonaying benehciaries inlo
resonsible bill-aying cuslomers.
ThalslheideabehindlheIamir
Irivale Iover Iro|ecl in easlern
Ta|ikislan.
Themounlainousregionvasa
slralegic Soviel oulosl during lhe
Afghanislanvaroflhe198Os,lhuslhe
slalerovidedsubsidizedoverlo
evenlhesmalleslvillages.ulvhen
lhe Soviel Union collased in 1991 and
civil var engulfed Ta|ikislan, many
lanlsveredamagedordeslroyed,
overvasculoffloaboulhalflhe
oulalion,andeolebeganhacking
dovn lhe foresls for hrevood. Due
lolhehighbusinessrisksandlov
incomesoflheregion,allracling
oulsideinveslmenlloresloreover
seemedunlikely.
Illookavhile,bulasolulionvas
foundlhroughaarlnershibelveen
lhe governmenls of Ta|ikislan and
Svilzerland, lhe World ank, and
lhe Aga Khan Iund for Lconomic
Develomenl, lhe for-rohl arm
of lhe Aga Khan Ioundalion. They
crealedarivalelyovnedsecial
urosecomany,IamirLnergy,lo
generaleandsulyeleclricilylolhe
regions25O,OOOresidenls.Meanvhile,
lhe ro|ecl received $1O million in
concessional hnancing from lhe
Worldankanda$5milliongranl
from lhe Governmenl of Svilzerland lo
keelariffsaffordable.
A UN reorl called lhe Iamir ro|ecl
anexamleofhovIIIscanvork
eveninalransilioncounlryvilh
aerceivedhighlevelofolilical
risk. Slill, il look a lol of innovalive
lhinkinglomakelhedealcome
logelherandsomeexerlsoinllo
suchbrainslormingasexacllylhelye
ofvorkdevelomenlorganizalions
shouldfocuson.
Thegranlsandloanslhalused
lobelheirrincileorlfoliohave
becomelessimorlanlnovlhallhe
rivaleseclorissleinguloarlner
vilhgovernmenls.Aidorganizalions
andMDs,lheysay,shouldnov
concenlraleonlheirolenliallo
becalalyslsforarlnershisand
resecledvalchdogslhalcanromole
lransarenlgovernmenlandslable
legalframevorks.
Thisvasalsolheconclusionof
Building on the Monterrey Consensus:
The Untapped Potential of Development
Finance Institutions to Catalyze Private
Investment,areorlbylheWorld
LconomicIorumlhalbroughl
logelher2OOexerlsloexaminelhe
unlaedolenlialofdevelomenl
hnance inslilulions. Il recommended
shiflinglhefocusfromloansloarlial
loan guaranlees and u-fronl risk
cailal lo idenlify ro|ecls and carry
oulfeasibililysludies.Ilalsocalled
foramoreacliveroleingovernmenl
caacilybuildinginareassuchas
roerlyrighls,conlracldisules,
bankrulcyframevorks,and
cororalegovernancerules.
Theseissueshavebecomelhe
riorily develomenl hnance needs
in all bul lhe ooresl counlries,
lhereorlsaid.Hovever,MDs
andbilaleralaidagencieshavenol
adaled sufhcienlly lo lhese changed
circumslancesTheymuslsee
lhemselvesfundamenlallyasroviding
bridges lo rivale seclor hnancing
andlhisshouldbecomelheirrimary
oeralional elhos.
ThoughMDsdonolclaimlhal
rivalesecloroeralionsarelheir
hrsl riorily, lhey mainlain aclive
andraidlyexandingdearlmenls
devoled lo bridging lhe rivale1ublic
hnancing ga. AD, for examle, nov
has a vice-residenl devoled solely lo
rivalesecloroeralions.Ilexecls
lhalby2O2Oacliviliesinrivale
seclordevelomenlandrivaleseclor
oeralionslocomrise5O/ofils
annual oeralions, vilh cohnancing
evenluallyexceedinglhevalueof
AD's sland-alone ro|ecl hnancing.
Desilelheincreasedemhasison
lherivaleseclorbyMDs,nolenough
rogresshasbeenmade,accordinglo
Samuels.
Thesearemorecomlicaledissues
lhan |usl vriling a check, she says.
We need lo lrain governmenl ofhcials,
consullanls,andbankerssolheyhave
lheskillselsloullogelherbankable
ro|ecls. Lverybody agrees on lhese
concels.ulveneedlogofrom
vords lo aclion. Q
THE BIG PICTURE
Private Participation in Infrastructure Projects Trends
Central and West Asia
$3
2
1
0
billion
90 92 94 96 98 00 02 04 06 08 10
South Asia
0
60
40
20
90 92 94 96 98 00 02 04 06 08 10
billion $80
0
20
15
10
5
Southeast Asia
90 92 94 96 98 00 02 04 06 08 10
billion $25
0
80
60
40
20
Developing Asia*
90 92 94 96 98 00 02 04 06 08 10
billion $100
East Asia
0
billion $14
12
10
8
4
2
6
90 92 94 96 98 00 02 04 06 08 10
Pacific
0
120
80
40
90 92 94 96 98 00 02 04 06 08 10
million $160
Investment Commitments to Infrastructure Projects with private participation, in 2010 dollars
Number of Infrastructure Projects with private participation
* Afghanistan, Armenia, Azerbaijan, Bangladesh, Bhutan, Cambodia, Peoples Republic of China, Fiji, Georgia, India, Indonesia, Kazakhstan, Kiribati, Kyrgyz Republic, Lao Peoples Democratic
Republic, Malaysia, Maldives, Federated States of Micronesia, Mongolia, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Sri Lanka, Tajikistan, Thailand, Timor-Leste, Tonga,
Turkmenistan, Tuvalu, Uzbekistan, Vanuatu, and Viet Nam.
0
50
100
150
200
250
Developing Asia
90 92 94 96 98 00 02 04 06 08 10
0
20
40
60
80
100
120
South Asia
90 92 94 96 98 00 02 04 06 08 10
0
10
20
30
40
50
Southeast Asia
90 92 94 96 98 00 02 04 06 08 10
0
2
4
6
8
10
12
14
16
90 92 94 96 98 00 02 04 06 08 10
0
40
80
120
East Asia
90 92 94 96 98 00 02 04 06 08 10
0
1
2
Pacific
90 92 94 96 98 00 02 04 06 08 10
Bridging the Gap
Publicprivate partnerships (PPP) offer an economically viable solution
to infrastructure needs when public funds are limited. Despite some failures,
PPPs continue to spread across developing Asia
Some Successful Partnerships
While failure of a PPP is not unheard of, many projects have had
great success in bringing better conditions and opportunity in areas
that might otherwise have gone without such improvements
Sri Lanka:
Port Expansion
Improved efficiency,
increased port traffic,
and improved
competitiveness
Tsunami Relief
Local PPPs established to rebuild
and improve water infrastructure
in countries including Indonesia,
Maldives, Sri Lanka,
and Thailand
India:
East Coast Road
Toll road cut congestion
and local air pollution
while improving
opportunities for
local business
and trade
Philippines:
North Luzon Expressway
Expanded toll road increased
safety, cut congestion,
created viable commute times,
and improved economic
opportunities in the area
Malaysia: Mixed-Use Tunnel
A tunnel beneath roads diverts
floodwaters in Kuala Lumpur
and carries automobile traffic
when clear of water,
cutting above-ground
congestion
Indonesia: Urban Water
To help address the major challenge of
access to clean water in Jakarta, a PPP
has been established and is increasing
water delivery efficiency.
Research and design: Mark Blackwell
Sources: World Bank Group. 2011. Private Partnership in Infrastructure Projects Database. http://ppi.worldbank.org/explore/Report.aspx;
United Nations Development Programme. 2008. Sharing Innovative Experiences, Volume 15: Examples of Successful PublicPrivate Partnerships.
Across developing
Asia, the majority of
PPPs since 1990 have
been energy projects.
Telecoms made up a
large portion of
projects in the Pacific
and in Central and
West Asia
Type of Infrastructure Projects with private participation, 19902010
Energy
43%
Telecom
9%
Transport
29%
Water/Sewerage
19%
Developing Asia
Energy
50%
Telecom
12%
Transport
27%
Water/Sewerage
11%
Southeast Asia
Energy
39%
Telecom
>1%
Transport
24%
Water/
Sewerage
37%
East Asia
Energy
27%
Telecom
66%
Water/ Sewerage
7%
Pacific
Energy
44%
Telecom
11%
Transport
43%
Water/Sewerage
2%
South Asia
Energy
43%
Telecom
39%
Transport
11%
Water/ Sewerage
7%
16DevelopmentAsiaAril}une2O12
PRIVATE SECTOR DEVELOPMENT: THE BIG VOICE
vvv.develomenl.asia
L
R
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S
A
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S
1
A
D
Taking Stock
Durreen Shahnaz thinks investors will buy stocks in companies based
on social impact. She should know
YIloydWhaley
I
n1991,DurreenShahnazvasa
youngrofessionalvorkingvilh
angladeshsioneeringGrameen
ankduringalimevhenilvas
lrying lo allracl inlernalional hnancial
suorl.AgrouhadcomefromNev
Yorkloconduclduediligenceon
Grameenbeforemakingamulli-million
dollarinveslmenl.AflerShahnazgave
herresenlaliononbehalfofGrameen,
oneoflhevomenfromNevYork
aroachedher.
Ilsashameyouvereborn
inlhiscounlry,lhevomanlold
Shahnaz.Youhavesuchagood
hnancial skill sel. There is a lace
calledWallSlreelandifyouvere
borninmycounlry,vilhyourskill
selyoucouldhavevorkedlhereand
madealolofmoney,lhevoman
said.eforeShahnazcouldresond
lolhecommenl,Grameenfounder
MuhammadYunus|umedinandlold
lhevoman:Aclually,Durreencamelo
usfromMorganSlanley,referringlo
lhe Wall Slreel inveslmenl hrm.
The misconcelion is familiar lo
Shahnaz.Havingmovedbelveen
high hnance and socially conscious
enlerrisesherenlirecareer,she
believes hnance, develomenl, and
mediaareinlerconnecledandsuorl
oneanolher.orninangladesh,
hergrandmolhervasmarriedal11
vilhoulknovinghovloreador
vrile.Wilharenlscommilledlo
hereducalion,sheoblainedadegree
fromSmilhCollege,amaslerof
businessadminislralionfromWharlon,
UniversilyofIennsylvania,anda
maslerofarlsfromlheSchoolof
AdvancedInlernalionalSludiesal
}ohnsHokinsUniversily.Aslinlal
MorganSlanleyinNevYorkvas
follovedbyvorkalGrameenank
inangladesh,Worldankand
InlernalionalIinanceCororalionin
Washinglon,DC,andMerrillLynchin
HongKong,China.Shelalerheaded
ulheAsiaoeralionsofHearsl
MagazinesInlernalional,Readers Digest
Asia, andAsiaCilyIublishingGrou.
These days, Shahnaz is lrying lo
blendlhevorldoflherivaleseclor
andsocialenlerrisesinamore
aggressivevaylhanshehaseverdone
before.Sheislhefounderandchair
ofImaclInveslmenlLxchange(IIX),
vhichseekslobeaslockexchange
lhalallovssocialenlerrisesloraise
cailal.Inlinevilhlhal,shehas
slarledorganizalionslhalassislsocial
enlerrisesinraisingcailalandin
lherocess,crealelhesaceforsocial
cailalmarkels.Sheexeclslhesocial
enlerriseslockexchangelobeuand
runningbymid-2O12.
DA: What is a social enterprise
stock exchange?
DS: Ieolelhinkilisgoinglobelike
lheNevYorkSlockLxchangevilh
bellsgoingoffandsoforlh.Ilsnol
goinglobelikelhal.Ilisonlineandil
basicallyrovideslheabililyloinvesl
inacomany,losellandbuysecurilies,
|usl like any olher exchange. The
differencehereislhallhecomanies
villbeshovcasinglheirsocialand
environmenlalrelurnalongvilhlhe
hnancial resulls. Thus, inveslors vill
makeinveslmenldecisionsbased
onlhelrilebollomline,nol|usl
on rohl. When lhe lrading angle is
allachedlolhelalform,ilvillbe
ImaclLxchangeAsias(anderhas
lhe vorld's) hrsl lrading lalform for
invesling in social enlerrises. The vay
ilisshaingurighlnov,illookslike
vevilliniliallyhaveonlyaccrediled
inveslors on lhe lalform. This may
assislusinhavinglessregulalory
hurdleslhanalargerexchange,
includingnolhavingafull-blovn
roseclus,vhichisverycosllylo
roducevilhalllhearliesinvolved
increalingil.Asaresull,lhecoslof
raisingcailalonlhelalformvillbe
a lol less. The exchange vill be lhe
laslsloincrealingfull-blovnsocial
cailalmarkels.
DA: All stock exchanges claim they are

committed to social improvement.
What makes IIX different?
DS:lherexchangesarelryinglo
embracesociallyresonsibleraclices.
Someexcludecomanieslhalareinlo
alcoholorsmoking.Inolhervords,
lheyconduclnegalivescreening.
Whalvearedoingfocusesonosilive
revards,nolnegalivescreening.We
SOCIAL CAPITAL Dureen Shahnaz wants
to establish a stock exchange that allows
social enterprises, or businesses that
promote social change, to raise capital.
givealalk.Ivasaskedlogivelalksal
conferences. This inilialive has grovn
allighlseedbasicallyinresonse
lo lhe markel. The markel is really
craving lhis. The reason ve received
somuchallenlionisbecauseoflhe
2OO8crisis.Ilvasavake-ucall.You
|uslcanlconlinuelodolhingslhe
vaylheyhavebeendone.Ieoleare
seeinglhereisnolenoughcailallo
meellhedemandforsocialchange.
The governmenl can'l hll lhis need and
urerivaleseclorisnollookingalil.
uleveryoneisimacledbyil.
You just cant
continue to do things
the way they have
been done. People
are seeing there is
not enough capital to
meet the demand for
social change
arevorkingvilhcomaniesvhoin
lheircorearefocusingonmaximizing
socialandenvironmenlalimacland
doing lhal in a hnancially suslainable
vay.Ilisfororganizalionslhal,al
lheircore,vanllodosocialgood.Ifil
isanenergybusiness,lheyaredoing
renevables,lheyarecrealingenergy
oulofvasle,orlheyareusingsolar
anelslhalarenoldeslroyinglhe
environmenl. They are laking a holislic
aroachoflookinglodobusiness
lhal romoles social change. There are
comaniesandexchangeslhalcover
environmenl,social,andgovernance
(LSG)indicalors.IIXisbasicallyLSG
lusluslus.
DA: There is a lot of cynicism toward
the markets and the global financial
system these days, due to the global
financial crisis. Has this created
problems for the launch of IIX?
DS: Wehaveseenlheoosile.WhenI
slarledlalkingaboullhisideain2OO9,
evenbeforeIhadasinglevordoflhe
businesslanvrillen,Ivasalready
gellingcallslogivelalksonlhis.Ivas
inviledbylheIndiangovernmenllo A
I
I
DA: When the exchange launches, if you
have a company that is performing
well financially, but its social impact is
decreasing, do you really think investors
will punish that stock by selling?
DS: Ilvillbeinlereslinghovlhis
manifeslsilselfonlheexchange.n
lhelalform,vehavehaddiscussions
onlhefacllhalifcomaniesslarl
losinglhesocialasecl,lheyneedlo
bevarned,andifnochangeoccurs,
lhenlheyvillneedlobede-lisled.
This raclice is no differenl from
vhalregularexchangesdoiflhe
comaniesdonolcomlyvilhlheir
lislingrequiremenlsandconlinuelo
osl bad hnancial resulls. Ior IIX, ve
villdoduediligencelomakesure
lheycareaboullhesocialside.Having
saidalllhal,inveslorsvillslillsay,
I care aboul lhe hnancial side hrsl
andiflheyhave|uslalilllebilofsocial
imacl, lhal's hne. Well, lhal's nol
hne for us. Social imacl is lhe vhole
oinlofvhalvearedoing.Iknovif
ve ul u comanies based on rohl,
lheinveslorsvillloveil.uliflhe
comaniesdonlhaveaslrongsocial
aseclloil,veslillvonlaccelil.
A
I
I
CLEAN ENERGY A worker cleans solar
panels in Mehsana district, India. Impact
Investment Exchange (IIX) seeks to
promote investments in socially and
environmentally responsible businesses.
einginlheosilionvearein,being
aheadoflhecurve,vecanmakeour
ovnrules.
DA: If corporate social responsibility
(CSR) is an indicator of a companys
social impact, Asian corporations do
not appear to be doing very well. Why
do you think Asian companies fare
so poorly on global CSR rankings?
DS:InAsia,vearenolverymuch
inloslrucluredhilanlhroy.Ilhink
ilsaculluralasecl.Wecareaboul
ourfamily.Wecareaboulourclan.
Wecareaboulourvillage.Andilends
lhere. This makes our Asian cullure
slrong, lhis inlensihes family and
villageslrenglh,bulalsoinsomevays
il makes us limiled. Tradilionally,
comaniesmakemoneyanyvay
lheycanandlhengiveavayalillle
lolhelemleorlocharily.Asian
comaniesareslillinlhedarkages
ofCSR.urhoeislhalerhas
vhereCSRcouldnollakeoff,imacl
inveslingvill.Wilhimaclinvesling,
lheindividual1organizalionisnol
givingavaymoneybulinvesling
and,inrelurn,receivingasocialand
environmenlalimacl.Inmanyvays
imaclinveslingmaybreaklhecurrenl
hilanlhroybarriersandmakeAsians
heleacholherbeyondourboundaries.
DA: With that kind of mentality, why
would Asian companies and investors
support these social enterprises?
DS: IeoleinAsialikelhiskindof
inveslmenlbecauseilismoneylhal
lheydonlhavelogiveavayallogelher.
They have lhe olenlial of gelling
lheirmoneybackandlheycanslill
saylheydidsocialandenvironmenlal
good.Ifyouareaveallhyindividual
orcomanyandyouvanllogel
inlosuorlingsocialenlerrises,
vesay,lhisisnolhilanlhroy,ils
aninveslmenl.Alolofeoleare
recelivelolhal.
DA: You worked with Grameen, the
pioneer of microfinance, early in your
career. How do you feel about the
situation with microfinance today?
DS: Microhnance loday is gelling a
badrabecauseofafevbadales.
When inveslmenls in microhnance are
lrealedasacommercialinveslmenland
lhesocialsideisnollakeninloaccounl
lhen,yes,youvillhavesilualions
likevhalhaenedinAndraIradesh
vilh SKS |Microhnancej. So, yes, lhere
havebeensomeabusesinlheinduslry,
bullhalcannolbeusedlo|udgelhe
vhole induslry. Microhnance has
doneenormousosilivelhingsfor
lhedisadvanlagedgrou.Ilisloday
a$5Obillioninduslryandmillionsof
eole(eseciallyvomen)haveaccess
lo cailal because of microhnance. This
henomenoncouldnolhavehaened
vilhoul microhnance.
Imaclinveslinglodayishaening
on lhe shoulders of microhnance.
Microhnance did a lol of good, il
broughllogelherlherivaleseclor,
ublicseclor,andcivilsocielyinavery
effeclivevay.Hovever,ilshouldnever
havebeenseenaslhesilverbullel.
There is no silver bullel for suslainable
develomenl.Wehavelokeeon
lryingdifferenlmodelsandshould
behayifamodelroducessome
osilive effecl, vhich microhnance
dehnilely did. Il is an amazing lool
andgoodvorkisslillbeingdonein
microhnance, giving access lo hnancial
serviceslhalolhervisenoonevould
give.Inlermsoflhenegaliveasecls,
lhalvasvheregreedcameinloil,
vherelayersignoredlhesocialside
of microhnance. And nov lhere is a
backlash.Ilisacaulionarylale.
DA: Another hot issue where the
private sector and development
intersect is the debate about
marketing products to the poor, or
selling to the bottom of the pyramid.
Where do you stand on this?
DS: Irecenllyvenlbacklolhevillages
vhereIvorkedvhenIvasvilh
Grameenanklovisilsomeoflhe
borroverslhalIvorkedvilhback
lhen.Ilvasvonderfulloseelhal
afler2Oyearslhesevomenvereall
runningsmallenlerriseslailoring
slore, grocery slore, elc. They also had
onaveragelhreemobilehonesin
eachhousehold,colorlelevision,and
salellile dish. Along vilh lhe afuence
alsohavecomeolherchangesin
consumlionallerns.WhenIasked
somevomenvhallheybuyvilhlheir
exlramoney,lheresoundingansver
vasCokeandIairandLovely
SkinWhilener.IknovIcannolbe
|udgmenlalaboullheurchasing
habilsoflhesevomen.Idoen|oyan
occasionalCokeonceinavhilemyself
bulofcourselheissueofusingskin
vhilenerisanolherdislurbingsocial1
culluralissueallogelhersolelsnol
golhere.Hovever,onehaslovonder
hovmuchlheirdecisionisaninformed
one.Wouldlheyslillconsumelhe
roduclsonaregularbasisiflheyhad
lhecomleleknovledgeaboullhe
roduclssideeffecls`
DA: Should companies market
candy, skin whiteners, and other
non-necessities to the very poor?
DS:Ivouldsayaslongasilisan
informeddecisionlobuy.ulIvould
saymosloflhelimeilisnolan
informeddecision.Whydonllherich
useskinvhilenersècauselheyknov
lhereareissuesofcarcinogensand
so forlh. The oor should be informed
oflhalasvell.Goaheadandmarkel
lolheoor,bulinformlhem.Many
comaniesarelakingadvanlageoflhe
naivelofoorconsumers.
DA: You have spent your life
blending the work of the private
sector with human development.
Has it been a life well spent?
DS:Ivasborninangladeshbul
senl my adull life in lhe US. These
aremylvovorldsandIalvays
slruggled lo bridge lhe lvo. The
ersonalslruggleofcoursevery
much inuenced my career. I alvays
lriedlomergelhevorldofmaking
moneyvilhhumandevelomenl.
Somelellmelhalil|uslmakeslife
difhcull, bul as I like lo viev il, I am
a dehanl olimisl. Why can'l I
bringmoreeoleinlodoinggood
inasuslainablevay`Whycanllhe
differenlvorldslhalIvasforlunale
enoughloexeriencecomelogelher`
Weareaflerallinlhislogelher.Weall
sharelhisonevorldlhalisimacled
byoureveryaclion.
Inmysmallvay,Ihavealvays
lriedloblendlhese,lherivaleseclor
andhumansides,ineverylhingIdo,
in hnancial organizalions, in media
comanies,ineverylhing.Ihavefell
likeIhavebeen|umingbackand
forlhandcarryingmessagesacrosslhe
borderslolhedifferenlseclorslikea
missionary.IfIgiveu,vhovilldoil`
ul,novalmosl2decadesofdoing
lhis,ilfeelslikelhelecloniclales
areshiflingandeolearesillingu
andlakingnolice.Slovlybulsurely
everyoneiscominginlolhissame
sace.Yes,everyonemayhavelheir
ovn selhsh reasons for doing lhal, bul
lheyaredoingil.Lveryoneisseeing
lhalvehavelovorklogelher.So,il
ishaening,inourlifelime.Weare
vilnessingcailalismdoingsocial
good.IfIcansayIhadasmallrolelo
layinlhal,Ivilldieaveryhay
vomanbecauseIlhendidmyarlfor
lhevorld.Q
MOVING UP A vegetable vendor speaks
on a mobile phone at a roadside market
in Allahabad, India. A
I
I
Good work is
still being done in
microfinance, giving
access to financial
services that otherwise
no one would give. In
terms of the negative
aspects, that was where
greed came into it
PRIVATE SECTOR DEVELOPMENT
N
olfarfromlhesoulhern
ColombianvillageofLos
Iozos,vhichmeanslhe
vellsinSanish,Marxisl
guerrillaskidnaedfouroilvorkers
fromlheIeolesReublicofChina
(IRC).Thalvason8}une2O11,and
lodalelherehasbeennolraceoflhe
abducledmenvhovorkforLmerald
Lnergy,asubsidiaryoflheIRC
chemicalcomanySinochem.
Lmeraldsroblemsdidnlslolhere.
Shorllyaflerlhekidnaings,several
oillrucksconlracledbylhecomany
veresabolagedbylherebels.Yelfor
alllhesecurilyroblems,Lmeraldhas
forgedaheadandconlinuesloum
oilandexloreformoredeosilsin
someoflhemosldangerousareasof
Colombia.
Ilhasnlalvaysbeeneasy.ul
drivenbylheneedforravmalerialslo
feedilsdynamiceconomicexansion
alhome,lheIRC,India,andolher
Asiannalionsareinveslingandlrading
alunrecedenledlevelsvilhAfrica
andLalinAmerica.
Asiancomaniesarebuyingoil,
coal,soybeans,andolhercommodilies.
Theyarebuildingfacloriesand
acquiring banks. They are hnancing lhe
conslruclionofrailroads,highvays,
andresidenlialalaces.Thishas
fueledeconomicgrovlhincounlries
Global Asia
Asian companies are using their new-found financial might to invest worldwide,
but they are not always welcome
Y}ohnlis
DRILLING AHEAD Workers from the
Zhongyuan Petroleum Exploration
Bureau (ZPEB) of Sinopec drill an oil well
in south Sudan. To meet its growing
demand for fuel, the Peoples Republic of
&KLQDLVLQYHVWLQJLQRLOHOGVRYHUVHDV
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suchasArgenlina,razil,Nigeria,and
SoulhAfrica.
ThehenomenalgrovlhinLalin
Americaoverlheasldecadeisduelo
lhegrovlhin|lheIeolesReublicofj
China,CharlesS.Shairo,residenlof
lheUniledSlales-basedInsliluleoflhe
Americas,loldaconferenceonlheIRC
laslyear.
TheIRChasgarneredmosloflhe
allenlionbecauseilslvo-vaylrade
vilhLalinAmericahas|umedfrom
nexllonolhingadecadeagolomore
lhan$18Obillionin2O1O.Similarly,
lradevilhAfricannalionsnovslands
alaboul$11Obillion,vhilefrom2OO8
lo2OO9lheIRCrovidedmoreloans
looor,mosllyAfricancounlrieslhan
lheWorldank.
MODEL FOR GROWTH
Allhoughlhenumbersaresmaller,
IndiaandlheReublicofKoreaare
alsogreallyexandinglheireconomic
linksvilhAfricaandLalinAmerica,
asis}aan,lhoughlhalcounlrys
economicascendancehaslaeredoff.
esidescrealing|obsandlransferring
lechnology,exerlssay,Asiacan,in
someasecls,serveasamodelfor
AfricaandLalinAmericaaslhose
regionsallemlloallainsimilarhigh
ralesofeconomicgrovlh.
Thesamekindofincenliveslhal
vorkinAsiavorkinAfrica,says
Harryroadman,chiefeconomislof
lhe global consulling hrm IvC and
a former senior World ank ofhcial.
ulsoloocanlhedisincenlives
suchaslhedislorlionsduelorice
conlrols,corrulion,andlhelackof
infraslruclure.Soilculsbolhvays.
Indeed,lhedovnsideslolhenev
economicrelalionshioflengrabmore
headlines.
Somenalionsfearlheirinduslrial
basesarebeinghollovedoulbya
ood of chea goods from Asia. Trade
remainslosidedinacommodilies-
for-machinesallernvilhAfrica
andLalinAmericaexorlingchea
ravmalerialsloAsiavhilebuying
backlhalregionsvalue-added
manufacluredgoods.Inlhevordsof
IeruvianIresidenlllanlaHumala:
Wesellorangesandlheysendus
backorangemarmalade.Thalneedslo
change.
AfricaandLalinAmericahave
lradilionallybeenvievedaslhe
backyardsoflheUSandLuroe,
bulAsiahasalvaysmainlainedan
inuenlial resence in lhese regions.
}aan,forexamle,rovidedhuge
sumsofreconslruclionaidfolloving
LalinAmericascivilvarsinlhe198Os
and layed an imorlanl hnancial
roleamidlheregionsdeblcrisis.
TheIRCsuorledmanyofAfricas
nalionalliberalionmovemenlsin
lhe196Osandlheconlinenlsnevly
indeendenlnalionsheledavelhe
vayforlheIRClogainasealallhe
UniledNalionsin1971.
ChairmanMaosaidilvasour
friendsinAfricavhosenluslolhe
UniledNalionsso,lradilionally,
|lheIeolesReublicofjChinahas
rovidedalolofassislanceloAfrican
counlriesandlhalheledusbuilda
rellygoodbusinessrelalionshi,
says}un|ieZhang,anassislanl
rofessorofenvironmenlaleconomics
allheUniversilyofCalifornia,
SanDiego.
Thelinksarealsoersonal.Legions
ofLalinAmericanslivein}aan,
vhichhasbecomelheregionslhird
largeslsourceofremillances,afler
lheUSandLuroe.Indiahasahuge
EXPANDING MARKET PRESENCE
$PDQZDONVSDVWWKHRIFHRI,QGLDV
mobile phone company Bharti Airtel
in the Kenyan capital, Nairobi. India is
expanding its economic footprint in
Africa in various industries, including
telecommunications.
We sell oranges and
they send us back
orange marmalade.
That needs to change
President Ollanta Humala of Peru
exalrialecommunilyacrossmuchof
Africa,eveninUgandavhereIndian
residenlsvereexelledenmassein
1972bylhen-diclalorIdiAmin,vho
vaseagerloblamehisdomeslic
roblemsonoulsiders.ManyLalin
Americancailalsarehomelolhrongs
ofIRCand}aaneseexalriales,
vhileformerIeruvianIresidenl
AlberloIu|imoriislhesonof}aanese
immigranls.
Alloflheselieshaveheledcemenl
so-calledSoulhSoulhcooeralion.
Yel,lhemaindriverisAsiaseconomic
boom,vhichcomesalalimevhen
LuroeandlheUSaearlobe
slagnaling.y2O4O,someeconomisls
eslimalelhallhecombinedgross
domeslicroducls(GDIs)oflheIRC
andIndiavillbe1Olimeslargerlhan
Luroesenlireannualoulul.
Weareslarlingloseevhallhe
cenluryofAsiavilllooklike,saysLuis
AlberloMoreno,residenloflheInler-
AmericanDevelomenlank(ID).
Ilhelslhallheeconomiesoflhese
regionsarecomlimenlary.
InLalinAmerica,lhereareabundanl
mineralsandnaluralresources.In|lhe
IeolesReublicofjChina,veneed
lhesemineralsandnaluralresources,
saysLiuKegu,aformervice-residenl
oflheChinaDevelomenlank,vho
mademorelhan2OvisilsloLalin
Americaduringhislenure.InLalin
America,lechnologyisneeded.In|lhe
IeolesReublicofjChina,vehave
lechnology.
CAPITAL-INTENSIVE PROJECTS
LvenbeforelheIRCadoledils
gooulolicyin1999loencourage
domesliccomaniesloinveslabroad,
IRC hrms vere mining for iron, gold,
coer,andcoaloverseas.Thoseinilial
inveslmenlsveresomeoflhemosl
conlroversial.
In1992,forexamle,ei|ings
Shougangsleelcomanyboughlan
ironoreminenearlheIeruvianlovnof
Marcona.Lversincelhalurchase,lhe
miningoeralionhasbeenlaguedby
annualslrikesbyvorkersvhocomlain
oflovvages,lhehiringofIRClaborers,
dangerousvorkingcondilions,andlhe
dumingofloxicvasle.
Wequicklyrealizedlhalvevere
beingexloiledlohelbuildlhenev
|IeolesReublicofjChina,bul
vilhoulseeinganyoflherevards
fordoingso,HonoraloQuise,63,
a union ofhcial al lhe mine, lold
The New York Times in2O1O.
MoslIRCinveslmenlscomefrom
slale-ovnedenlerriseslhalfollov
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SOUTHSOUTH LINKS Brazilian

President Dilma Rousseff (left),
South African President Jacob Zuma
(center), and Indian Prime Minister
Manmohan Singh join hands at a
trilateral summit in Pretoria in 2011.
Right, a shop selling Chinese-made
shoes in the downtown area of
Kampala, Uganda.
We are starting to see
what the century of
Asia will look like
Luis Alberto Moreno, president
of the Inter-American Development
Bank (IDB)
forbooslinglheregionseconomies
lhroughslrongdemandfor
commodilies.
LikeIRCcomanies,Indian
comanieshavealsoramedulrade
andinveslmenlvilhAfricaandLalin
America,bullheiroeralionshave
gonealilllesmoolher.Ioronelhing,
lhelanguagebarrierislessofan
issue,vhileIndia,lhevorldslargesl
democracy,hasmoreincommon
olilicallyvilhlheelecledgovernmenls
ofAfricaandLalinAmerica.
Ierhasasaresull,exerlssay,
Indian hrms have been more villing
lobringlocalvorkersinlolheir
oeralions,lransferlechnology,and
makegoodoncommilmenlsfordirecl
inveslmenl.
WhenyouseaklolheirCLson
lheground,lheyvanllobeknovnas
Africancomanies,saysroadman,
vhoalsoleadsIvCsemerging
markelsraclice.Theyareablelo
inlegralemoreeasilyinlosocielyas
aresulloflhalrism.Ifyouvalk
ofhcial diclales making lhem less
nimble lhan rivale hrms and, al limes,
lone-deaflolocalconcerns.More
recenlly,hovever,lheyhavebeen
hiring ublic relalions hrms lo imrove
communilyrelalionsandhavebegun
lakinglhenolionofcororalesocial
resonsibililymoreseriously.
Whalsmore,IRCsabililylo
rovidelargeamounlsofcailalfor
ro|ecls,fromminingandelroleum
inveslmenlsloinfraslruclurero|ecls,
givesilleveragevilhnalional
governmenls sufhcienl lo overcome
sourcesofoosilionlosuchro|ecls,
saysLvanLllis,aIRCLalinAmerica
exerlallheNalionalDefense
UniversilyinWashinglonDC.
Inaddilion,ilsgovernmenl-run
comaniescaninveslinhigh-risk
KEY PLAYER Former Brazilian President
Luiz Incio Lula da Silva speaks at a
business event promoted by Korean
UP/*(OHFWURQLFV1H[WWR-DSDQWKH
Republic of Korea is the second biggest
Asian investor in Latin America.
counlriesandvenlureslhalrivale
hrms, vhich musl ansver lo lheir
shareholders,shyavayfrom.Ilus,
lheycanalsoaffordlobealienl.Ior
examle,IRCsCheryaulomobile
comanyrecenllyoeneda
$4OOmillionfaclorynearSaoIaulo,
razil.Wilhslalebacking,Cherycan
lakeilslimeingainingafoolholdin
razilanddoesnolexecllomake
rohls for lhe nexl decade.
Whilerazilisleasedlohave
lhosevell-aid|obsallheChery
lanl,lhereisgrovingconcernlhal
lheIRCvhichhasalreadyrelaced
razilaslheNo.1exorlerlolheresl
ofSoulhAmericaisushinglocal
manufaclurersoulofbusiness.Thebulk
ofanlidumingcomlainlsregislered
byLalinAmericabeforelheWorld
TraderganizalioninvolvelheIRC.
Meanvhile,lheei|inggovernmenl
somelimesbalksalbuyinglheregions
rocessedgoods.TheIRCimorls
hugequanliliesofArgenlineand
raziliansoybeans,forexamle,bul
oflenresislsbuyingsoybeanoilfrom
lhosenalions.
TheshiflingalliludesinLalin
America are reecled in lhe local
mediavherelheIRCisdeicledas
bolh villain for ooding counlries
vilhinduslrialgoodsandsavior A
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lhroughlheirlanlsandassembly
lines,youseeafairamounloflocal,
Africanvorkers,andlhisisinconlrasl
lomanyChineseinveslmenls.
Alonglhevay,Indiahasburnished
ilsreulalionbyarlneringvilh
lheAfricanUnionloselulhe
Ian-Africane-Nelvork,ahigh-
seed hber-olic nelvork belveen
lhegovernmenlsofall53African
counlries.Ilhasbeenadrivingforce
behindlhenevAfricanInslilulesof
ScienceandTechnology,vhichaim
lorelicaleIndiashighlyresecled
inslilulesoflechnology.
Moregoodvillhasbeengeneraled
bylheIndianharmaceulical
comaniesCilaandRanbaxy,
vhichhaveoenedsubsidiariesand
manufacluringfacililiesinSoulhAfrica.
Thallaskvasmadeeasierbylhefacl
lhalbolhcomanieshavebeenlifelines
forAfricansvhoareHIV-osilive,
becauselheyroducecheaergeneric
anlirelroviraldrugslhanAmericanand
Luroeancomanies.
AmilMilra,lheformersecrelary
generaloflheIederalionofIndian
ChambersofCommerceand
Induslry,noleslhalIndiahasslood
insolidarilyvilhAfricaonanumber
ofma|orissues,includingefforlslo
eliminaleagriculluralsubsidiesinlhe
develoedvorld.
Indiaunderslandslheneedsof
Africa,hesaidina2O1Oseechallhe
LondonSchoolofLconomics.
ulIndiancomaniesarealso
sendinginexensiveeleclronics
andolhergoodsloAfricaandLalin
America.MauricoMesquilaMoreira,
anIDeconomisl,varnslhalafler
lheinilialshockofcheaIRC
imorls,lheseregionsmuslnovbrace
lhemselvesforanIndianonslaughl.
Thisisgoinglobeasecondshock
andeolevillhavelorearefor
lhalbecauseilisgoinglomakelifefor
manufaclurersevenmoremiserable
lhanilvasbefore,hesays.
Somevhaloverlookedinlherivalry
belveenlheIRCandIndiahasbeen
lheReublicofKorea,a$1lrillion
economylhalhasregisleredanannual
GDIgrovlhof7/sincelhe196Os.
IlslradevilhLalinAmerica,for
examle,soaredlo$44billionin2O1O.
Whalsmore,LalinAmericanexorls
lolheReublicofKoreagobeyond
cheacommodiliesvilhaboul3O/
reresenledbymanufacluredgoods.
Meanvhile,lheReublicofKoreas
direclinveslmenlinlheregion
suchasHyundaiaulomobilefaclories
inrazilandSamsungeleclronics
lanlsinMexicololaled$5.1billion
from 2OO3 lo 2O1O, a hgure 3 limes
largerlhanlheIRCs.AmongAsian
nalions,only}aaninvesledmorein
lheregion.
ArecenlIDreorlonlheReublic
ofKoreanoles:reakingvilhlhe
allernofolherAsianinveslmenls,
manufacluringhasfrequenllybeen
lhelargelof|lheReublicofjKoreas
inveslmenlsinlheregion,roviding
lhebasisforamorebalancedand
diversihed relalionshi. Q
MIXED FEELINGS Mining operations at
a foreign steel company in Peru, above,
have been beset by labor strikes. In
Africa, right, Indian pharmaceutical
companies have generated much
goodwill through the production and
distribution of cheap anti-HIV/AIDS
drugs.
vvv.develomenl.asia
Aril}une2O12DevelopmentAsia25
one child
one life
one chance
There are more malnourished children
in Asia than any other continent.
Poor nutrition in the first 1,000 days
of life can lead to irreversible damage
to children's minds and bodies.
Inadequate nutrition kills human
potential and is a major barrier to
development.
The World Food Programme nourishes
children through the whole life cycle,
building the brains and bodies of the
next generation.
Join Marion Caunter and WFP in
the fight against child hunger and
under-nutrition in Asia.
Visit www.wfp.org/womenAsia
and make a donation today.
Fighting Hunger Worldwide
W
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26DevelopmentAsia Aril}une2O12 vvv.develomenl.asia
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Tiny Savings
After the enthusiasm and then lowered expectations of microlending,
advocates for microsavings take a more cautious approach
YMarcLerner
N
ollongaflerbreakfaslon
asunnyDecemberday,
adozenvomenemerge
frommodeslhomes
somemadeofbamboo,olhersof
cemenlblocksandgalherlosellle
lheiraccounlsunderlheshadeofan
aluminumroofinagongAnyo,alovn
inQuezonIrovinceinlheIhiliines.
Aflerabriefrayer,oneoflhe
vomenbeginsarollcalloflhose
galheredforlheirveeklymeelingvilh
an accounl ofhcer from CARD ank,
aruralbankvilhaslrongfocuson
microhnance.
nebyone,lhevomencalloullhe
amounloflheirdeosilforlheveek.
Manyoflhedeosilscoveraymenls
onmodeslloanslhevomenhaveused
lolaunchsmallbusinesseslhalul
foodonlheirlables,keelheirchildren
clolhed,andfuelbiggerdreams.
uloflhe5Olovnsfolkvhomakeu
lhe larger grou of CARD ank savers
vhomeeleveryThursdaymorningin
agongAnyo,only18haveloans.The
olher32aresimlysavers.
Ilsmydreamlobuildahouse
oneday,saysMinervaenavidez,
a55-year-oldgrandmolher.Ionly
deosiledI5OO(lesslhan$12)loday,bul
Icanseemymoneybeginninglogrov.
Anolherdeosilor,MaryGracede
Caslro, used lo hide vhalever money
shecouldsave.ulilisloolemling
vhenyouhavelhemoneyhiddenin
lhehouse,shesays.Andloomany
eolevillaskforaloan.Ilsmuch
bellerlokeeyourmoneyinlhebank.
While lhe microhnance movemenl
hasbeencloselyassocialedvilh
microcredilloansassmallas$75
or $1OO lo hel build self-sufhciency
amonglheoormicrosavings
HARD DAYS EARNINGS A vendor
counts his money at a public market in
Manila. Initial studies show microsavings
programs offer a better solution to
EXLOGLQJVHOIVXIFLHQF\DPRQJWKHSRRU
than microcredit.
Aril}une2O12DevelopmentAsia27 vvv.develomenl.asia
mayofferabellerolionformany
oorhouseholds.Lfforlsbybanks,
cooeralives,andnongovernmenl
organizalionslobringsavingsand
olher hnancial services lo lhe oor are
novreceivingsuorlfromavariely
ofsources,includinglheill&Melinda
GalesIoundalion,lheIinancialAccess
Inilialive,GrameenIoundalion,vhich
oeralesindeendenllyfromGrameen
ank,InnovalionsforIoverlyAclion,
andlheUniledSlalesAgencyfor
InlernalionalDevelomenl(USAID).
The early microhnance movemenl
focusedloomuchonmicro-credil,
says}ohnvens,vhohasbeen
vorkingvilhruralbanksinlhe
Ihiliinesfor12yearsasro|ecl
direclorforlheMicroenlerriseAccess
loankingServicesIrogram,vhich
hasfundingfromlheUSAID.
ulullingclienlsindeblasavay
oulofoverlydoesnlalvaysvork,
hesays.Infacl,lheoorcansave
andlheycanbequilegoodalsavingif
givenlheoorlunily.
DOUBLE BURDEN
}onalhanMorduch,aNevYork
Universilyrofessorvhoheadslhe
schoolsIinancialAccessInilialive,
sayslheoorfaceadoubleburden
oflovincomeandmanagingvhal
lilllemoneylheyhavevilhoulbank
accounlsorinsurance.
Iinanceallovseoleloinvesl
inlhefulureandimorlanllylo
marshalresourceslomeelneeds
loday,exlainsMorduch.Access
lo hnance, lhen, is a key lool for
imrovinglhelivesoflheoor.
Hovever,manyoflheoor,
includingsome2.8billionadulls
vorldvide,havenoaccessloformal
hnancial services, including savings
accounls.
}ulieIeacheyvorksforGrameen
Ioundalionasanon-silero|ecl
managerinaruralareaoflhe
Ihiliines.Shesaysbanksmusl
makeforaysinloruralcommunilies
andvillages,andmainlainanongoing
resenceiflheyvanlloexlendsavings
and olher hnancial services lo lhe oor.
Manyoflheseclienlsvouldnever
valkinloabank,ilvouldbeloo
inlimidaling,saysIeachey,vho
is assisling CARD ank. ul nov
bankersarecominglolhemloexlain
hovsavingsaccounlsvorkandlo
collecldeosils.
yreachingoulloonce-overlooked
clienlsinruralandoorcommunilies,
CARD ank nov has aroximalely
6OO,OOOsavingsclienls,accordinglo
GlendaMaganlay,lhebanksassislanl
vice-residenlforoeralions.The
moneymobilizedfromsavingsalso
makesileasierforlhebanklomake
loanslosmallenlerrisesandbudding
enlrereneurs,shesays.
Theoor,ofcourse,havealvays
savedininformalvaysfrombuying
ananimallofallenforslaughler,lo
hidingcashinbambooorhoarding
smalliecesofgold.Someevenayan
inlermediaryloholdlheirmoneyfor
lhem.
Novruralbanks,cooeralives,
andolherinslilulionsincluding
CARD ank and Green ank in lhe
Ihiliines, ank Rakyal Indonesia,
lheKashfIoundalioninIakislan,lhe
Rural Women's Nelvork Neal, SLWA
ankinIndia,andmanyolhersare
rovinglhaloorhouseholdscanand
villsavelhroughformalchannels.
Microhnance slarled vilh |usl a
handfulofclienlsinlhemid-197Osin
angladesh.There,Grameenankand
lvosimilarinslilulionsASAand
lhe angladesh Rural Advancemenl
Commillee (RAC)nov boasl
morelhan17millioncuslomers.
Putting clients in
debt as a way out
of poverty doesnt
always work. In fact,
the poor can save and
they can be quite good
at saving if given the
opportunity
John Owens, project director
for the Microenterprise Access to
Banking Services Program in the
Philippines
NEW CUSTOMER A loan applicant
in Ahmedabad, India completes the
UHTXLUHPHQWVRIDPLFURQDQFHUP
6XFFHVVIXOPLFURQDQFHSURJUDPVFDQ
turn borrowers into savers. A
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28DevelopmentAsia Aril}une2O12 vvv.develomenl.asia
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Similar rograms have ourished
in Afghanislan, Cambodia, India,
Indonesia,Neal,Iakislan,lhe
Ihiliines,andVielNamandhave
sreadloAfricaandLalinAmerica,
roviding lhe oor vilh hnancial lools
onceavailableonlylolhemiddleclass
andlhosevilhveallh.Globally,more
lhan15Omillionooreolenovhave
access lo microhnance services.
Moslsuccessfulrogramssharelhe
samebasicslruclure.Theyrovide
simleandreliableservices,require
smallandfrequenlaymenls,andare
convenienl, oflen vilh bank ofhcers
visilingclienlsinlheirvillagesor
neighborhoods.
Toallraclcuslomers,rogramsmusl
adallolhearlicularcuslomsand
needsofclienlsinavarielyoflocales,
exerlssay.anksalsomuslinnovale,
usingrogramssuchascommilmenl
savingsaccounlslhalrequireclienlslo
meelself-imosedgoalsiflheyvanl
loearnfullinlereslandavoidenallies.
Inasense,commilmenlaccounls
lurnborroversinlosavers.
Iflheoorcanmakeloanaymenls,
vhycanllheysaveinsimilar
incremenlsàsksLslherDulfo,an
economicsrofessorinacommenlary,
The World of Poor Economics, vhich
shecoaulhoredvilhAbhi|ilaner|ee.
TogelhervilhSendhilMullainalhan,
lheyfoundedlheMassachusells
InsliluleofTechnologysAbdulLalif
More than 3 decades
after its founding in
1976, Grameen Bank
holds a remarkable
$1.40 in savings
for every $1.00 in
outstanding loans
NO QUICK FIX Poor families queue up
to receive free bags of food items from
DGRQRULQ0DQLOD0LFURQDQFHLVQRW
a panacea for poverty, says Grameen
Foundations Christopher Tan. The
move out of poverty is generational.
CHANGING ATTITUDES A customer
exchanges money at a street corner in
Karachi. Many of the worlds poor have
never used a banks services.
}ameelIoverlyAclionLab,vhichhas
ioneeredlheuseofemiricalmelhods
loevalualedevelomenlrograms.
Theansverseemslobelhallhe
ooruselheloanreaymenlschedule
asavaylocommillhemselveslonol
sendingacerlainamounlaveek.If
you don'l ay u, your loan ofhcer
comesoundingonyourdoor.nlhe
olherhand,ifyoudonlmanagelo
save,lhereisnoonelocomlainrighl
avay. Wouldn'l il be nice lo hnd a vay
loenablelheoorlocommillosave,
vilhoulhavinglolakeoulaloan`
AroacheslikelhalofGreenank,
along vilh hnancial and lechnical
suorlfromarlnersandfoundalions,
haveheledlilhebalancefrom
microcredillomicrosavings.The
grand dame of microhnance, Grameen
ank,isarimeexamleoflhis
melamorhosis in microhnance.
Ineffecl,Grameenlurnedilself
fromamicroenlerriselenderinloa
lruerelailbank,bulonelhalconlinued
lofocusonoorhouseholds,say
MorduchandhiscoaulhorsinPortfolios
of the Poor, vhich used hnancial diaries
lolracklhesendingallernsofeole
livingonaslillleas$2aday.
Infacl,morelhan3decadesaflerils
foundingin1976,Grameenankholds
aremarkable$1.4Oinsavingsforevery
$1.OOinoulslandingloans.
lher ma|or microhnance
organizalionshaveshovnsimilar
success.Hyderabad-basedSKS
Microhnance raised $35O million in
aninilialublicofferingin2O1O.This
valued lhe hrm al $1.5 billion.
The hnancial success of some
microhnance organizalions has
ublishedinlheQuarterly Journal of
Economicsin2OO6.
Aishvarya Ralan, direclor of lhe
MicrosavingsandIaymenlsInnovalion
InilialivealInnovalionsforIoverly
Aclion,sayslhalvhilesuchearly
hndings are romising, furlher research
isneededinloolhervaysloslimulale
savings.
Lvenlhen,shesays,ilis
imorlanllolhinkofmicrosavings,
asvellasmicrocredil,asoneamong
lhemanyinslrumenlsnecessaryfora
oor household lo manage ils hnances
olimally.
Chrisloher Tan, lhe Lasl and
SoulheaslAsiaregionaldireclorfor
GrameenIoundalion,sayshesseen
evensmallamounlsofsavingsmake
adifferenceinlhelivesofcounlless
eole.
ulilsnolaanacea,caulions
Tan.Lifeforlheoorisslill
difhcull. The move oul of overly is
generalional.
Researchers agree on one lhing:
lhe hnancial silualions of lhe oor
arecomlex.Andlheygiveserious
lhoughl lo lheir hnancial life and are
eagerloimrovelheirlol.
Wecameloseelhalmoney
managemenlis,forlheoor,a
fundamenlalandvell-undersloodarl
ofeverydaylife.Ilisakeyfaclorin
delermininglhelevelofsuccesslhal
oorhouseholdsen|oyinimroving
lheirovnlives,Morduchandhis
coaulhorsconcludeinPortfolios of the
Poor.Managingmoneyvellisnol
necessarilymoreimorlanllhanbeing
heallhyorvelleducaledorveallhy,
bulilisoflenfundamenlalloachieving
lhosebroaderaims.
Ilsnol|usloeninganaccounllhal
makessomeoneasaver,bulralher
lhehabilofsellingasidesomemoney
forlhefulure,saysTan,lheGrameen
Ioundalionregionaldireclor.
Tvenlydollarsmighlnolbealol
ofmoneyfromamiddle-classoinlof
viev,saysTan.ullolheoorilcan
meanlhedifferencebelveensendinga
youngchildloschoolorsendinghim
oullovork.Q
crealedconlroversy.Theshiflby
Grameen ank and olher microhnance
inslilulionsinlomorelradilionalrelail
bankinghasbeenaccomaniedby
crilicismsofmissiondrifl.
DavidHulme,associaledireclorof
lherooksWorldIoverlyInslilule
allheUniversilyofManchesler,says
Grameenanksefforlloexandand
increase rohlabilily has moved il
avayfromilsoriginalmissionloserve
lheexlremelyoor.
Whilelhebankslillroclaimsils
missionofoverlyreduclion,my
ersonalobservalionsleadmelobelieve
lhalilsclienleleislesseconomically
derivedlhanvaslhecaseinlhe198Os
and199Os,saysHulme.
BUSINESS MODEL
LmilyLnad,vice-residenlofrisk
managemenlal1slValleyankin
Cagayan De ro in lhe soulhern
Ihiliines,saysherbanksGihandom
(Dream)SavingsAccounlrogram
vhichhasnearly2,OOOclienlsvilh
morelhanI71O,OOO(aboul$16,OOO)
indeosilsisabusinessmodellhal
vorks.
WhilelheGihandomaccounls
reresenlasmallfraclionoflhebanks
lolalorlfolio,lheyhelmobilize
deosilsfromclienlsvhoverenl
savingbefore.Thalsanevoolof
moneylhalallovsuslolendloolhers
launchingsmallbusinesses,Lnad
says.Theaccounlsalsobringinnev
clienlsvhomighllaleralyforloans
andolherservices.
1slValleyankandolherbanks
haveloallraclmicrosaverslhesame
vaylheylureolhercuslomersby
underslandinglheirneedsand
energelicallymarkelingservices
lailoredlolhoseneeds.
1slValleyankuseslheinleresl-
bearingGihandomaccounlslolargel
clienlslhalhavelikelyneverused
abankbefore.Theaccounlsrequire
aninilialdeosilof|uslI1OO,(aboul
$2.25).ankoslersvilhbrighlcomic-
bookanelsorlrayanallraclive
youngmolhervonderingvhelher
sheshouldborrovorsavelheI2,OOO
INFOMERCIAL 1st Valley Banks poster
WDUJHWVUVWWLPHVPDOOVDYHUVE\
requiring an initial deposit of just 100
pesos (less than $3).
Moslmicrosavingsinslilulions
andlargerbanksvilhmicrosavings
olionsofferregularassbook
accounls,aulomaliclellermachine
cards,andcommilmenlaccounls.
Ioularromolionsincludegiveavays
andlolleriesvilhimrovedoddsof
vinningformorefrequenldeosilors.
Whiledozensofresearchro|ecls
onmicrosavingsareundervay,a2OO6
sludyofcommilmenlsavingsaccounls
offeredbyGreenankonlheislandof
MindanaoinlhesoulhernIhiliines
suggesledlhalsuchrogramsare
makingadifference,vilhsavings
grovingbyasmuchas82/inayear.
Thesavingsresonsereresenls
alaslingchangeinsavings,andnol
merelyashorl-lermresonseloanev
roducl,concludesaresearchaer
(aboul$45.OO)shellneedforher
childrensschoolfees.orrovingal
2O/,sherealizesshedreayI2,4OO
orI8Oadayforamonlh.ulbysaving
|uslI67aday,shedhavemorelhan
I2,OOOin|uslamonlh.
Ifyoucanlanahead,savingis
bellerlhanborroving,lheosler
advises.
If you need Z,000 pesos you
hove TWO opfions: You con
SAVE or you con 8OPPOW.
Lef's see whof hoppens when
you fry eoch of fhese opfionsl
Mof of oII. If you sove
o7 pesos eoch doy, you
wiII hove Z,000 pesos in
onIy I monfhl
WouIdn'f if foke o
Iong fime fo sove
Z,000 pesos7
Whof hoppens if I borrow7
If you borrow of Z07 per monfh you
hove fo poy 80 pesos eoch doy for I
monfh. Thof's o fofoI of Z,400 pesosl
OPTION 1: SAVING
saving 67
pesos per day
X
30
days
=
2,010
pesos
you pay 80
pesos a month
X
30
days
=
2,400
pesos
OPTION 2: BORROWING
vvv.develomenl.asia 3ODevelopmentAsia Aril}une2O12
N
ollongaflera
7.9-magniludeearlhquake
devaslaledSichuan
Irovince,inlheIeoles
ReublicofChina,inMay2OO8,
killinganeslimaled7O,OOOeole,lhe
cororalesocialresonsibilily(CSR)
mechanismsofglobalcororalionsin
lheareakickedin.
Thearenlcomanyoflhe
inlernalionalfaslfoodoeralion,KIC,
immedialelyledged3millionyuan
($475,OOO)fordisaslerreliefandlaler
increasedlhallo15.8millionyuan
($2.5million).lhermullinalional
cororalionsmadesimilarledges
basedoncororaleoliciesdesignedlo
The Triple Bottom Line
Companies in Asia are reinventing the concept of corporate social responsibility by
putting people and the planet on par with profits
YIloydWhaley
allovforquick,charilableresonseslo
disaslers.
Desilelhequickdonalions,many
oflheglobalcomaniesoeralingin
lheareaincludingKIC,CocaCola,
McDonalds,NokiaandSamsung
foundlhemselvesonavidely
dislribuledSMSlexlmessagelhal
lisledinlernalionalironrooslers,a
derogalorylermreferringloaroosler
lhalvillnolgiveuasinglefealher.
Chineseconsumersexressedoulrage
andcalledforboycollsoflhecomanies,
accordingloareorlinlheJournal of
Multidisciplinary International Studies.
Theoularercelionvaslhal
inlernalional hrms' relief conlribulions
A
I
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PROTECTING FUTURES School girls
walk on the shores of Galle Face Beach
in Colombo, Sri Lanka. Procter &
Gambles Protecting Futures program
aims to keep teenage girls at school
through the provision of free sanitary
protection.
nolonlydidnolmalchlhoseof
localChinesecomaniesinlermsof
scaleorlimeliness,bulalsoverenol
commensuralevilhlheirresencein
lheChinesemarkel,saysasludyon
lheloicbylheWharlonSchooloflhe
UniversilyofIennsylvania.
Thesludynoleslhallhe
mullinalionalsoflendidnolaggressively
ublicizelheirconlribulionsaflerlhe
earlhquake,vhichleflconsumers
unavareoflhem.Also,inlernalional
comaniescouldnoloblainarovals
asquicklyaslocalcomaniesloincrease
lhelevelsofconlribulionsaslhedisasler
vorsened.
Localcomanies,closelyalluned
loublicsenlimenlaflerlhemassive
disasler,verequickloresondand
quickloescalalelheirdonalions.
Theyalsovidelyublicizedlheir
hilanlhroy,somelimeslinkinglhe
urchaseoflheirroduclsloasenseof
nalionalism.
Themullinalionalsfollovedlheir
(CSR)guidelinesforresondinglo
disaslers,madedonalionsaccording
locomanyolicy,andyelcameoff
lookinglikeoorcororalecilizens
deservingofboycolls.
Iormullinalionalcomaniesused
looeralingunderaglobal(CSR)
framevork,lheensuingconsumer
backlashcameasashock,lhe
Wharlonsludynoles.
Welcomelolhecomlex,ever-
changingvorldofcororalesocial
resonsibililyinAsia.
AsAsiancomaniesemergeasglobal
layers,lheyareembracingloagrealer
degreelheinlernalionalconcelsand
rincialsofCSR.Yel,exerlsnole,
lheyarenolleavingbehindlheir
lradilionalmelhodsofgeneraling
goodvillinlhecommuniliesin
vhichlheyoerale.And,aslhe
mullinalionalsinlheIRCdiscovered,
lheyarekeenlyallunedlolheirfasl-
changingcuslomerbase.
ManyoflhecomaniesinAsiaare
slillfamily-ovned,nolesIranciscoL.
Roman,lheexeculivedirecloroflhe
Manila-basedCenlerforCororale
Resonsibilily.Theylendmorelovard
hilanlhroylhanamodernconcelof
cororalesocialresonsibilily.
Largefamily-ovnedcomanies
inAsiavillhaveaCSRunilbecause
LOCAL AID Proceeds from a book sale in
Beijing went to the Sichuan earthquake
relief fund. Thousands of Beijingers
donated blood, money, and other
essentials to earthquake victims.
everyolhercomanyhasone,bullhey
aremorefocusedonlhelradilional
charilyvorklheyhavealvaysdone,
hesays.Thecullureofhilanlhroyis
slrongbulAsiancomaniesarebehind
inlhemodernracliceofcororale
socialresonsibilily.
WINDOW DRESSING
nekeychallengeinexaminingCSRis
agreeing on a dehnilion.
Is CSR a reeclion of 'vindov
dressingaclivilieslosuorl
a markeling goal or a reeclion
oflhecomanysinlegrilylo
romolegoodvillforsocielyàsks
IacharaornKesarakorn,lhedeanof
lheSchoolofCommunicalionArlsof
angkokUniversilyinarecenlsludy.
Inilssimleslform,CSRinvolves
charilablevorkslhalburnisha
cororaleimage,bulonlyilsmosl
basicraclilionersvouldesouse
lhal dehnilion loday. A broader, more
videly acceled dehnilion involves lhe
lrile bollom line: rohls, eole, and
lhelanel.Thisisaslralegyoflooking
beyond rohls, shareholder value,
andrelurnoninveslmenl,andinslead
lakingabroadervievofcororale
successlhalincludesenvironmenlal
andsocialdimensions.
TheCenlerforCororale
Resonsibililyulsillhisvay:
CororaleSocialResonsibilily
consislsoflheconscienliousaclions
acomanylakeslocrealegeneral
vell-beingforallofilsslakeholders.
InraclicingCSR,comaniesinlegrale
economic,social,andecological
concernsinlheirbusinessoeralions
andinlheirinleraclionsvilheachof
lheirmanyslakeholders.
Thiscouldmeananylhingfrom
makingdonalionslolhecommunily
afleradisaslerlorovidingemloyees
vilh roer vages and benehls
Is CSR a reflection
of window dressing
activities to support
a marketing goal or
a reflection of the
companys integrity to
promote goodwill for
society?
Pacharaporn Kesaprakorn,
the dean of the School of
Communication Arts of Bangkok
University in a recent study
A
I
I
vvv.develomenl.asia 32DevelopmentAsia Aril}une2O12
FUTURE CONSUMERS
Indeveloingcounlriesaroundlhe
vorld,imoverishedgirlsmissschool
severaldayseachmonlhbecauselhey
lackbasicsanilaryroleclionlomanage
lheirmenslrualeriods.Toaddresslhis
roblem,arogramcalledIrolecling
Iuluresrovideseducalion,sanilary
roleclion,andsanilaryfacililieslohel
vulnerablegirlsslayinschool.
Since2OO6,lherogramhasheled
8O,OOOgirlsin17develoingcounlries.
Underlherogram,vhichuseslhe
sloganIroleclingfulures,keeing
girlsinschool,lhegirlsreceive
AlvaysorTamax,lvoroduclsoflhe
globalconsumerroduclgianlIrocler
&Gamble,Inc.
Whilelherogramlegilimalelyhels
girlsinneedaroundlhevorld,ilalso
A
I
I
lodisosingofcomanyvasle
malerialsinaresonsiblevay.Ilis
acomrehensiveallemllooerale
acororalioninaresonsibleand
suslainablemanner.
LOW RANKINGS
Tomakelhemallermorecomlex,
CSRhasslrongregionalvarialions.In
Luroe,forexamle,environmenlal
suslainabililyisadominanlasecl
ofmanyCSRrograms.InlheIRC,
CSRrogramsoflenfocusoncrealing
harmonyornalionalunily.
Suchculluraldifferencesexlainin
arlvhyAsiancomaniesgenerally
scoreloveroninlernalionalcororale
socialresonsibililyrankingslhan
NorlhAmericanorLuroean
comanies,saysKyokoIukukava,
aseniorleclurerinmarkelingal
lheradfordUniversilySchoolof
ManagemenlinlheUniledKingdom.
Iukukava,vhoediledlhe2O1O
book,Corporate Social Responsibility in
Asia,conducledinlervievsvilhCSR
managersof}aanesecomaniesand
lhey oinled oul lhal vorker exibilily,
suchasanemloyeesoorlunilylo
change|obs,scoreshighinlheCSR
rankingsyslem.
Yel,inlhe}aaneseconlexl,long-
lermemloymenlandcomanyloyally
isconsideredanimorlanlaseclfor
bolhacomanyandaroseclive
emloyee,saysIukukava.There
isaslrongbeliefinandlradilionof
emloyers laking 'care' of and lraining
lheiremloyees.
ShealsonoleslhalmanyCSR
rankingsyslemsincludeuholding
humanrighlsinlheircrileria,bul
lhalsomeAsiancomaniesvould
noldocumenllhalasarloflheir
cororalecullure.
Inlhe}aaneseconlexl,basedon
myresearch,onemanagerdescribed
hovhumanrighlsaresofundamenlal
lhal lhey vould nol lhink lo 'documenl'
hovlheyareexercised,Iukukava
says.ul,ofcourse,forassessmenl
uroses,ifilisnoldocumenled,lhere
is no 'evidence' of social resonsibilily.
Iukukavasuggeslslhallhefacllhal
lherearefeverAsiancomaniesonlhe
inlernalionalCSRlislslhanWeslern
comaniessaysasmuchaboullhe
rankingsyslemsasildoesaboullhe
comanies.
Weneedloslarllhinkingaboul
hovassessmenlcrileriaaredevised
andvhelherornolconsullalion
genuinelyoccursacrossaviderange
ofslakeholders,shesays.Weoughl
nollolakerankingsalfacevalueand
labelAsiancomaniesaslaggards,bul
realizelhalcomanieslhalarenolina
rankingslislcannonelhelessbesocially
resonsibleinvariousvays.
Whilsl 'social resonsibilily' is a
oularhraserighlnov,veshould
acknovledgelhereisalonghisloryof
businesselhics,vhichiscomlexand
varied,Iukukavaconlinues.Hov
manycounlriesandslakeholders
oulsideoflheG8|Grouof8jare
involvedvilhrankingsandlhe
consullalioninlhedevelomenlof
rankingsyslems`Somelimeseole1
comaniesarenolgivenoorlunilies
lohavelheirvoiceheard.
CHARITY PREMIERE Chinese star Jackie
Chan holds a check for victims of the
May 2008 earthquake in Sichuan with US
OPGLUHFWRU5RE0LQNRIIDQG-DSDQHVH
actress Misako Yasuda at a charity
premiere.
Cultural differences
explain in part why
Asian companies
generally score lower
on international
corporate social
responsibility
rankings than North
American or European
companies
dealvilhvorkersrighlsissues,lhe
environmenl,androduclsafelyare
oflendrivenbylhedesirelocalure
markelshareinveslernsocielies
lhaldemandsuchrincilesfrom
comanies,saysHanlon,aosldocloral
researchfellovallheInsliluleofAsian
ResearchallheUniversilyofrilish
Columbia.
Comaniesinlheregionareless
oflendrivenbycivilsociely,vhichhas
beeninslrumenlalincororalereform
inmanycounlriesaroundlhevorld,
hesays.
Inmanyveslerncounlries,lhereis
anaclivecivilsocielylhalbringscourl
caseslhalhaveforcedcomanieslo
reformlheirsulychains,imrove
vorkingcondilions,androducesafer
roducls.InAsia,NGsoflendonl
havelheleveragelomobilizeaslrong
socialmovemenlloraiseavarenessor
lhe conhdence in lhe courl syslem lo
bringacaseagainslacororalion.
nlhebrighlside,Hanlonnoles,
consumersinAsiaareusinglhe
Inlernelloforcecomaniesloembrace
CSR vhen lhey cannol hnd relief in lhe
courlsorlhroughlhegovernmenl.
Youhaveconsumerslakinglheir
grievancesonline,hesays.Wehave
seenmassroleslsorganizedagainsl
comaniesollulingriversandnol
beingheldaccounlable.Ilisadifferenl
dynamicinAsialhaninlhevesl,lhe
overslrucluresaredifferenl.
SHAREHOLDER VALUE
AllhecoreofCSRlieslheconcel
ofself-regulalion.CSRrogramsare
lheorelicallydesignedloimrove
comaniesfromvilhin,nollo
inslilulereformsslricllyforexlernal
consumlionorduelooulside
ressure.Andmanyroonenlsclaim
lhalslrongandcomrehensiveCSRis
direclly linked lo increased rohl.
AsludybyMITSloanSchool
ofManagemenlleclurerCaroline
Ilammerfoundlhalcomanies
receivedadireclbooslinslockrices
associaledvilhresonsiblebehavior.
Hersludylrackedresonsibleand
irresonsibleenvironmenlalbehavior
byubliclylradedcomaniesin
lheUniledSlalesfrom198Olo2OO9.
Thedalashovedlhalcomanies
exeriencedanaverageslockrice
increaseof.84/inlhelvodays
follovinganannouncemenlof
environmenlallyresonsiblebehavior,
andvereunishedvilha.65/
averagedeclinevhenlheyvere
involvedinaclivilylhaldamaged
lheenvironmenl.Thesludyfocused
onubliclyknovnenvironmenlal
acliviliesreorledinlhemedia.
Making lhe link belveen rohl and
resonsiblecororalebehaviorisvilal.
Groving rohls and increasing CSR
acliviliesareinlrinsicallylinked.
Iamskelicaloflheallruislic
molivesofcororalionsvhenilcomes
locororalesocialresonsibilily,says
Hanlon.ulvhalIvillsayislhal
vhencomaniesreachacerlainlevel
of rohl lhey oflen lry lo re-invesl lo
makelhingsbellerforlheirvorkers,
lryloimrovelhevicinilyvherelhey
arevorking,lheylendlolakeaclions
inlinevilhCSR.Q
builds brand loyally. enehciaries of
sucharogramvilllikelyconlinue
lobuylhoseroduclslhroughoul
lheirlives.
Similarly,comulergianlInlelhas
en|oyedenormoussuccessvilhilsInlel
Teachrogram,vhichhasrovided
comulerlileracylraininglomorelhan
sevenmillionleachersindeveloing
counlriesaroundlhevorld.Those
leachershaveassedlhislrainingonlo
lheirsludenls,andalloflhemhave
usedInlelroduclsinlherocess.
A DIFFERENT DYNAMIC
Suchrogramsareconsidered
modelsofmodern,sohislicaledCSR
inilialives,bullhereisanincreasing
callbymanyforcomanieslolook
invardvhenconsideringCSR.
AndAsiaisallheforefronloflhis
discussion,saysRoberlHanlon,
aulhoroflhereorl,Corporate Social
Responsibility, Corruption and Human
Rights: Multinational Corporations in
China and Southeast Asia.
TheconversalionsaboulCSRare
muchmoremeaningfulinAsia,says
Hanlon.InlheWesl,ilisoflenaboul
ublicrelalionsandmiligalingrisk.
WhenyougelloAsia,youarelalking
aboulslrikes,suicidesinyoursho,
environmenlalroblemslhalcangel
youkickedoulofacounlry.
Asiancomanieslhaladol
modernCSRrogramsvhich
INTEL TEACH Former Intel chairman
Craig Barrett interacts with a student of
Uttam School during his presentation
in New Delhi in 2006. The Intel Teach
program has trained more than seven
million teachers in developing countries
around the world.
A
I
I
O
ulsideahadurgarh,
nearDelhi,amanvilh
lroublebrealhinganda
aininhischeslislying
onhisback.Hehas|uslvalkedfor
anhourloreacharuralcardiacclinic
vhereGirishKhuranalrealsalienls
everyveek.
AcrossIndia,lhousandsofrural
clinicsoflenlackbasicinfraslruclure,
lelehonelines,andadequalemedical
sulies,androulinelyexerience
overoulagesformorelhan12hours
3RYHUW\3URWV
The worlds poor are increasingly being viewed as a lucrative market for
the private sector. Is it exploitation or long overdue?
Y}adeLee-Duffy
aday.Hovever,lhisalienldoesnl
havelovorryaboulKhuranas
eleclrocardiograh(LCG)amachine
lhalrediclsanddiagnosesalienls
vilhhearldiseasebreakingdovn
fromaoverfailure.
In2OO8,lheinlernislurchased
lhe hrsl-of-ils-kind MAC 4OO LCG
machine,vhichhadseeminglyshrunk
fromearlier5O-oundmodelsvheeled
aroundonhosilalcarlsloa7-ound
ballery-oeraledmachineaboulhalf
lhesizeofafaxmachine.The$1,OOO
coslalsomakeslheorlablemachine
considerablymoreaffordablefor
doclorsinIndia,vhoreviously
couldnlaylhe$1O,OOOforanLCG
redecessor.Thesavingalsolransfers
loalienls,allovingKhuranalo
chargeaboulhalfasmuchasbefore.
HANDY TOOL A farmer uses his mobile
SKRQHDVKHZRUNVLQDSDGG\HOGLQ
western Bangladesh. Mobile phones
enable farmers to check crop prices and
allow migrants to transfer money easily.
Thisradicallyinnovalivemachine
vaslheresullofGeneralLleclrics
Medical Syslems Grou embarking
onreverseinnovalion:aslralegy
lo hrsl develo enlry-level, lov-cosl
roduclsforemergingmarkels,and
lhen reackage lhem lo ov uhill lo
develoed, hrsl-vorld markels.
Many olher comanies are also
redireclinglheirefforlslolhebollom
oflheyramidlhevorldsooresl
eole.Thesecomaniesseelhe
vorld's oor as a rohlable markel and
believelheycanchangelhelivesof
billionsforlhebeller.
Reverseinnovalionisa
develomenlalbusinessrocesslhal
goesagainsllheconvenlionalvisdom
ofglobalizalioninvhichcomanies
develoremium-ricedroduclsfor
I think there has been a lot of interest in frontier
markets at the bottom billion from the rich world.
They know that the environment is risky and
complicated, but opportunities are there
Paul Collier, author of The Bottom Billion: Why the Poorest Countries are
Failing and What Can Be Done About It
markel.Accordingloa2O11Uniled
NalionsChildrensIund(UNICLI)
reorl,Global Inequality: Beyond the
Bottom BillionA Rapid Review of
Income Distribution in 141 Countries by
Isabel rliz and Mallhev Cummins,
lheveallhiesl2O/inlhevorld
reresenlednearly83/oflhelolal
globalincome,vhereaslheooresl
2O/hadexaclly1/underlhe
globalaccounlingmodel,asof2OO7.
Shockingly, 4O/ of lhe vorld's ooresl
eoleincreasedlheirshareoflolal
incomebelveen199Oand2OO7byless
lhan1/.
Ilhinklherehasbeenalolof
inlereslinfronliermarkelsallhe
bollombillionfromlherichvorld,
saysIaulCollier,rofessorof
economics,direclorforlheCenlrefor
lhevorldsveallhiesl1O/allhelo
oflheyramid(mainlyconsumersin
lhe Uniled Slales), lhen modify lhem
formarkels,suchasLuroeand}aan,
andlaslly,lricklelheseroduclsdovn
looorcounlries.
Hovever,adalingandreackaging
global roducls made for lhe US lo
counlriessuchaslheIeolesReublic
ofChina(IRC)andIndiavillonly
calureafraclionoflheoorlunilies
lhalexisllhere,lheneedsofemerging
markelsareverydifferenllolhoseof
veallhierones.
Reverseinnovalionislhesolulion
formanycomaniesaslheaggregale
urchasingoveroflhevorldsoor,
vhonumbermorelhan4billion,is
lremendous.Inaddilion,lheuvard
migralionofroduclscanbehugely
rohlable.
When ve are designing secihcally
fordeveloingmarkels,oflenlimes
youhavelouselhelalesllechnology
becauselhesizeoflheunilisvery
imorlanl,asvellasilsorlabilily
and ruggedness, Mike arber, chief
lechnology ofhcer al General Lleclric
Heallhcarelellsloomberg.
Wehavelurnedilaround18O
degrees,sonovourroduclslhalare
rimarilydeveloedfordeveloing
markels,vehavebeenablelolake
lheseroduclsandbringlhemback
lo develoed markels like lhe US or
WeslernLuroe.
Ilsanevolulionoverlime,
leveraginglheminialurizalionof
eleclronics,andridingonlhevave
ofullingmorelhingsinlosoflvare,
andreallyunderslandingvhalislhe
rimaryinlerfacelhalvasnecessary.
Theeoleallhebollomoflhe
yramidareclearlynolanobvious
ENTERTAINMENT VALUE A street vendor
sells pirated DVDs. Research shows
the poor usually save up to buy small
luxuries, such as DVD players, rather
than more rice and other necessities.
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lhe Sludy of African Lconomies al
TheUniversilyofxford,andaulhor
ofThe Bottom Billion: Why the Poorest
Countries are Failing and What Can Be
Done About It. Theyknovlhallhe
environmenlisriskyandcomlicaled,
buloorluniliesarelhere.
Nolonlyarecomaniessuchas
Microsofl, Nokia, and Levi's forging
inloemergingmarkels,bullarge
hnancial inslilulions are moving inlo
Africaasvell.Agoodexamleis}I
Morgan, an imorlanl bank vilh a
hugelislofimorlanlcomaniesas
cuslomers,exlainsCollier.Their
CL}amieDimonisveryinleresled
inbuildingAfrica,andexanding
lhe resence of }I Morgan in Africa.
Collieraddslhecoremolivalionfor
inlernalionalbanksloenlerAfricais
lhallheirovnclienlsandolherma|or
cororalionsarealreadyinveslingin
lheconlinenl.
|}I Morganj is an examle and an
indicalionofalargerhenomenonin
lhe lasl 12 years, asserls Collier. So
vhencuslomerssay,Whereisour
bank`lheyarelherelorovidelhe
hnancial services.
Aslhefasleslgrovingeconomiesin
lhevorldareinAfrica,lheIarLasl,
lhe Middle Lasl, and Cenlral Asia,
oorluniliesabound.Aloloflhese
economiesaregroving.Ghanavas
lhefaslesllaslyear,faslerlhan|lhe
Ieole's Reublic ofj China. Ior lhese
counlries,lhereislillledovnsiderisk.
Theyhavebeensooorforsolong,
lhereisamassivescoeforgroving,
saysCollier.
Thesecounlrieshaveenormous
resourcesfromexlraclions|ofnalural
resourcesj. And lheir conslruclion
seclorisbooming.Inconlrasl,ifyou
looklolheWesl,youhavelhedeeesl
recessionindecades.
WhilemanyerceivelheIRClobe
lhevorldsfasleslgrovingeconomy,
Ghanasurgedaheadlolakelhelo
solin2O11,accordinglolheWorld
ankreorl, Global Economic Prospects
January 2011: Regional Annex. Wilh
largeoilreserves,lhereorlro|ecled
Ghanaseconomicgrovlhralelobe
13.4/in2O11and1O/in2O12,vhile
lheIRCsgrossdomeslicroducl
grovlhralevasro|ecledlobe9.3/in
2O11and8.7/in2O12.
Wilhnumerousmullinalionals
secihcally develoing roducls for
emergingmarkels,suchasIroclorand
Gambleslover-riceddiaersand
Coca-Cola's Minule Maid Iuly |uice
drink,isilelhicallosellgoodsand
rohl from eole vho can'l afford lhe
basicnecessiliesoffoodandsheller`
Inlhereorl,More Than 1 Billion
People are Hungry in the WorldBut
What if the Experts are Wrong?aulhors
Abhi|il aner|ee and Lslher Duo
revealedlhallheoordidnlealmore
evenvhenlheycouldaffordlo,or
vhenricesforslales,suchasrice
andgraindecreased.Thereverse
haened,lheyacluallyalelessslales.
Alikelyexlanalionvasconsuming
morecaloriesvasnolariorily,vhile
buyingbeller-laslingfoodandolher
indulgencessuchaslelevisionsand
DVDlayers,vhichcouldlakemonlhs
losaveufor,vasimorlanl.
Weshouldnlforgel,loo,lhalolher
lhingsmaybemoreimorlanlin|oor
eole'sj lives lhan food. Ioor eole
inlhedeveloingvorldsendlarge
amounlsonveddings,dovries,and
chrislenings. In Soulh Africa, oor
familiesoflensendsolavishlyon
funeralslhallheyskimonfoodfor
monlhsaflervard,exlainaner|ee
and Duo. Al lhe same lime, roducing
andsellingnonessenlialfoodand
goods,suchassodasandeleclronic
equimenl,creales|obs.
IfyouaskanAfricanvhalislhe
moslvaluablelhinglheyhaveboughl
inlhelaslyearilvouldbeamobile
hone.Ilsmuchmoreimorlanllo
lhem lhan lo us in lhe US or Luroe,
saysCollier.Ifalandlinedoesnlexisl
orisdovn,ilsanexlremelyuseful
loolfarmerscanuseamobilehone
lo hnd oul cro rices.
InAsia,lhesilualionissimilar.
Arecenlsludyamonglheoorinseveral
Asiancounlriesfoundlhalmobile
honeshavelhecharaclerislicsofa
necessilyinlheI|bollomoflhe
yramidj of angladesh, Iakislan, India,
Sri Lanka, lhe Ihiliines and Thailand.
Theveallhierlheconsumer,lhe
lesserlheimorlanceofmobilehone
servicesinlheconsumersbudgel,
noleslhe2OO9reorl,Bottom of the
Pyramid Expenditure Patterns on Mobile
Phone Services in Selected Emerging Asian
Countries, roduced by Sri Lanka-
basedinformalionandcommunicalion
PRODUCTS FOR THE BOTTOM BILLION
Multinationals are developing entry-level,
low-cost products for emerging markets,
from medical equipment such as a
portable ECG to orange juice drinks.
lechnologyolicyandregulalion
lhinklank,LIRNLasia.
Thereorlargueslhalmobilehone
shouldbeseenasanecessaryublic
service,nolaluxury,andshouldbe
laxedandregulaledassuch.Given
lhalmobilehonesarearlof
everydaylivesandlhallheyreresenl
aneedamongolherneedsinmodern
socielies,olicieslhalfoslerandnol
hamerinveslmenlandinduslry
grovlhshouldbedesignedand
imlemenled,lhereorlslales.
Sluarl Lloyd Harl, lhe Samuel
C. }ohnson Chair in Suslainable
GlobalLnlerriseandrofessorof
managemenlalCornellUniversilys
}ohnson Graduale School of
Managemenl, agrees everyone al lhe
loandbollomoflheyramidshould
begivenachoiceofvhallheycanbuy.
Theoorareeoleloo.Theyarenol
|uslsurvivalmachinesvhoarelrying
logrindoulaliving.Theyvouldlike
lofeelmagicalaboullife,loo,says
Harl,vhocoaulhoredlheaer,The
Fortune at the Bottom of the Pyramid vilh
CKIrahalad.
Whenfacedvilhchoices,lheydonl
alvayschoosenulrilious,lov-cosl
food,bulneilhervouldanyofus,so
vhyshouldveexeclooreolelo.
Weshouldalloveolelodecideand
arlicialeinlheirovnfulure.
Asaidmoneyalonevonlsolve
lhevorldschronicoverlysilualion,
olheraroachesmuslbeexlored.
Thereisnolenoughaidmoneylo
makelhelransformalionalshiflneeded
|in develoing counlriesj. And il's nol
|uslaboulhovlogeleolelobemore
roduclive,Imlhinkingbiggerlhan
lhal,saysHarl,vhoalsovroleNext
Generation Business Strategies for the Base
of the Pyramid vilhTedLondon.
AccordingloHarl,morelhan
2billioneolesubsislonlesslhan
$2dayandhavebeenlefloulof
lheglobalcailalismmodel.Raid
induslrializalionofemergingmarkels
orcailalizingonenergyresources
suchasoilarenolsuslainablesolulions
forliflinglhebaseoflheyramidoul
ofoverly,Harlsays.Theonlyvaylo
lifl4billioneoleoulofoverlyand
locrealeadecenlslandardoflivingis
lolookallheroblemverydifferenlly,
heexlains.
Suslainabilily vhen markeling lo
lhevorldsoor,saysHarl,requires
leafroggreeninnovalionlhal
combinesenvironmenlallysuslainable
lechnologiesoflodayvilhlhe
businessmodelsoflomorrov.Nev
lechnologiesforrenevableenergy,
oinl-of-use valer urihcalion, vireless
informalionlechnologies,suslainable
agricullure,andnanolechnology
crealedindeveloingmarkelsarevhal
Harldescribesasarlofagreenlea
slralegy.Headdssmall-foolrinl
roduclsandserviceslhalarebeller
suiledlolhebollom-of-lhe-yramid
conlexlareoneoflhekeyslosuccess.
Small-scale solar and oinl-of-
usevalerlrealmenlcanbecomeso
effeclive,reliable,andcosl-comelilive
lhallheycanullimalelycomele
direcllyvilhincumbenlofferingsallhe
looflheyramid,saysHarl.
Lven Microsofl has formed a nev
lrickle-uinnovaliongrou,vhose
focusislocrealeanevgeneralionof
easy-lo-use,inexensivealicalions,
nolesHarl.Thelechnologygianlhas
direcledilsinilialefforlsloIndia,vhere
ilislanninglogeneralealicalions
lhalcombinemobilehones,soflvare,
andlheinlernelforlheunderserved
segmenloflhemarkel.
The Bottom BillionaulhorCollier
concludeslhereiscrediblehoe
forlhevorldsoor.Ilhinkilcan
haen.verlhenexldecadelhey
villbegellingalolofmoneyfrom
naluralresourceexlraclion,he
says.Andloharnessalllhalmoney
fordevelomenldeendsongood
economicgovernance.Whelherlhey
lunderlheirresourcesornollhal
villbelheclassicslrugglelhallays
oulinlhenexlfevdecades.Q
The poor are people
too. They are not just
survival machines who
are trying to grind out
a living. They would
like to feel magical
about life, too
Stuart Lloyd Hart, the Samuel
C. Johnson Chair in Sustainable
Global Enterprise and professor of
management at Cornell Universitys
Johnson Graduate School of
Management
GREEN ENERGY In a village in Nairobi,
a woman recharges a solar lamp by
hanging it from the roof. Sustainability
expert Stuart Lloyd Hart says one of
the keys to success in marketing to the
poor is developing small footprint
products and services that are reliable
and affordable.
A
I
I
OFF THE SHELF
Demystifying the Chinese Economy
By Justin Yifu Lin
Cambridge University Press, December 2011, $75.00
I
nDemystifying the Chinese Economy, lheWorldanks
chiefeconomislrovidesalheorelicalframevorkand
hisloricalconlexlforunderslandinglheeconomic
develomenlofhishomecounlryandilslransilionloa
markeleconomy.
efore|oininglheWorldank,}uslinYifuLinvasfounding
direclorandrofessoroflheChinaCenlreforLconomic
ResearchalIekingUniversilyinlheIeolesReublicofChina.
Aalriolicyelhardheadedlookalhovhiscounlrynolcheduaverage
annualgrovlhof9.9ercenlforlhreedecadesaragmalichisloryofeconomic
causeandeffeclaninsidersaccounlofvhy|lheIeolesReublicofjChina,
vhichdominaledlhevorldeconomyrighlinlolhe19lhcenlury,fellsofarbehind
lheWeslandhovilcameroaringbackinourlimes.James Pressley, Bloomberg
ThebookisalranslalionoflecluresIrofessorLingavealIekingUniversily.
Iloffersaninsidersvievoflhebiggesleconomicevenlofourera:lheriseof
|lhe Ieole's Reublic ofj China. Whelher one agrees, or nolI hnd much of his
argumenlersuasivevehavelounderslandhovsuchamanlhinks.Martin
Wolf, Financial TimesQ
Deng Xiaoping
Deng Xiaoping and the
Transformation of China
By Ezra F. Vogel
Belknap Press, September 2011, $39.95
T
hisbookbylheformer
direclorofHarvards
IairbankCenlerforLasl
AsianResearchandlheAsia
Cenlervasnamedasoneoflhebesl
booksof2O11.IlvashailedbyThe
Lconomisl as lhe dehnilive accounl of
Denginanylanguage.
LzraI.VogelisHenryIordII
IrofessoroflheSocialSciences
LmerilusalHarvardUniversily.
Vogelsnevbiograhyorlrays
Dengasnol|usllhemakerofmodern
|IeolesReublicofjChina,buloneof
lhe mosl subslanlial hgures in modern
hislory.Thisbookisbolsleredby
insiderknovledgeandoulslanding
sources. The dehnilive accounl of
Denginanylanguage.The Economist
Boomerang
Travels in the New Third World
By Michael Lewis
W. W. Norton & Company, October
2011, $25.95
T
heaulhoroflhe2O1O
beslseller The Big Shortlurns
hisallenlionlolhecredil
bubblesinGermany,Greece,
Iceland,andIrelandinabooklhalis
arl-invesligalive
|ournalismand
arl-lravelogue.
MichaelLevisis
a hnancial |ournalisl
andloomberg
Vievcolumnisl.
Healsovrole Liars
Poker, The Money
Culture, The New
New Thing, Moneyball, The Blind Side,
Panic, andHome Game.
Combininghiseasyfamiliarily
vilh hnance and lhe lalenls of a lravel
vriler,Mr.Levisselsoffinlhese
ageslogivelhereaderaguided
lourlhroughsomeoflhedisarale
laces hard hil by lhe hscal lsunami of
2OO8,likeGreece,IcelandandIreland,
lracinghovverydifferenleolefor
verydifferenlreasonsgorgedonlhe
cheacredilavailableinlherelude
lolhaldisasler.Thebookbasedon
arliclesMr.LevisvroleforVanity
Fairmagazineisacomanioniece
ofsorlsloThe Big Short: Inside the
Doomsday Machine,hisbeslselling2O1O
book aboul lhe hscal crisis.Michiko
Kakutani, The New York Times
InThe Big Short Levisrealizedlhal
lhemoslexcilingvaylodocumenllhe
credilcrisisvaslofollovlheaclion
fromlheersecliveoflhosevho
savilcomingandmadeamassive
rohl. His nev book Boomerangshifls
lhefocusloLuroeandlheongoing
melodramaoflheeuro.Andrew
Anthony, The GuardianQ
Thefocus
oflhebookis
Dengsunusual
careerlra|eclory,
hisuniqueslyle
ofrule,andlhe
slralegicchoiceshe
madeduringand
aflerlheCullural
Revolulion.Thisbookshouldberead
byanyonevhovanlsloundersland
lhedomeslicandinlernalional
dynamicslhalhaveledlo|lheIRCsj
riseasagrealover.Yanzhong
Huang, Foreign Affairs
Hegiveslhereaderlhenecessary
hisloricalconlexlandbackground
lounderslandvhyDengmadehis
decisions.Ilisallaboullhegrand
hisloric viev. And lhal is hlling: oul of
allofDengsamazingqualilies,ilishis
grasofabroadersecliveandhis
keensenseofhislorylhalenabledhim
loachievevhalsomanyhaddeemed
imossible.Chow Chung-yan, South
China Morning Post Q
Together
The Rituals, Pleasures and Politics of Cooperation
By Richard Sennett
Yale University Press, December 2011, $28.00
S
ociologyrofessorRichardSennellargueslhal
cooeralionhasbecomeanecessaryskillina
mulliculluralsociely.
CrilicsmaycarlhalSennellshandbooklolhe
craflsofcooeralionsidesleslhehardeslqueslionofrool-and-branchreform
vhelherofinner-cilyveallhdislribulion,orlheglobalbankingsyslem.ul
reair,asheinsisls,hasloslarlinyourovnbackyardandoveryourovnfence.
IoranyonevholakesuTogelherschallengelomakeavocalionofcommunily,
hemayvellhellhemloavoidbolhlhesquabblesinlhelaygroundandlhe
riolsinlheslreels.The Independent Q
Honor in the Dust
Theodore Roosevelt, War in the
Philippines, and the Rise and Fall of
Americas Imperial Dream
By Gregg Jones
NAL/Berkley, February 2012, $26.50
A
nAmerican|ournalisl
goesbacklolheearly2Olh
cenluryvhenlheUniled
Slalesbeganilsascenlas
ama|orvorldover.Hisslorybegins
vilhlheyoungnalionsvicloryover
Sain,vhichgave
ilconlroloflhe
Ihiliines,lhen
aSanishcolony
lhalvasallhe
oinlofdeclaring
indeendence.
Honor in the
Dustchronicles
lheRoosevell
adminislralionsresonselolhe
Iiliinoguerillaresislanceandcharges
ofUSmililarymisconduclinlhe
Ihiliines,andhovlheseevenlshave
shaedAmericasosilioninglobal
affairs.
Gregg}ones,lhebooksaulhor,vas
acorresondenlinAsiafor1Oyears.
He vas a hnalisl for lhe Iulilzer Irize
andGeraldLoebAvard.Hisvorkhas
aearedinThe Dallas Morning News,
The Los Angeles Times, The Washington
Post, The Guardian, and The Observer
(London),amongolhers.Healsovrole
Red Revolution: Inside the Philippine
Guerrilla Movement.
WhalisslrikingaboulHonor in the
Dust,Gregg}onessfascinalingnev
bookaboullheIhiliine-American
War,isnolhovmuchvarhaschanged
inmorelhanacenlury,bulhov
lillle.The New York Times
Alively,documenlednarralive
aboulanimorlanlbuloflenneglecled
sloryinAmericanhislory.Dallas
Morning NewsQ
Thinking Fast and Slow
By Daniel Kahneman
Farrar, Straus and Giroux October 2011, $30.00
E
minenlsychologislDanielKahnemandislillsyears
ofresearchinonebookloexlainhovlhemind
vorkshovvearriveallhedecisionslhalvemake.
KahnemansioneeringvorkvilhlhelaleAmos
TverskyondecisionmakingreceivedlheNobelIrizein
Lconomic Sciences in 2OO2. Their ideas have inuenced many helds, including
economics,medicine,andolilics,andheledlaylhefoundalionforbehavioral
economics.
InThinking, Fast and Slow, Kahnemansayslherearelvosyslemslhaldrivelhe
vayvelhink:Syslem1(fasl,inluilive,andemolional)andSyslem2(slover,
moredeliberalive,andmorelogical).Herevealslheexlraordinarycaabililiesof
fasl lhinking as vell as ils ilfalls, vhen lo lrusl our inluilion, and lhe benehls
ofslovlhinking.Thinking, Fast and Slowvasraledasoneoflhebeslbooksof
2O11byThe New York Times, The Economist, The Wall Street Journal, andThe Globe
and Mail.
Therehavebeenmanygoodbooksonhumanralionalilyandirralionalily,bul
onlyonemasleriece.ThalmaslerieceisDanielKahnemansThinking, Fast and
Slow.William Easterly, The Financial Times
Kahnemansnevandmoslaccessiblebookconlainsmuchlhalisfamiliar
lolhosevhohavefollovedlhisdebalevilhinlhevorldofeconomics,bulil
alsohasalollosayaboulhovvelhink,reacl,andreachralher,|umlo
conclusionsinallsheres.WhalmoslinlereslsKahnemanarelherediclable
vayslhalerrorsof|udgmenloccur.Roger Lowenstein, Bloomberg Businessweek
Manybooksaboullhemindacrovdedgenrelhesedayscombinevivid
sloriesvilhaccounlsofseminalexerimenlsandlhenroceedloarguefor
changesinlav,olicyorbusinessraclices.Thinking, Fast and Slowisdifferenl.
Il is almosl dehanlly focused on lhe science, vilh a leavening of memoir and
ersonalobservalion.Christopher F. Chabris, The Wall Street JournalQ
4ODevelopmentAsiaAril}une2O12 vvv.develomenl.asia
ARTICLE
A
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n lhe decade of conicl lhal has
laguedAfghanislan,goodnevs
hasbeenaveryrarecommodily.
ulin}une2O1O,UniledSlales
and Afghan ofhcials made a slunning
announcemenllhalseemedlochange
everylhinginlhelong-suffering
counlry.
Geologisls idenlihed nearly $1 lrillion
inunlaedmineraldeosils.The
GovernmenlofAfghanislanlaler
ad|usled lhal lo an eslimaled $3 lrillion
inmineralandelroleumdeosils,
includingcoer,iron,gold,oil,
chromiles,uranium,andrareearlh.
ullhemassivediscoveriesvere
greeledvilhlimiledcelebralion.
TheGovernmenlofAfghanislan
andilsallieshaveanarrovvindovof
oorlunilylobecomeavorldleader
inresourcelransarencyasrighls
lolheseresourcesarebeingsoldover
lhe nexl 3 years, says }uman Kubba,
acamaignervilhlheorganizalion
GlobalWilness.Theslakescouldnol
behigher:gelilrighlandminerals
couldbelhecalalyslforeaceand
roserily,gelilvrongandlheres
amassiverisklheyvillbelosllo
corrulion,orformanevaxisof
inslabilily and conicl.
Afghanislanislhelaleslinaslring
ofdeveloingcounlriesinAsialhal
haveinlhelaslfevyearsdiscovered
vaslnaluralresourcedeosils.These
counlriesincludingCambodia,
Mongolia,andTimor-Lesleareal
lhecenlerofadebaleonhovbesllo
manage lhe coming inux of revenue
associaledvilhlhesediscoveries.
Lconomislshaveseveralnamesforlhe
henomenonofgrealveallhouring
inloafragile,develoingeconomy
vilhdisaslrousresulls.asedrimarily
The Resource Curse
Asian nations are finding billions in oil, gas, and minerals. But will it make them poorer?
YIloydWhaley
PROSPECTING Miners drill into
rock in a makeshift emerald mine
in Panjshir Valley, Afghanistan. The
country is sitting on a gold mine of
mineral reserves, perhaps the richest
in the region, that offer hope for
an economy mired in poverty after
decades of war.
onhard-learnedlessonsinAfricaand
LalinAmerica,counlriesvilhlucralive
resources lhal hnd lhemselves lagued
vilh conicl and overly are said lo
suffer from lhe aradox of lenly or
lhe resource curse.
Thereasonsforlhishenomenon
aremullile.Lxorlearningsfrom
The stakes could not
be higher: get it right
and minerals could be
the catalyst for peace
and prosperity; get it
wrong and theres a
massive risk they will
be lost to corruption,
or form a new axis
of instability and
conflict
Juman Kubba, a campaigner with
the organization Global Witness
andmineralresourcesdiscoveredin
lhecounlryinrecenlyears.According
lolheAsianDevelomenlanks
Asian Development Outlook 2011reorl,
inveslmenlinlhecounlrysyuTolgoi
coerandgoldmineisro|ecledlo
lolal more lhan $4 billion over lhe nexl
2years.Wilhroduclionexecledlo
begin in 2O13 and reach full caacily by
2O18,lheoverallinveslmenlisexecled
lo reach $18.6 billion over lhe lifelime
oflhemine.
Inaddilion,rearalionsare
undervaylodevelooneoflhelargesl
coalhelds in lhe vorld, Tavan Tolgoi.
Al full caacily, lhe helds are execled
loroduce15millionlonsofcoaleach
year.olhsilesyuTolgoiandTavan
Tolgoiarelocalednearlheborder
vilhlheIeolesReublicofChina,
anavidbuyerofmineralandenergy
resourcesvorldvide.
TheGovernmenlofMongolia
haslakenavarielyofmeasureslo
manage lhe inux of mineral and
energyrevenue.nekeyfealureofils
rogramhasbeenlheeslablishmenl
oflheHumanDevelomenlIundin
November2OO9.Thefundisexecled
louseminingrevenueslogivecash
handouls, ay luilion fees, and hnance
olher social benehls. In Iebruary 2O1O,
eachMongoliancilizenreceivedlhe
equivalenl of aboul $5O, and in 2O11,
monlhly cash handouls of aboul $15
veregiven.
DISTRIBUTION OF WEALTH
Cashhandoulinilialives,suchaslhose
beingunderlakeninMongolia,areal
lhecenleroflheglobaldiscussionof
hov lo deal vilh lhe inux of mining
revenues.
ecauseresourcerevenuesare
volalile,governmenlsneedlosave
duringeakearningeriodsinorder
lovealherlhelimesvhenricesand
resources can arlihcially increase
lhevalueoflhecurrency,vhich
discouragesmanufacluringforexorl.
Volalile earnings based on uclualing
globalricescanalsocrealeunslable
hscal and debl managemenl silualions.
And, mosl imorlanlly, a large inux
ofnaluralresourcerevenuescanhavea
overful,negaliveimaclonnalional
inslilulionsandgovernance.Inshorl,
hovdolhoseinoverovercomelhe
lemlalionlouselhesevaslrevenues
forlheirovnenrichmenl`
nevaylolookallhisqueslion
islouloneselfinlolheshoesoflhe
residenlorrimeminislerofacounlry
lhal has large energy resources, noles
lhenLxeculiveDireclor}ohannes
I.LinnofWolfensohnCenlerfor
Develomenlinanarliclein2OO8
ublishedbyTherookingsInslilulion
inWashinglon,DC.Ilisslrikinghov
manydecisionssheorhehaslolakein
regardlolhenalionalenergyveallh,
hovmanyoorlunilieslherearelo
makelhevrongdecisions,andhov
manylimessheorhe,andmanyolhers
inlhegovernmenlandinlheenergy
induslry,maybelemledloengage
incorrulbehaviorinorderlogaina
shareoflheresourceveallhforolilical
or rivale benehl.
BACKBREAKING WORK A miner

emerges from a hand-dug excavation in
a remote corner of Cambodia known as
the Gold Forest.
CASH HANDOUTS
InMongoliasvindsvelcailalof
Ulaanbaalar,high-endluxuryshos
andexensivesorlscarscannov
befound.Ilisnoluncommonlosee
bollles of $4OO Irench vine on lhe lable
alreslauranls.Thisisinacounlrylhal
in2OO9hadaercailagrossdomeslic
roducl of around $1,5OO and lolal
gross domeslic roducl of $4.2 billion.
Thisoverldislayofveallhcanbe
allribuledlargelylolhevaslenergy
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incomesfall.Thisissomelimesdone
lhroughlheeslablishmenlofnalural
resourcefunds.Theroblemvilhlhese
fundsislhallheycanbealleredor
raidedbyolilicalleaders,saysLaura
Ialer,aolilicalscienlislalColumbia
Universilyvhohassludiedlheissue.
Direcllydislribulingrevenuelo
cilizenscouldbyasslhisroblemby
lellingeoledecidehovmuchlo
consume or save, says Ialer. Il is also
arguedlhal,ifcilizensknovlheyare
enlilledloashareoflheresourceveallh,
lheyvillhaveslrongerincenliveslo
beolilicallyengagedandlomonilor
governmenlloroleclrevenuefrom
being diverled lo olilicians.
Slillolhershavemadelheclaimlhal
naluralresourcesbelongloeveryone
and il is only righl lhal cilizens benehl
direclly from lheir exlraclion and sale,
sheadds.
Suchdireclcashaymenlsneed
lobemanagedcarefully,argueslhe
LuroeanankforReconslruclion
andDevelomenlreorl,Managing
MongoliasResourceoom.Direcl
cashhandoulscanbeadisincenlive
lovork,vhichhinderslheeconomic
diversihcalion needed lo overcome lhe
resourcecurse.
Ifindividualsreceiveabasicincome
vilhoulhavinglovork,lhevageslhal
lheyvillneedlobeaidinorderlo
ersuadelhemlolakea|obincluding
inlhenon-resourceseclormayneed
lo be higher lhan if lhey do nol, lhe
reorlnoles.Thisvouldreducelhe
comelilivenessoflhenon-resource
seclor.
Avarialionoflhisdislribulion
syslemlhalmanyexerlslhinkshovs
romiseisaroosalbeingromoled
bylheCenlerforGlobalDevelomenl,
inWashinglon,DC,lhalvouldallach
laxeslocashhandoulrograms.
Havingullhismoneyinlhe
handsofilscilizens,lheslalevould
lrealillikenormalincomeandlaxil
accordinglylhusforcinglheslalelo
collecllaxesandfuelingublicdemand
forlhegovernmenllobelransarenl
andaccounlableinilsmanagemenl
ofnaluralresourcerevenuesandin
lhe delivery of ublic services, slales
adescrilionoflheroosalonlhe
cenlersvebsile.
AccordingloIaler,lhiscouldhel
buildlhegovernmenlinslilulionslhal
villberequiredlongaflerlheresources
runoul.
Thenolionislhalvhilenalural
resourcevindfallscanundermine
develomenl,manybelievelhal
laxalionslrenglhensbolhaccounlabilily
and bureaucralic caacily, she says.
BENCHMARK An off-shore drill ship
in the Timor Sea. Oil-rich Timor-Leste
has joined the Extractive Industries
Transparency Initiative, which sets global
standards for oil, gas, and mining.
Direcllydislribulingresourcerevenue
locilizensandlaxingilbackcould
emulale lhe benehls of a hscal syslem
lhaldeendsnolonvindfallsbul
ralher on laxes.
Sucharoosalneverlhelessalso
requireslhalolilicianshavelhevill
and abilily lo make il vork, she adds.
Aril}une2O12DevelopmentAsia 43 vvv.develomenl.asia
BOOMTOWN Tourists shop for Genghis
Khan-branded vodka in a store in
Ulaanbaatar. High-end shops opened in
Mongolias capital in recent years after
vast energy and mineral resources were
discovered in the country.
If citizens know
they are entitled to a
share of the resource
wealth, they will have
stronger incentives
to be politically
engaged and to
monitor government
to protect revenue
from being diverted
to politicians
Laura Paler, a political scientist
at Columbia University
NinaMerchanl,assislanldireclorfor
lheeconomicreformanddevelomenl
rogramofTheAsiaIoundalion,
agreeslhaloneoflhegrealesl
challengesloimlemenlinganeffeclive
cashdislribulionsyslemisoflenlhe
governmenlandoverbrokersina
counlry.
Llilesinmoslcounlries,
arlicularlysmallandinslilulionally
veakcounlries,havelillleincenlive
lo even lry lhis, says Merchanl.
Direcldislribulionnolonlyderives
lheslaleofilsresources,bulalso
deriveselilesoflheirsourceof
renls.Inmanyinslilulionallyveak
slalesarlicularlylhosevilhveak
democralicinslilulions,corrulion,
redaloryorveakleadershilhis
vill |usl nol haen from lhe oulsel.
TRANSPARENCY
Ifcounlriescanovercomelheobslacles
associaledvilheslablishingasyslem
lhal uls lhe benehls of nalural
resourcesinlolhehandsoflheeole
vhoneedilmosl,lhalisonlylhe
beginning,saysIaler.
Wilhoulaccessloinformalion
onlheamounlofresourcerenls
lhalgovernmenlreceivesandhov
lhalmoneyisbeingsenl,ilisvery
onaclualgovernmenlsendingcan
have a signihcanl imacl on vhelher
eolescrulinizegovernmenlandhold
oliliciansaccounlableinresource-rich
environmenls.
TheLxlracliveInduslries
TransarencyInilialive,vhichselsa
globalslandardforlransarencyin
oil,gas,andmining,isakeyrogram
forhelingdeveloingcounlrieslo
managelheirnevfoundresource
veallh,saysIaler.
Inaddilion,Mongoliainclober
2O1Obecameoneoflhefevcounlries
inlhevorldloachievefullcomliance
slalusvilhlheLxlracliveInduslries
TransarencyInilialive.lhercounlries
inAsialhalhave|oinedlhisinilialive
andhavereachedfullcomliancevilh
ilsslandardsincludeAzerbai|anand
Timor-Lesle.TheIhiliinesisalsoin
lheinilialslagesof|oining.
Donorsandinlernalional
develomenlorganizalionshaveakey
rolelolayinlherocess,saysIaler.
Theycanbelhecalalyslsforbuilding
socielalmechanismslomainlaina
|uslandlransarenlsyslemofsharing
naluralresourceveallh.
Whenilcomeslolransarency,
lheremighlbegrealerscoeforlhe
inlernalionaldonoranddevelomenl
communilylovorkdirecllyvilh
domesliccivilsocielyorganizalions
and lhe media lo ul lhe ressure on,
saysIaler.Thiscouldcomefrom
inilialivesloslrenglhenlhecaacilyof
lhemediaandcivilsocielyloadvocale
forbelleraccessloinformalion,lo
monilorgovernmenlrevenueand
sending,andlodisseminalelhal
informalion lo lhe broader ublic.
ul,sheadds:Ilisanuhillballle
againsloflenoverfulandenlrenched
inleresls. Q
difhcull for cilizens lo hold olilicians
accounlable, she says.
Revenueisonlyonesideoflhe
coin:civilsociely,lhemedia,and
cilizensalsoneedaclearericlureon
vherelhalmoneyisgoinginorder
lobeolilicallyengagedandhold
olilicians lo accounl, Ialer adds.
Myresearchshovslhalensuring
lhalcilizensgelbellerinformalion
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S
everalyearsago,IaulRomer,
aneconomicsrofessoral
NevYorkUniversily,vas
slrugglingvilhaverybasic
queslion:vhyilislhalsomeareas
develoandreduceoverly,vhile
olherslanguish`
Hisconclusionembracedbyrivale
seclorsecialislsindevelomenl
organizalionsvorldvideislhal
lhekeyfaclorinsuccessfuloverly
reduclionisgoodgovernance,orashe
ulsil:eoleinoorcounlriesaround
lhevorldsufferfrombadruleslhal
hinderlheirdevelomenl.
Insleadoffocusingonoornalions
andhovlochangelheirrules,ve
shouldfocusonooreoleandhov
lheycanmovesomevherevilhbeller
rules,hevrolein2OO9.nevay
lodolhisisvilhdozens,erhas
hundreds,ofnevcharlercilies,
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vheredeveloedcounlriesframelhe
rulesandhundredsofmillionsofoor
familiescouldbecomeresidenls.
HongKong,China,alinyenclave
ofgoodgovernancelhalgrevfasler
lhanilsneighborsfordecades,isoflen
ciledasanexamleoflhecharlercily
concel.
WhalexacllyisRomersconcel`
Myideaislobuilddozens,erhas
hundreds,ofcilies,eachrunbyanev
arlnershibelveenarichcounlry
andaoorcounlry.Theoorcounlry
vouldgiveusomelandforlhecily,
vhileadeveloedcounlrylikerilain
orCanadacouldconlribuleacredible
|udicialsyslemlhalanchorslherule
oflav,hevroleinThe Sunday Times
in}anuary2O1O.
Wilhclearlegalroleclions,rivale
inveslorsvillbuildlhebuildingsand
infraslruclure,includinglheover
Replicating
Hong Kong, China
Charter citiessmall enclaves of good governance in developing countriesare gaining
supporters, but some remain skeptical
YShu-Ching}eanChen
GOOD GOVERNANCE Hong Kong,
China, a tiny enclave of good governance
that grew faster than its neighbors for
decades, is often cited as an example of
the charter city concept.
lanlsandgrid.Accesslolheseaislhe
onlyrealnecessilyaslongasacharler
cilycanshigoodsbackandforlhon
conlainershis,ilcanlhriveevenif
ilsneighborslurnhoslileorunslable.
Andanyadminislralivecoslscanbe
recouedfromaseciallaxonlhe
hugeriseinlandvalueslhalhaens
asalargevell-runcilydevelos.
Thesecilies,ideally,vouldbe
roughlylhesizeofHongKong,
ChinaandSingaore,oraboul1,OOO
squarekilomelersenoughlohouse
1Omillioneoleinaoulalion
densilyof1O,OOOersquarekilomeler,
aboulhalflhedensilyofcenlralIaris.
Heslresseslhalhisconcelisvery
exible. The lhree key arlicianls in
acharlercilylhehoslcounlry,lhe
sourcecounlryoflheeole,andlhe
guaranlorcouldbelayedbylhehosl
governmenlinvariouscombinalions.
ecauselheserolescanbelayedby
asinglenalionorbyseveralcounlries
vorkinglogelherasarlners,lhere
aremanyolenlialarrangemenls,he
slalesonlheCharlerCiliesvebsile,
vhichheseluloromolelheconcel.
neoflhevarialionsisloallov
agovernmenlloassumealllhree
rolesinundervrilingacharlercily,
simullaneouslylayinglhehosl,source
ofeole,andguaranlor,muchas
|lheIeolesReublicofjChinadid
ineslablishinglhesecialeconomic
zonevherelhenevcilyofShenzhen
emerged,orevenIndiasrecenl
inilialivelocreale24nevcilieson
greenheld siles based on vhal Romer
describesasinnovalivegovernance
slrucluresandublicrivale
arlnershi.
Romerslemlaleinvokesa
sanilizedversionofHongKong,China
slriedofilshisloricalandcolonial
comlicalions. He idenlihes such
ciliesashavingfourbasicelemenls:a
vacanlieceofland,largeenoughfor
an enlire cily, a charler lhal secihes in
advancelhebroadruleslhalvillaly
lhere,acommilmenllochoice,backed
byvolunlaryenlryandfreeexilforall
residenls,andlheequalalicalionof
allrulesloallresidenls.
Healsoseeksloembodyinlhecharler
cilieslheverybeslbusinessraclicesof
aglobaleconomyfromrulesoflav
andlransarency,loequalilyforall
residenlscainglhesevilhlrade-
friendly, efhcienl infraslruclure, all al no
cosllolhehoslcounlryaslongasland
canbesuccessfullyleasedoul,nolsold,
lorivaleoeralorsexacllylikein
HongKong,China.
CONTROVERSIAL PROPOSAL
Thecharlerciliesconcelhasbeen
allackedforbeingneocolonial,asil
suggeslslhallheoorhoslcounlry
shouldgiveusovereignlyin
exchangeforlhedeveloedcounlry
governmenlsassurancelhalilvould
aclasguaranlorloensurelhecilys
charlervasresecledandenforced.
Romerre|eclslhis.Ilvaslheabsence
ofvolunlarychoicelhaldoomed
moslcolonialvenlures,hesaid.The
commilmenllovolunlarychoiceisvhal
dislinguisheslhisnevro|ecl.
SuorlersofRomersconlroversial
roosal,suchasVoxiHeinrich
Amavilah,anad|unclrofessorof
LconomicsalGlendaleCollege,
Arizona,seeilasaninnovalivemeans
ofhasleninglheeconomicgrovlhof
develoingcounlries.lhersrecall
similarsuccessesinhislory,suchaslhe
12lhcenluryfoundingoflheGerman
cilyofLubeck,lheReublicofKoreas
ullrahigh-lechIncheonsmarlcily,and
Turkeyslov-laxandmanufacluring-
focusedorganizedinduslrialzones.
Crilics,meanvhile,oinllolhe
danger of irling vilh lhe birlh of a
cilyvilhoulregardforolilicaland
socialconsequences,andfrelaboullhe
holloving-ouleffeclofsuchcilies
aslheysalo-endhumanresources
andundermineagovernmenls
abililylolaunchnalionalro|eclsfor
develomenl.lhersvorryaboul
areealoflheIeolesReublicof
Chinashumilialioninlheearly2Olh
cenluryvhenmanybigcilies,lo
amonglhemShanghai,cededareaslo
foreignoversascharlerzones.
Chrislallman,anassislanl
rofessorofolilicalscienceand
economicsalYaleUniversily,varns
againsllheolenlialcoslsinvolved.
Alrial-and-errorrocessvould,
vilhouldoubl,roducedozensof
successfulcharlerciliesaroundlhe
vorld.ullheerrorandlrialcould
haveaveryheavyhumancosl.
Alleasllvodeveloingcounlries
signedonloalailoredversionoflhe
roosal.
Madagascar,eagerlolaforeign
inveslmenl,vasconlemlalinglhe
Instead of focusing
on poor nations and
how to change their
rules, we should
focus on poor people
and how they can
move somewhere
with better rules.
One way to do this is
with dozens, perhaps
hundreds, of new
charter cities, where
developed countries
frame the rules and
hundreds of millions
of poor families could
become residents
Economist Paul Romer
SHOWCASE CITY Factory workers
assemble electronic components in
6KHQ]KHQDVKLQJYLOODJHWKDWKDVEHHQ
transformed into a showcase charter city. A
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offoreigninveslmenl,andramanl
smugglingofforeignimorlsinlolhe
IRC,fueledbylhezonesloverlariff.
Allhoughlhecenlralgovernmenl
hadlaiddovnlhedireclionforlhe
secialeconomiczone,ilvasso
vaguelhalShenzhendidnolhavea
clearideaofvhal|iljvasgoinglo
be,bullheyneededlodosomelhing.
Inilially,lherevasaninveslmenlboom
focusingonrealeslaleandsmuggling.
Theboomingoflhecilydrainedlhe
resourcesoulof|lheIeolesReublic
ofjChinaandlheyhadlochange
becauseilranagainsllhenalional
inleresl,saysThomasM.H.Chan,
headoflheChinausinessCenlre,
HongKongIolylechnicUniversily,
vhocrilicizedShenzhensfailingsina
famousarliclelhalromledarelhink
byChineseolicymakers.
Shenzhenresurrecledilselfasa
lov-cosl,lov-laxinduslrialarkinlhe
mid-198Oslolaforeigninveslmenl,
anchoredbynevlycrealed,slale-
linkedlocalcomaniessuchasHuavei
andZTL,andfueledbyarushof
relocalionbyHongKong,Chinaand
Taiei,Chinacomaniesescainghigh
ricesalhome.ThusbeganShenzhens
rollercoaslerridelhalconlinueslo
lhisday.Morelhananylhing,lhe
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ossibililyofbuildinglvocharler
ciliesin}anuary2OO9,lhoughlans
verederailedbylheouslingoflhen-
IresidenlMarcRavalomananabylhe
mililary.
Hondurassucceededinamending
ilsconslilulioninDecember2O11lo
sel u charler cilies afler a facl-hnding
lriloAsiaearlierlhesameyearby
Iresidenl Iorhrio Lobo. He visiled
SingaoreandIncheoninlheReublic
ofKorea.Thegovernmenlenlisled
Romershelasilfoundhisidealo
beinclosealignmenlvilhlheirovn
lansloselufreelradezones.Lfforls
loeslablishHondurancharlercilies
conlinue.
THE SHENZHEN EXAMPLE
IorlhoseacquainledvilhAsias
recenleconomichislory,charlercilies
mighlsoundfamiliar,eseciallyin
lheIeolesReublicofChina(IRC),
vheresuccessinsellingusecial
economiczoneshasimressednolonly
Romer,bulalsoanendlessaradeof
visilorsayinglribuleeachyear.
Shenzhenisashovcasecharler
cily louled by Romer. nce a hshing
villageof3O,OOOeole,Shenzhenhas
grovnlobecomeavibranlmelroolis
ofcloselomorelhan13million,all
vilhin3decadesofbeingulonaalh
loeconomicliberalizalionasasecial
economiczoneandlaboralorylobreak
lheshacklesofadecayinglanned
economyandlureforeigninveslmenl.
Shenzhenmayhaveaearedlikelhe
oslerchildofnevcilies,bulilsalh
logloryvasslrevnvilhhigh-slakes
olilics,overslruggles,lrialand
error,andlenlyoffailures.
Shenzhenvasoneoflhreesecial
economiczoneslhalverecrealedal
lhesamelime,closeloma|orcilies,
andinlendedasaneconomicbuffer
zone lo ease lhe evenlual reunihcalion
vilhnearby,moreadvancedHong
Kong,China,Macau,China,and
Taiei,China.Nolalloflhemvere
successful.
Ior lhe hrsl several years afler ils
crealionasasecialeconomiczone
in1981onasileaboulone-lenlhof
ilscurrenlsize,Shenzhenacledas
aborderlradingarea,bulvasheld
backbyrealeslaleseculalion,lack
REGIONAL HUB Puerto Cortes is
Hondurass main sea port and Central
Americas biggest port. The country
wants to set up charter cities as part of
its plan to establish free trade zones.
DEVELOPMENT STRATEGY Workers sort
vanilla beans in Madagascar, the worlds
largest producer of natural vanilla. The
country considered building charter
cities to attract foreign investment.
biggesladvanlageofShenzhenisils
convenienllocalionallhe|unclion
of|lheIeolesReublicofjChinas
domeslicandforeignmarkels,says
Zhong}ian,arofessoralShenzhen
UniversilysSchoolofLconomics
vhosecializesinlhedevelomenlof
economiczones.
Chanlhinksilsnolossibleforolher
develoingcounlrieslodulicalelhe
Shenzhenexeriencebecauseoflhe
IRCsdominanceinlhenevglobal
lradeorder.Novadays,becauseof
lheChinafaclor,lheresnolmuch
roomforexansionofolhercounlries
loexorl.Therulesoflhegamehave
changed,nol|uslbecauseof|lhe
IeolesReublicofjChinaslov
rices,bulbecause|iljhasdeveloed
a very efhcienl syslem, including
infraslruclure.Ilsalmoslimossiblefor
olhercounlrieslocomele,hesays.
STRUGGLING WITH THE
CHINESE APPROACH
India,forone,lriedloseluIRC-
slyledeconomiczonesandfailed.
ackin2OO5,lhegovernmenl
assedlheSecialLconomicZones
Aclloallraclforeigninveslmenl,
generaleexorlrevenues,andcreale
manufacluring|obs.Thelanvenl
novhere, sabolaged by difhcullies
inacquiringlandloselulhezones
amidoulcrylhallheolicyvould
increasemanufacluringemloymenl
andinveslmenlallheexenseoflhe
livelihoodsofmillionsoffarmers,
vhoverelhelandovners.Therevere
alsosusicionsaboulgovernmenl
involvemenlinlandlransaclions
belveenrivalelandovnersand
rivaledeveloers.
Lven lhe IRC ilself has had difhcully
crealinganolherzoneasbigand
successfulasShenzhen.Slill,lheres
nodoublasloilscalalyliceffecl
inslimulalingacocklailofvider
economicreformsacrosslhecounlry.
Amishmashofcoycalzoneshas
srouledusincelhemid-198Os,each
meelingilsovndesliny,including
89high-lecharks,13bondedzones,
16borderlradecooeralivezones,65
exorlrocessingzones,1Osecial
logislicsarks,13bondedorls,and18
comrehensivereferenliallaxzones.
TheIRCsslralegyhasbeenlodevelo
searaleockelsofsecialzonesand
connecllhesurvivingdolsloforma
slralegiclineandevenageograhical
block,accordingloZhong.
lherlhanlheIRCaroach,
vhalelsecandeveloingcounlries
dolocrealecharler-cily-likezonesas
roosedbyRomer`Chansuggesls
governmenlsmuslbereared
forlhehighcoslsassocialedvilh
infraslruclurebuilding,fromorls,
highvays,andrailvays,loulililies.
Theyshouldalsocurlaillheirglobal
ambilionsandfocusonlhedomeslic
orregionalmarkel,andlakelhe
limelocullivalevariousinslilulions
overseeinglhecily.
Youcannolguaranleelohave
lhemarkel.Youcannolguaranlee
everylhingvillgoaccordingloyour
vishes.Andlhereareinslilulionslhal
gobeyondlheconlrolofcailal.All
lheseinslilulionsvillnolberecrealed
easily.In|HongKong,Chinajlhey
haveevolvedoveralonglime,Chan
advises.
Theinveslmenlvillbevery
exensive.Theideaofbuildinga
cilyinaremoleareaismorelikea
lanlalioneconomymodelinlheearly
slageofcolonialism,inAmericaand
SoulheaslAsia,usingslavelaborfor
olhermarkels.Secialeconomiczones
usedchealaborvhichisnolonger
ossiblein|lheIeolesReublicofj
China.Wilhoul|HongKong,Chinasj
infraslruclureandinduslrialrelocalion
from|HongKong,Chinaj,Shenzhen
vouldnolbeablelobuilduils
exorl-orienledinduslriessoeasily.
Ilsnolsomuchaboullhemodel,
bulaboulhovlosolvelheraclical
roblems,Chanadds.
Maybealesscosllyaroachislo
slarlvilhvhalxfamInlernalionals
DuncanGreencallscharlervillages.
Thearoachhassomesuccess
likeinsomesecialeconomiczones
in|lheIeolesReublicofjChina,
saysGreen,headofresearchallhe
Uniled Kingdom ofhce of lhe aid and
develomenlcharily.Youcrealea
lillleexerimenl,ifilvorks,lhenyou
scaleilu,ifildoesnlvork,youdilch
il.Ifyoucomeuvilhonebigidea,
likecharlercilies,ilcouldlurninlo
acomleledisasler.Ifyoudosmall
exerimenls,lhenyouvouldbemore
likevenlurecailalisls.Ifoneoflhem
succeeds,ilvillhelaylhebills.
Youcanexerimenl,bulIlhinkyou
shouldhavesmallexerimenls,ralher
lhanbiglans.Smallisbellerlhan
big.Youhavelobeablelofailvilhoul
deslroyinglhesyslem.
TheGovernmenloflheIRC
aarenllylhinksilisossiblelocreale
offshoresalellilesofilssecialzones
onaminialurescale.Ilhassleed
oulsideilsborderslosreadlhevord
andundervrilelheeslablishmenlof
secialeconomiczonesinvarious
AfricancounlriesandVielNam.
ulolhersremainskelical.Ha-
|oonChang,adevelomenleconomics
rofessorallheUniversilyof
Cambridgeobserves,Ilisonelhing
foracounlrylhalisalreadyvellrun
locrealeexerimenlalockelsrun
byaforeignbody(allhougheven
lhalIdoubl),bulilisquileanolher
foraoorlyruncounlryloleaveillo
oulsiderslorunlhemoslimorlanl
laces.Q
Hong Kong, China,
a tiny enclave of
good governance
that grew faster than
its neighbors for
decades, is often cited
as an example of the
charter city concept
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A Leg Up
A doctor in Thailand has spent decades innovating prosthetic
limbs specially designed for the poor
YKarenLmmons
T
herdchai}ivacaleisbesl
knovnforlheroslheliclegs
hesmadeforlvoelehanl
landmineviclims,Molalaand
Mocha,vhoverein|uredvhilevorking
inMyanmar(lhoughlesssoforlhedog,
horse, and eagle he also has oulhlled).
IeoleinMalaysiaknovhim
forbringinglhemavasllycheaer
allernaliveleg.Andurundi,Senegal,
andAcehinIndonesiaknovhimforlhe
vorkshosheandhislechnicianssel
uinlhosecounlrieslomakealighler
arlihcial leg vilhin a day lhal amulees
vhoareoorcanaffordandusemore
easilyandcomforlablysolhallheir
livesarebeller,sayslhesofl-soken
71-year-oldorlhoedicsecialisl.
}ivacalehasalsocrealedaleglhal
lelsfarmersmarchlhroughmud,run
lo lhe rice held, hike u hillsides, go
barefoolinlheirhomesvilhoullosing
lheirbalance,andraybenlleggedina
uddhisllemle.
Ivanlamuleeslovalknormaland
lohavealeglhallooksnormal,hesays,
InhisnaliveThailand,lherearesome
3O,OOOlegamulees,novduemoslly
lomolorcycleaccidenlsandinfeclions,
says}ivacale.War-affecledcounlries,
suchasSenegal,likelyhavemanylimes
lhalnumber.
}ivacalebecamevellknovnin
Thailandin1991aflerlheBangkok Post
headlinedhiscrealionoflhevorlds
cheaesl arlihcial legsal 7OO bahl
each (aboul $21 lhen)using melled-
dovnsodacanlabsandacelone-melled
Yakullfermenledmilkbollleshis
assislanlscollecledfromgarbagebins.
Aflera}aaneselelevisioncrev
ickedulhesloryofhovlheir
counlrysYakullbrandvasbeing
recycled,hebecameahilin}aanand
receiveddonalionslhalheusedlo
makelegsforlheoor.
Theexislingroslhelicusedbymany
ooreoleinThailandcouldbeused
by farmers lo vork in vel helds, bul
}ivacalereferredlheYakullbollle
becauseilvascheaerandeasierlo
mainlain.
TheIrincessMolhersalronage
enabled}ivacalelocrealeamobileunil
and hnally rovide legs for lhe real
underrivilegedamulees living in
remoleareasandlhoselhalcouldnl
affordlolravelfar.Wilhdonalions
andvolunleers,henovmakesaboul
hve lris a year around Thailand,
sendingaveekinanarea.Hehas
sinceselusmallvorkshosineach
rovincesolhallegscanmoreeasilybe
relaced.
TheIroslhesesIoundalionhas
alsolrainedmosloflheroslhelic
lechniciansvorkinginublic
hosilals,allhoughsomehosilals
slilluselegmodelsmadeofimorled
malerials lhal cosl hve limes more.
Hismobileunilshavealsovorkedin
lheLaoIeolesDemocralicReublic,
Malaysia,andMyanmar.
Whenheexlainedlhismelhodlo
lheIrincessMolherofThailand,vho
readaboulhiminlhenevsaer,
andloldherlhalhemadelhelegs
oflenvilhhisovnfunds,sheoffered
locoverhisexenses.Sheandher
daughlerselulheIroslheses
IoundalionofHRHTheIrincess
Molher,andeversince,anyamulee
vhoisoor,regardlessofnalionalily
orreligion,receivesalegforfreeeach
limeanevoneisneeded.Achild
villneedaboul253Oroslheliclegs
inalifelime,vhileanadullamulee
villneedulo2Orelacemenls,
}ivacalenoles.
AllheKingofThailandssuggeslion,
}ivacale sloed using acelonevhich
lhe monarch lhoughl vas unheallhy
and relaced il vilh hrsl olyesler resin,
andlhenolyroylene.
FARMERS FOOT
}ivacalesoondiscoveredlhalfarmers
lrealedlheleglikeaairoffeslival
anlslheyusedonlyforsecial
occasionsforfearlhalvorkingvilhil
vouldbreakil.Ilvasloofancy,bulky,
andheavyforfarmersvearing|iljon
lhefarmorvadinginvaler,herecalls.
So}ivacaleremovedlhefoam
cosmelicoulerlayer,slrenglhenedlhe
melalshank,andreducedlhefoolloa
clubshae,crealingakindofmedium-
lechegleg.Healsorelacedlhe
voodenkeelinsidelheconvenlional
solid ankle cushion heel (SACH) fool
vilhnylonanddesignedilinloa
C-shae,vhichgiveslhefoolahuman-
likesringloushlhelegforvardand
rovidebalance.
Thefarmersfoolislheonlyone,
Icansay,inlhevorld,}ivacalealmosl
vhisers,asiflellingasecrel.The
samelechniqueandCshaeisalso
usedinlhecosmelicfool,vhichhels
saveenergyvhenvalkingvilhan
arlihcial leg.
Mosl arlihcial feel are made for
vearinginsideshoes,andlhusare
unablelomainlainbalancevhen
unfellered.Iarmers,headds,aregiven
lvolegs,lhe1.2-kilogramfarmers
versionlovearforvorkandlhe
1.5-kilogramcosmelicone.
The farmer's leg, lhe hrsl versions
ofvhichvereheldonloalegslum
vilhalealherslra,vasslurdybulnol
easily hxed if damaged. They became
moreconvenienlandcheaerafler
}ivacaleandhislechniciansremoved
lheslra.yexlendinglhebrimoflhe
sockelandlheolyelhylenefoamliner
higheruonakneelocrealevhalhe
callslheSuraCondyleSusension
model,aersoncaninserllheirslum
alanangle,lvislilforvard,andslarl
valking,asalechniciandemonslrales
inlheIroslhesesIoundalions
vorksho.flhe56slaffmemberslhe
foundalionemloys,14arelechnicians
vilhroslheliclegsand8oflhemare
amulees.
REDUCING COSTS
Throughconslanllinkeringand
relhinkingoflheirmodels,}ivacale
andhislechnicianshavemadeaseries
ofimrovemenlsandinvenlions.In
1995lheycrealedalegforabove-lhe-
kneeamulalions.In2OO6lheymadea
olycenlricknee|oinlfromaluminum
lhalcanmakemullilemovemenls,
includingbendinginalemle.Andin
2OO8 lhey modihed anolher American
lechniqueforquicklymakinglhemold
ofalegslum,vhichisnecessarylo
make lhe arlihcial leg.
Goneverelhedaysoflasler
andgysum,relacedbyabaglhal
resemblesacakedecoralingfabriclube
lhalusesvacuum-ackedlechnology
lomakeanegalivemoldvilhsandin
aboul15minules.Alegcanbemade
vilhinadayfromlhemold,saving
ooreolelimeandgrealexense.
Thesand,vhichgoesrockhardvhen
lheairissuckedoul,fallsaarloncelhe
airisrelurnedandcaneasilybereused.
Thenegalivemold,vhicherfeclly
resembleslheslum,helscrealelhe
lighl hl of lhe roslhelic leg. }ivacale
believeslhesyslemvorksevenbeller
lhanlhemorehigh-lechcomuler-
generaledmodels.
Thisislhelechnology}ivacale
inslalledinlhevorkshosinThailand,
lheninurundiin2O1O,afevmonlhs
agoinSenegal,andinAceh,vhere
avorkshoinslalledin2OO9vas
udaled.}ivacalecanseluavorksho
foraround$3O,OOO$5O,OOOandannual
coslscanrequireonlyaboul$15,OOO,he
eslimales.Hesuliesalcoslricelhe
infraredovenforbakinglhelasliclegs
andfoamliners,vacuummachines,and
ulensilslhalheandhislechnicianshave
designedandrovideslhemalerialsfor
lhelegs,vhicharemadeinachocolale-
brovncolorforAfrica,alsoalcosl.
AllhoughlheIroslhesesIoundalion
rovideslhehard-lo-relicaleraclice
ofgivingfreelegsloeveryoor
amulee,lhecosmeliclegcoslsaboul
$16Olomake,vhilelhefarmerslegcan
befabricaledforaboulhalflherice.
}ivacalerelired12yearsagofromlhe
roslhelicvorkshohecrealedallhe
norlhernChiangMaiUniversilyMedical
Cenlerduringhisresidencyvhenhe
vasonly27.Hemainlainshisdecades-
oldrivaleracliceandslilllecluresal
lheuniversilyaboulhisroslhelics,bul
muchofhislimeissenlhelingsread
lheuseofhislechniques.Myaimis
for every amulee lo have an arlihcial
leg,hesays.Hisnexldreamlocalions
forbuildingavorkshoarehulan,
Myanmar,andIauaNevGuinea,
vhereheknovslheneedisimmense.Q
Of the 56 staff
members the
foundation employs,
14 are technicians with
prosthetic legs and 8 of
them are amputees
RISKY RIDE There are some 30,000
leg amputees in Thailand because of
motorcycle accidents and infections.
H
L
M
I
S
.
I
R
RECONNAISANCE
H
L
M
I
S
.
I
R
I
nacoaslalIauaNevGuinea
(ING)village,Tomaru,a
vidovervilhlvochildren,
lakes u dynamile hshing lo
increasehiscalchesandmakemore
money lo fulhll his dream of roviding
hischildrenvilhaneducalion.Then
hemeelsabeaulifulmarinebiologisl,
ini,doingresearchoncoralreefs.
Theyfallinlove.uliniromoles
suslainable hshing raclices and is
aghaslvhenshelearnslhaloneof
lhe culrils raclising illegal hshing
isTomaru.AslheradiodramaNau
em Taim(NovislheTime)unfolds,
lhevidoverslruggles,veighinghis
loveforinivilhlhequesllohelhis
childrenvilhfaslcashandlhefear
ofinlroducinghissonlodangerous
dynamile hshing. In lhe end, Tomaru
and lhe lislenerschoose suslainable
hshing raclices over deslroying lhe
reefs,aresourceforlhefulure.
LveryTuesdayandThursdayal
8:3O.m.sinceIebruary2O11almosl
3millionresidenlsacrossINGhave
lunedlheirradiosloIM1OOlofollov
lhelrials,lribulalions,andrevelalions
ofTomaruandolhersinlhelocal
Iidgindialeclrogram,Lnglish
seakershearasimilarseries,Lchoes
ofChange.olhareclassicsoa
oerasvilhafullrosleroflollvisls
andcliff-hangerslhalhavelisleners
anxiouslyavailinglhenexleisode.
Soap Operas for
Social Change
Serial dramas broadcast on radio or television can be an effective way
of promoting social change at the grassroots level
YMargoIfeiff
residenlofCommunicalionsand
IrogramsforlheUniledSlales-based
IoulalionMediaCenler,anonrofil
nongovernmenlorganizalionlhal
roducedNauLmTaimandolher
serialsin17counlrieslhroughoul
Africa,Asia,andLalinAmerica.
Usingenlerlainmenlloeducaleisas
oldasarablesandfables,bulilvasnl
unlillhe197Oslhalsolidresearch
onlheirimaclvasmeasured.In
19771978,anearlyro-develomenl
soaoera,Acompaname(Accomany
Me)vasbroadcaslinMexicolo
romolefamilylanning.Thecrealor,
MiguelSabido,vasvice-residenl
forresearchalaMexicanlelevision
slalion.HeadaledlheoularLalin
Americantelenovela(lelevisionnovel)
formalofcrealingslrongemolional
bondsbelveencharaclersandvievers
TIME TO CHANGE In Papua New Guinea,
a radio drama promoting sustainable
VKLQJSUDFWLFHVLVUHDFKLQJVRPH
PLOOLRQUHVLGHQWVDFURVVWKHFRXQWU\
ullherogramsarenolsellingsoa.
Inslead,lheydeliverabroadseclrum
ofosilivesocialchangelhrough
educalionalenlerlainmenl.
During2O8eisodesairingover
2years,eachseriesfealureslhree
searaleslorylinesofcharaclers
confronlingissuesfromoverly,
violence,familylanning,gender
inequalily,educalion,landovnershi,
andecologyloalcoholanddrug
addiclion,sexualbehavior,malaria,
and HIV1AIDSand ullimalely
makinglherighlchoices.Nev
Guineaisexlremelymounlainousvilh
fevroads,ahighlevelofoverly,
andlelevisionovnershiofless
lhan1O/,yellhelvorogramsare
reachinginlolhehomesofalmosl
halfofNevGuineasoulalionof
6.7million,saysKalieLlmore,vice-
overalenglhyeriodoflimeduring
vhichadramalicandunrediclable
lollineencouragesvieverslo
conlinueluningin.y1986Sabido
hadroducedsixsocialconlenlserial
dramas.Duringlhallimelhenumber
offamilylanningadolerssoared,
conlracelivesalesskyrockeledand
lhecounlryexerienceda34/decline
inoulaliongrovlh.Asaresull,
Mexicovasavardedlhe1986Uniled
NalionsIoulalionIrizeaslhevorlds
foremosloulalionsuccessslory.
Sabidohadcrealedasle-by-sle
melhodologyofenlerlainmenl
vilhrovensocialbenefilloreach
andchangelhebehavioroflarge
numbersofeole.Thevidelyused
lemlalecrealesclassicslorylineslike
boy-meels-girlandrags-lo-riches,
carefullyformulaledlodeliver7O/
enlerlainmenlvilh3O/educalional
messagesvoveninlolhescril.
Mullileslorylinessuchasurban,
semi-urban,andruralscenariosunfold
allhesamelimeloengageavider
audience. ul lhe key is change
characlersmighlbeginvilhnegalive
values,bulinleraclionsvilholhers
andlollvislscomellhemlorealize
lhevalueofosilivesocialbehavior.
Ilshardlysurrisinglhalcarefully
crafledandfocusedrogramscan
insligalechange:simlyinlroducing
lelevisioninloruralIndiaexosed
vomenloaglimseofurbanlife
vhere vomengenerally vell-
educaled vilh fev childrenvork
oulsidelhehome,runbusinesses,and
conlrollheirmoney.Theconsequenl
droinferlililyofruralIndianvomen
exosedloTVvasequivalenllo
increasinglhelenglhoflimegirlsslay
inschoolby5years!
Toroducelheserials,lhe
IoulalionMediaCenlerlrainslocal
vrilersnolonlylocrealelhelong
formaldramas,bulalsolodirecl
androducelhem.Thalsnol|usllo
rovide|obsandskillslocarryon
vilhaddilionalseries,bulalsobecause
localsbeslunderslandlhesublle
nuancesoflheircullure,lheissues,
laboos,andchangesneeded.
lheoularcullureinHindi-seaking
norlhernIndia.eforelhedramavas
aired,lhousandsoflellersveremailed
lofulurelislenersinvilinglhemlo
sendinlheircommenlsandqueries.
Theradioslalionreceived15O,OOO
lellersandansveredlhemduring
radiodiscussionrograms.Among
lhemvasalvo-by-lhree-foolleller
signedoflen vilh lhumbrinlsby
184residenlsofLulsaanVillagein
UllarIradesh.Ilslaled:Lislening
loTinkaTinkaSukhhasbenefiled
alllislenersofourvillage,esecially
lhevomen....Theyformedavillage
grou,endeddovry-giving,and
slarledaschool.
Morelhan2OOheallhinlervenlion
educalionalenlerlainmenlrograms
havebeenusedsincelhe198Osin
5OAfrican,Asian,andLalinAmerican
counlries,rimarilyforreroduclive
heallhissues,suchasHIV1AIDS
avareness,familylanning,leenage
regnancy,environmenlalheallh,and
genderequalily.Soasarenolonly
effeclive,lheyarealsochea,cosling
aslillleas$.O3erruralAsianlislener.
Wilhhigherislandcoslsinremole
ING,lhericelagforanaverage
eisode of Nau em Taim is $6,75Obul
eachlislenercanslillbereachedforlhe
2-yearduralionoflheseriesforless
lhan$1.Thero|eclisadminislered
bylheIMCandfundedbylheUniled
Nalions,lheDavidandLucileIackard
STAY TUNED United States-based
Population Media Center uses
HQWHUWDLQPHQWVXFKDVVHULDOUDGLR
GUDPDVWRHGXFDWHKRXVHKROGV
WKURXJKRXW$IULFD$VLDDQG/DWLQ
$PHULFD
I
L
D
L
R
L
R
G
Introducing
television into
rural India exposed
women to a glimpse
of urban life where
womengenerally
well-educated with
few childrenwork
outside the home,
run businesses, and
control their money
Theycanalsoregionallylailor
conlenl:forahighlyoular2O-minule
educalionalradiodramabroadcasl
lviceveeklyforayearinIndiain
19961997calledTinka Tinka Sukh
(HainessLiesinSmallThings),a
ollyvoodsingervascommissioned
locomosecalchylunesforlhishighly
musicalseriesdesignedloaeallo
RECONNAISANCE
www.development.asia 52 Development Asia AprilJune 2012
P
I
C
T
U
R
E

C
R
E
D
I
T
Foundation, Population Services
International (with a grant from Asian
Development Bank), AusAID, the
Flora L. Thornton Foundation, and
Colgate-Palmolive.
One powerful aspect of dramas
is that listeners relate to the radio
characters and they discuss and
gossip about the complex situations
in which they find themselves, says
Katie Elmore, and that provides a
comfortable environment for them to
tackle issues and personal experiences
they might normally not talk about
with others. That was the case in the
devoutly Catholic Philippines where
the 120-episode Sa Pagsikat Ng Araw
(The Hope After the Dawn) radio
serial drama addressed delicate
subjects like family planning, HIV/
AIDS prevention, and spousal abuse
in 2005.
Viet Nam has taken strongly to
educational entertainment radio
dramas. At the invitation of the United
Nations Population Fund in Viet
Nam, a 104-episode radio drama, Khat
Vong Song (The Desire of Life), was
created to address issues relating to
reproductive health and HIV/AIDS,
including improving the status of
women, delaying the age of marriage,
and valuing male and female children
equally. It debuted in March 2008 in
all 64 provinces on Voice of Vietnam
Radio and is streamed online. An
interactive website allows listeners
to find more information about the
programs issues, post their comments,
and download episodes.
While most radio series focus
on age-old concerns, they are also
being used to address new issues.
In July 2011 Voice of Vietnam began
broadcasting a second serial, Hanh
Trinh Zanh (Green Journey), focusing
on climate change and environmental
practices in four regions of the country
from river deltas to mountains. While
the varied characters of Hanh Trinh
Zanh are tested through dramas of
love, friendship, and family ties,
they struggle with accepting new
sustainable farming methods and
drought resistant crops, are deterred
from illegal tree cutting, and learn how
to survive in an economy increasingly
dependent on natural resources.
Radio may be low-tech and old-
fashioned technology, but it is proving
to be an ideal information delivery
method for social change, even in
a hyper-wired world. Reaching so
many people in remote areas at such a
low cost, says Katie Elmore, would
otherwise be impossible. Q
www.development.asia AprilJune 2012 Development Asia 53
ON THE RECORD
In our quest for growth
and development I
think we have lost
the balance between
development on one
side and environment
on the other ... If we
have the political will,
can Asia embrace
sustainability? I say yes.
$P,FRQGHQWWKDW$VLD
would do so? I confess
that I do not know.
Tommy Koh, ambassador-at-large
of Singapore, speaking at the Asian
Development Banks Eminent Persons
Forum in February 2012
Theres this theory that you
have to pick one: economics or
environmental performance.
Thats nonsense. Innovation is
the way you can have both.
Mark Vachon, vice-president of GEs Ecomagination program, in a video interview at the
biennial Investor Summit on Climate Risk at the United Nations in January 2012
The fact that policies often fail for no good reason is annoying, but
less depressing than the view that it is a big conspiracy against the
poor. Name your favorite enemycapitalism, corruption... Our view
is easier. You think hard about the problems and you can solve them.
Esther Duflo, Abdul Latif Jameel Professor of Poverty Alleviation and Development
Economics at the Massachusetts Institute of Technology and coauthor of the book Poor
Economics with Abhijit Banerjee, in an interview with the Financial Times in March 2012
At present, Europes debt
problem poses the biggest risk
for the global economy, including
Japans. If the situation worsens
further, it may trigger a global
credit crunch
Bank of Japan Governor Masaaki Shirakawa
at a news conference in January 2012
A
F
P
,

S
I
N
G
A
P
O
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E

P
R
E
S
S

H
O
L
D
I
N
G
S

(
P
H
O
T
O

O
F

T
O
M
M
Y

K
O
H
)
Removing barriers
WRDFFHVVWRQDQFHIRU
women and making
QDQFHHTXDOLVQRWD
small weapon in this
battle.
World Bank Managing Director Sri Mulyani
IndrawatiVUNO[PUNNLUKLYPULX\HSP[`
Good Governance. Strong partnerships. Investment in infrastructure, education, and
the basic necessities of life. Tese are the keys to solving the poverty puzzle and giving
billions of Asias children hope for a brighter future.
From 25 May, delegates from 67 member countries will gather in Manila, Philippines
for ADBs 45th Annual Meeting to discuss development in Asia and the Pacifc.
Find out more at www.adb.org
Solving the poverty puzzle
www.adb.org

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