Deve/opinnt 23210 OUT REAC HEA P U T T I N G K NO, W L:E D GER: 0 WiR 0;K FR DE RM NT NANCY BIRDSALL ON HUMAN CAPITAL ANIL AGARWAL ON THE ENYVIRONMENTf R R E LITANO O FINANCIAL RISKS KUMI NAIDOO AND. LUIS MORENO OCA PO ONGOVERNANCEAND,' CORRUPTION ALSO L L SARA-4 CAVMN Hi EXCHANGE RATE DEBATE WWORLD B A N K I N S T I TU.T Ei IPI-lb, k. bjfti ! v V L U M ET H R E E, N U M B E R O N E a W I N T E R 2 0 0 1 Michael Cohen ~~~~~~~~~~~~~~~~~Development relies on the process of growth, through New York University, New York. USA ~~~~~~~which both qualitative and quantitative determinantes Paul Collier ~~~~~~~~~~~~~~~~~~interact to improve outcomes. This is the message in the The 'Wcirld Bank, Washington, DC, USA ~~~~~~~World Bank's recenitly pubiished QulJ3ity of Gmowth, wvhich Stephen Dennii~~~~~~~~~~~~~~~~~ ~looks at four key themes crucial to the development agen- John Gage ~~~~~~~~~~~~~~~~~~~~da: investing in education;, safeguarding the environment, Sun Microsystems, Palo Alto, California, USA. ~ensuring stable, prolonged economric growth-, and promot- The World Bank, Sara,ievo, Bosnia ~~~ ~inggoodgovernance, ac must be iniue as a compo- Kwawe Karitari ~~~~~~~~~~~~~~~~~nent of growth to ensure improved wel-are, espec ally of Sc.hool of Journalism and Communications, ~~~~~the poor. The University 0f Ghana, Leg'on, Ghana ~~~~~~~As pointed out by The Economist in its reviewv of the Vira Nanivska ~~~~~~~~~~~~~~~~~book, why should this theme seem so startingly nevv? Internatioal Center or Policy tudies, Kiv, UkraineThe answer is simp e-bocause policy analysis and Catholic University, Lima~~~~~~~~~ Peru. ~advice stlill neglect these issues. Countries have neglect- J. Robert S~~~~~~~~ Prichard a~~~~~~d them in practice as well. Investment in human capital University of Toronto, Canada ~~~~~~~~~~remains low, and inadequate attention is given to institu- Monterrey Tech University System, Monterreyi Mezri~o tional capital, the value of natural resources and the rule of law. Woo suffers the most from these failures? The Chicago Metropolis, Chicago, IL, USA ~~~~~poor. How do we reduce this trend? Recognize that Vsvienne Wee ~~~~~~~~~~~~~~~~~~~these factors play a crucial role in determinantes whether Centre for Envronment, Gende and De elopuint, Singaporetne beneflts of growth will be distributed to all. :.~ rzeotuTREAzrispuhlihedqarredbythWorldank nstitte ad refectsIn this issue we examine the above arguments, and offe a angeof iewoint frm a aneof uthoswol4 tie ntidQ at rpreent ffiial give a more in-depth look at the reasoning behind them. positionsf the Woni Bank orthe vie sof as mangement. . Nancy Birdsall of the Carnegie Endowment for MaR31 McNeil ~~~~~~~~~~~~~~~~~~International Peace looks at the need to recognize human Anna t~~~~~~~~~~~~anaon ~~~~~~~~~capital as a productive asset, one that, like natural, physi- societe Ed/tar ~~~~~~~~~~~~~~~~~cal, and financial capital, can generate income as well as Bob Soak ~~~~~~~~~~~~~~~~~~~other economic ano social benetits. And Agarwal of ejttaedpr £tCtLOIi ~~~~~~~~~~~~~~~India's Center for Science and Environment in New Delhi, Photoa0d llusratin creits:(rovr: Bb Soa, Phin/T~ Wold Bak; Pge2,4-5:discusses the role an active civil society plays in ensuring Photo/Nourin Haam- Pge 14 PictreDek P oos/Erc Mitert Pges 1-19:the protection of natural resources. Robert Litan of the NewsmkirrsPhots/Anit Bhrgaya; Pae 21:1 daxStoc tmAg se ages 2- ~Brookings Institution examines foreign capital investment Phots/Eic Miler;Pag 29:APP hoto/Paisp reditasrPa~e .3: Inex Sackin emerging economies, and Kumi Naidoo of Civicus and hnageiy/iin McGure; Page36: Blak Star Poros/G~i&ulihs.Luis Moreno Dcampo of Transparency International dis- cuss the watchdog role of citizens groups in curbing cor- ISSN 102 -797X © 200t The World Bank Institute ~~~~ruption. As always we invite your comments on the issue. For mnore information visit our website at World Bank Institute wnewortdbanInorg/wlsi ~~www.worldban k.org/d evoutreach. The World Bank 4evrreseiC~~~ro dbank.org . VV~e look forward to hearing from you. Mary McNeil TK~~~~~~ WORLD BANK ~~~~~~~~~~~~~~~~~~~Editor- , g ~~~~~I Development OLITREACH X; VolumeThree, Number One *Winter 2001 What Our Readers Think 2 The Global Dialogue VLet rOn Ecu ador Rus lir anzd Tanazazizwl Development News 3 -~ SPECIAL REPORT: The Quality of Growth 4 Rethinking Governance: The Quality of Growth: Key to Less Poverty and The Case of South Africa 24 Better Lives for All 5 Kumi Naidoo Governianzce must be a partzer.ship venture between elected officiaL Vinod Thomas et al. fi anld the organizatien l fored7e by e itiZend dzCtilzq 'in the Developnientgenerally calLi for econotc growth, hut it also ac involves the hunman, social enviironnmental, antdgovernantce dinzen?- ptblic itterest swOns. Quantitative and qualitative aspects mumt be part of the State Capture: Who Represents the Poor? 29 dellze agenda Luis Moreno Ocampo From The Economist - CON and PRO: Institutiomi are often contta/olled by a network of people w ho use the Quantity and Quality 8 govermtnent for their owni interest. New, networks, which include the Why Quality Matters 8 poor and all those who are currently excluded, nzust befornmed Vinod Thomas The first article takes a critical look at the book The Quality of Growth, the second one is a re.s,ponse y te hooks lead author FEATURE Growth: Quantity Versus Quality 10 Exchange Rates: Sudeshna Bandyopadhyay The Targeting Debate 33 An overview of the thought.s and opinuons voiced by hundreds of Sara Calvo ,p participants wvorld -ide in an onlinze Developl72ent Forum Dialoque The opti7al exchange rate regime on the quality ofgrow'th varies across countrics and over Y< time. The choi'ce of the exchange Human Capital and the Quality of Growth 14 rate reqine could h7elp reduce the Nancy Birdsall likelihood of output collapse The teiue ideas and te,ev technologics that ale critical to increased productivity and growth rely on high levels of human capital The Value of Natural Capital 18 DEPARTMENTS Anil Agarwal Voices from the Field 36 Environmental deiqradation wi most deva,statin/q to the pool; First hand insight into the idJUes of developinent and a w indowi for Environmtental protection and developmenit mustgo hand in hand, global interactionz a1s 7showin by examplesfront IndiMa Knowledge Resources 37 Accepting Foreign Capital: Lessons from Recent Electronic andprint tools thatfacilitate the,sharing fknowledqe Crises 21 Robert E. Litan Bookshelf 39 it ij im2portant t .n n7zazi/Z/inz/ finaiz/ziaz Calendar of Events 40 riskfsi not to7 treat all foreign7 capital alike. What i right policy for one counzltly or one set of conditionw may not be rightfor aniother -~~~ The Global Dialogue Following the release of the Summer 2000 issue lift up the population and put them of Development OUTREACH, we hosted a Global back on their feet, it is extremely Dialogue videoconference with the objective of important to have a poverty reduc- enhancing dissemination of knowledge for tion strategy that invests in post- development by providing a companion product conflict programs. At the same to the magazine. The panelists who participat- ;7 time, they pointed out tnat a strate- ed in the dialogue from Worid Bank headquar- i gy that focuses only on social seov- ters in Washington, D.C., were the authors of ices would not be effective. It is the articles featured in the magazine, which important to adopt a range of initia- focused on the topics covered in the World tives from macroeconomic policies Development Report 2000/2001. We connected to structural reform, as well as socia services. But tneir main concern was with project that was funied. trade globalization. They argued that global Anothe problm Theyraised trade pclicies negatively affect their economy. touwere concered with the short-term globalization is a serous impediment As for | consequences. They said that in the growth-enhancing policies, they thought they pero mlcsios of aneigthae benefits of growth,many pople wlldieacroegonodmorth pooiiere,bu wen wif grwnevis o_penness. ofWachilevn they suppoteneth broad-eased, e.g if the majority of the poor via sate//ie with three counfries: Ecuador because they cannot compete with would participate. Russia, and Tanzania. The audience inl each [ureignz products. Final,aqetiono grwas risec chat isn com-the country comprised poliocymakers from govern Finally, a questioncwaseraith the shom- From Quito, Ecuador meet agencies, researchers from think-tanks, mon to transition economies-the question of The participants expresser concern for what and representatives of non-governmental the changing nature of the poor. They ponted they see as a vicious crcle. They said that rganizations and civil society at large. A hrief out that in Russia there are people who became when a small country is affected by an external synopsis of some of the issues raisedbby the poor all of a sudden. These people are educat- financial crisis,. the government taes macro- Rusa a. Tazna The aundnc skile aneaeacbehoo eor participants Is offered below ed'alled a n hav rabeen poor eo economic measures to overcome the crisis, The situation is different in some regions of such as raising taxes, cutting subsidies, and From Mivoscowe, Russia Russia, where it resembles that of other aevel- reducing investment in the social sector. Participants in Moscow expressed concern oping countries. There, people have been poor However, all these measures increase poverty about the implementation of financial policies for decades- their parents were poor, their and affect vulnerable people. As a conse- in their country. To fight poverty, they argued, grandparents were poor-and they believe that quence, the community becomes disengaged the government needs resources to implement this is jest a normal way of life. The transition and civic participation decreases. The latter good policies. But since the country is poor and poor are a new phenomenon that should be was seen as a particularly troublesome point, the tax base is limited these resources are tackled. because one important factor in the fight lacking, creating a vicious circle that is difficult against poverty is a strong civil society. From Dar Es Salaam. Tanzania to break. Corruption is also a cause of poverty. Oeof the Es in Tanzania In the case of international loans, they said, One of the concerns in Tanzania reflected the there is not enough control on the part of the ongoing violence that afflicts the continent. donor, and often the money is not spent for the They said that poverty is often caused or aggravated by war and civil strife, and that to _a 2 W C R I, ) R A I K I r s Tr i i u i iE Development News News highlights on development issues from around the world Cisco Networking Academy national, sub-regional and regional levels. The released in Hanoi in advance of the Millennial Program's New Initiative AKNF concept embraces a range of disciplines, Consultative Group meeting on December 14 Global Knowledge Partnership member organi- from economics to anthropology and to agricul- and 15. It stressed the importance of coordina- zation, Cisco Systems, Inc., has announced that tural science. For more information, visit: tion and partnership among all of Vietnam's it will invest $3.5 million in educational pro- www.unsia.oro/aknf/, or e-mail Sean O'Siochru development partners so Vietnam's resources- grams in more than half of the world's Least (sean@nexus.ie) or Bruce Girard including Overseas Development Assistance- Developed Countries (LDCs). Cisco will deliver (bgPcomunex.net). can be used more effectively. In order for the investment through its global Cisco Vietnam to achieve the economic and social Networking Academy Program, which teaches Ethiopia to Receive $400.6 transformation it desires, the country needs to students around the world to design, build and Million to Rebuild Economy build and strengthen its six "pillars" of develop- maintain computer networks (details of this pro- The World Bank approved two loans totaling ment-enterprise development, rural develop- gram are featured in a GKP Story available at $400.6 million for Ethiopia to help the war-torn ment, human and social development, infra- www.globalknowledge.org, click on "What do African nation rebuild its economy. The larger of structure development, environmental quality, we do" then "Mastering the Net"). Cisco will the two loans, for $230 million, is targeted at and good governance-in order to identify and work with its current strategic partners, the those Ethiopians most affected by their nation's remove impediments to growth. United Nations Development Programme (UNDP) recent battles with neighboring Eritrea. These and the United States Agency for International funds will be used for a wide range of purposes, International Forum on Women Development's Leland Initiative, to extend the including efforts to remove land mines, rebuild and ICT Networking Academy program to 24 LDCs. With roads and power facilities, and prevent the fur- UNDP Malaysia, along with the Malaysian this new initiative, Cisco will also partner, for ther spread of HIV/AIDS. The second loan of National Council for Women's Organizations the first time, with the U.S. Peace Corps, the $170.6 million is to support ongoing peace ini- (NCWO) and the Department of Women's Affairs United Nations Secretary General's new initia- tiatives and provide additional resources for of the Prime Minister's Department, co-spon- tive UniteS, and the United Nations Volunteers, investment in the social and economic sectors, sored and co-organized an international forum to help implement the project. For more informa- thereby expediting economic recovery. The proj- on women and ICT titled: "Women in the New tion contact Elli Takagaki at ect will help the government demobilize its ICT Era: Challenges and Opportunities." The etakagak@cisco.com armed forces and return its soldiers back to their forum brought together women from all sectors communities. of Malaysian society and highlighted the use of African Knowledge Networks ICT as a tool for women's empowerment and Forum to be Launched Vietnam: Entering the 21st advancement. A series of workshops provided a The United Nations Economic Commission for Century platform for participants to discuss the chal- Africa (UNECA), based in Addis Ababa, is in an A new development report was recently pro- lenges that women face in access and usage of advanced stage of planning for the African duced by the World Bank in partnership with the ICT and to suggest ways in which these chal- Knowledge Networks Forum (AKNF). The AKNF, Asian Development Bank and the United lenges can be overcome. The forum was part of to be launched early in 2001, is conceived as a Nations Development Program, and was a larger national project called "Networking 'network of networks,' bringing Women: Empowerment Through ICT," which together existing African research seeks to develop networking capabilities and networks of research centers, uni- capacity among Malaysian NGOs for improving versities and non-governmental the delivery of community services. For more organizations. It aims to enrich . information contact Ms. Tam Pham at research through building cross- tam.pham@undp.org disciplinary bridges, and to enhance research capacity by, for Visit Us ON t Web. example, using ICTs and the Web, 9evc-lopment OUTMEACH and, especially, to establish pro- vibloqHea ductive bi-directional links between research and policy at . wwwworldbank.org/devoutreach D E V E L O P M E N T o L E R E A C H H W I N T E R Z 0 0 I 3 40- all pop,, v come that in some countries children from poor b 20- / @ schooling. In Brazil and Mexico, for example, / . @maleedulatson emale ault less than 10 percent of young adults (aged 20- 2 are 40 80 100 fanlies borsIOpreneftlttefo puli hospenodin onv 0~ ~~6 the pooes 10 peren o1hoshod0hv Cumlaive°/ (adult) population completed secondary school (compared to more than 70 percent in the richest 10 percent of Sources for Charts 1 and 2: calculations using data from WDI 120001, WIDER households). In countries like India, where inequality databases, and Barro & Lee 12000). Expenditure Ginis in Cat2readjusted to be comparable to income Ginis. there are still large numbers of adults (largely adult women) without any education at all, edu- regions within countries) succeed and others fail at gener- cation (among adults) is less equally distributed than ating and sustaining high levels of human capital. expenditure per capita (across households) (see chart 2). The insights in the book, The Qulity of GroIr'th, take us Other evidence shows that an unequal distribution of much further. They start us dow n a new more promising human capital slows growth, and particularly slows path for policy guidance: treatment of human capital as a income growth of the poor. So in the short run India, productive asset - one that, like land and physical and finan- Brazil, and Mexico face a lower growth path (other things cial capital, can generate income as well as other economic, equal) than Sri Lanka, Malaysia and Costa Rica, where political and social benefits for its owners, but also like other the current distribution of education is already more assets cannot simply be delivered top-down by government, equal. no matter how effective and well-intentioned government Happily, data on the distribution of education over time may be. Like other assets, human capital is an outcome of show inequality falling in all regions of the world; as aver- as well as an input to the 'quality of growth.' It has to be accumulated and maintained by its owners, may well be dis- Chart 2: Inequality of Education and Income tributed unequally, and has value that may Select Countries, 1990s not be realized in the absence of appropriate -Education U1 Income markets and institutions. India .,. . - Consider three issues raised by the Ghana 1 = __= explicit view of human capital as a pro- Brazil = == = ductive asset -issues on which tradition- South Africa 2= al models of growAth are silent. Chile_=__ United Kingdom = = - The distribution issue Kore Sweden - Traditional growth models ignore the dis- United States _= _ tribution of human capital across individu- 0 10 20 30 40 50 60 70 als, and thus the distribution of opportuni- Gini coefficient ties on which growth ultimately depends. DEVELO . )PMlE N T O UT R EA CH N W I NT1ER 2 0D0 1 5 Table 1: Absolute Income Shares of Lowest Quintile of Households, capital markets are Malaysia and Brazil (in US dollar terms) imperfect, and many GNP per capita Income Share Per capita income poor and uneducated Country (PPP-adjusted) of bottom 20 % of bottom 20 % parents are thus not Malaysia, 1989 4,674 4.6 1,075 Brazil, 1989 4,271 2.4 513 able to borrow to Source: Birdsall, Ross, and Sabot, (1995). invest as much as they would like in their age education levels rise, inequality declines. Still, in some children. As shown in the table, Brazil and Malaysia had countries, current inequality in the distribution of educa- similar average levels of per capita income in 1989 (table tion means most children of the currently poor are not 1). But the poorest quintile in Brazil had only one-half the acquiring enough human capital to exploit the new oppor- absolute income of the poorest quintile in Malaysia. Given tunities that market reforms and the arrival of an informa- an income elasticity of demand for secondary education of tion age in their countries are creating. 0.50, if the distribution of income had been as equal in Brazil as in IMalaysia, secondary enrollments among poor The demand issue Brazilian children would have been more than 40 percent Traditional growth models also ignore the demand side. higher - a huge increment. Human capital accumulation is treated as exogenous. Parents' demand for human capital for themselves and Like manna from heaven, it's a good thing that arrives their children is also a function of the benefits they expect seemingly independent of private and collective decisions, from their investment in this capital asset, in the form of and thus independent of such realities as the pre-existing higher futurc incomes for themselves or their children. level and distribution of human capital! What does in fact Expected benefits and thus demand will naturally be determine how much households invest privately and soci- lower for women and for members of racial and ethnic eties invest collectively in their children's education and groups facing job and wage discrimination in the labor health and in other forms of human capital? market. Where market distortions reduce the demand for Private decisions to invest in children are made mostly workers with the limited skills that primary education by parents (including especially mothers in most cultures), affords, the benefits of primary. schooling for those who in part as a function of their own education and income, cannot expect to continue to secondary school will be Thus the initial distribution across households of adult edu- lower. In developing countries where new technologies cation matters - just as tends to be the case with other and open markets are increasing the returns to university- assets. Parents own income and assets matter because educated workers - but leaving behind in relative terms they shape attitudes and expectations, but also because even those with secondary school, families struggling to ensure secondary Table 2: Education and Resource Abundance school for their children Secondary Enrollment (%) will be discouraged Mean Median from even that goal. Resource Poor Countries 28.5 26.0 Low quality of public 1975 Resource Rich Countries 25.3 19.5 schools reduces Difference 2.8 6.5 Controlled Difference 5.7 demand since it reduces the expected benefits Resource Poor Countries 39.5 40.5 (such as higher income) 1985 Resource Rich Countries 35.7 34.0 of keeping children in Difference 3.8 6.5 Controlled Difference 7.4 school compared to the immediate costs. Note: "Controlled Difference" takes into account the average impact on income of secondary enrollment and illit- eracy by means of regression analysis. Categorization of countries taken from Auty (1997). In all these situa- Source: Birdsall, Pinckney and Sabot, (2001). tions, more spending 1 6 v o l R 1 1) B A N K I N S T I 'I l) T 1} Chart 3: Education, openness, and economic rates of premium on public investments in human capital. return in 1,265 World Bank projects The problem of other distortions Economic rate of returnv (percent) For all these reasons, building human capital, espe- cially among the poor, is about much more than edu- 18 r t B > - cation and health programs. A focus on demand 16 reminds us that, like other assets, human capital's 14 value depends in part on its owners' ability to deplov 12 <1 it in a competitive market in which the rules of the | 14.8 _ game reward innovation, entrepreneurship and high- 10 er productivity. The experience of the former Soviet LOVV EC, LI ~yore Union suggests that relatively good stocks of human 'Ohation [ ~ H eo capital need not translate into growth or improved Educet.on leSshuman welfare in the face of distorted markets and Note: Economic rates of return are from the evaluation database of the World repressed political life. Growth, and the quality of Bank's Operations Evaluation Department. Education is measured by the aver- growth depend not only on the level of human capi- age level of schooling of the labor force, and openness by the logarithm of the foreign exchange parallel-market premium. tall but on the deplovment of this asset m the econo- Sources:Thomas and Wang "Education,Trade and Investment Returns.' my and in social and political life. A subheading in Working Paper. WBI, 1997 The Ouality ot Groith says it all: Combine Human Capital with Opportunities in Open Markets (p. 78). and program reforms, for example, to raise quality of pub- As chart 3 (from the book) shows, the returs to investment lic schooling, can make private decisions to invest in (in this case in World Bank-financed projects) have been human capital more affordable and more attractive - bv higher in countries where education levels are higher - but reducing upfront costs and increasing future benefits. But where education really seems to pay off is in more open other changes - outside the province of the "human capi- economies. talt" ministers (of education, health, social welfare and so Growth of human capital, as Schultz suggested, pro- on) are also critical: reducing discrimination, eliminating vides an escape from "ard, manual work and poverty. labor rules that discourage job creation, reform of banking On the one hand, human capital IS not development's and property regulations that discourage lending to the magic bullet. As with other assets, its accumulation, distri- poor. bution, and deployment are an outcome of choices, of poli- There is also a question of demand at the societal level. cies and of institutions. On the other hand, unlike other In countries rich in mineral and certain other (non-renew- assets, human capital does have a special property. Once able) natural resources, the oft-resulting concentration of acquired It cannot be sold or stolen. That gives It a special income seems to generate a political dynamic which limits role, as the people's asset, in ensuring the "quality" of human capital investment (see table 2). Where inequality rowth. of wealth and income is high, rich families are likely to successfully resist the tax burden that spending on good Naney Bird' all is oen ar associate, Carnegq'e quality basic education for the poor majority would Endoi',oenzt for Intet'natiolazl Peace. impose. On the positive side, in more open economies, firms that want to stay competitive in global markets are The sources and full citations for text, tables, and charts likely to press for a workforce able to adapt to constantlv are available with this note at wrw.ceip.org changing technologies and processes. And of course, where the strcngthening of democracv mcans the poor and the middle class can participate more actively in political life, collective decision-making will generally put a high D E V E L O P Ml E E T O U T R E A C H W I N T E R 21 0 0 1 17 The ValIu e of ti , NaturallCapitall t is a good thing that the economic value of natural capital is receiving greater attention, as environmental degradation is likely to be most devastating for the poor. WNe have pointed out in the first citizens' report on the State of India's ; Environment - a unique participatory civil society exercise unparalleled anywhere _ in the world - that environmental destruction and social injustice go hand in hand in a poor country. Any process of economic development that destroys the envi- ronment in a poor country means loss of livelihoods and incomes of poor people, and by definition cannot even be called development. This has been the first time that a powerful voice was raised within the developing world, stating that environment and development must go hand in hand, and challenging the grow now-take care of the eInvironment later syndrome. The report provid- BY ANIL AGARWAL e(d a social and political rationale for the growth of an environmental movement in a desperately poor countryr. Economic growth, when unmanaged, can easily lead to tv in growth policies. But they need to go further. It is an increase in ecological poverty - the lack of a healthy even more important to incorporate sustainability in natural resource base for safeguarding public health and poverty alleviation strategies. Today a major challenge local economies. Even today, the world remains split right facing the world is not just maintaining the global natural down the middle, with one-half of the world's population capital but also reviving it in numerous degraded ecosvs- living on human-made capital and the other half on natu- tems. Nearly half a billion of the world's absolute rural ral capital. For one, the Gross National Product of the poor today live in degraded lands where natural capital modern economy is of value, while for the other, it is has diminished to a point that the traditional biomass inconsequential; for the latter, the local Gross Nature economy has completely eroded. Large parts of China, Product is of value. A large part of the world's people South Asia, Africa and Central America suffer from such depend on a traditional, biomass-based subsistence econo- degradation. In these areas, a lot of wvhat is described as my. For these people, food, fuel, fodder and building economic poverty using indicators like an income of less materials are all in the form of biomass. Water, another than US$1 per day is actually ecological poverty. ctitical need, is not biomass but it plays a critical role in Poverty alleviation programs must address this ecological making biomass available. poverty if they want to address economic poverty in Proponents of the "quality of growth" are correct in any serious sense. In fact, many poverty alleviation pro- pointing out the importance of incorporating sustainabili- grams, including those of the NWorld Bank and of many W0R L ) B AK IN IAU TE X X _ AL X - . Sj- .DEP O R T 'sL ; ' (} 7k \+j+< t X % A X ~~~~~~~~4 'I .4~~~~~~~~~ ;4''b'*AX's ' * *- ' S 4 N N ,. ~ ~ ~ ~ ~ ~ ^ X. - . ,.' , Is.! national governments, fall because they do Dot address bolds bad an annual income of over US$]10,000. ecological poverty. The second experience, that of the village of Sukhoma'jri in the sub-Himalayan Sbivalik Hills of Communities regenerate natural capital Haryvana, is over 20 years old. It again shows that Fortunately, over the last two to three decades, there have rebuilding the natural capital results in a sustainable eco- been excellent community-based natural resource regen- nomic and livelihood base. From a poor, food-importing eration efforts in India that have showvn outstanding eco- village, with an agricultural base dependent on the logical and economic returns. These experiences show vagaries of the monsoon, the village today takes three that it is possible to rebuild natural capital together wZith assured crops and is a good-exporting village. The protec- the local economy. The first experilence, that of the vil- tion of the watershed has resulted in the regeneration of a lage Ralegan Siddhi, 'in a semi-arid region of standing forest of valuable khair trees (Acacia catechu) INlIaharashtra, is now nearly 25 vears old. From a highly wvorth Rs 90 crore (US$20 million). If the government degraded village ecosystem and an extremely destitute wvere to allovw the villages to harvest the forest, a sustain- economic condition, the village is today one of the richest able cut would alone give the 100-odd household village in the countryv and a model for the rest of the countrv. A an income of some Rs. 5 crore (US$ 1.1 I million) every survey commissioned by the Centre for Science and year. These two villages have reached a mature stage in Environment found that over one-quarter of the house- the development of the local economv buillt on the regener- I) E % E L O P El E N T O U I' K t A C H -; WV I N T t: R 2 OO (I1 9 needed o ~eneia~e t~enece~- atlon of the natural put and reduction of distress outmigration. The entir capital, and show work was achieved without one new official being hired, saW p ~4wipr~sure ~ i clearly how for- one new being t or one dollar of _ aid. ward the regenera- The effective mobilization of existing human and financial tion of the natural resources was enough to get the program underway. por~tirg sustaablity sa key resource base can It is interesting to note that in all the experiences e[etne~ of ~rwtti prgrams. take a biomass-based described above, the starting point in each case was the economy. improvement of water availability through the harvesting The third experi- of the local rain endowment. Once surface and ground- ence, that of the semi-arid villages situated in the Aravalli water resources were enhanced, agricultural production hills of Rajasthan's Alwar district under the leadership of a increased and stabilized, and over time new and modern local NGO, is now about 15 years old. Over the last one forms of agriculture began to emerge. Animal production and a half decades, over 500 villages have begun to revive also improved with the increased availability of fodder. the local tradition of water harvesting. The restoration of WNith the local community undertaking water harvesting, the depleted groundwater resources has led to sustainable interest in its watersheds also grew with time, leading to agricultural development which has allowed local farmers its protection and improved grass and tree productivity. to withstand consecutive drought-years. As in Ralegan Over the years, the entire village ecosystem has improved Siddhi and Sukhomajri, distress outmigration has been together with the local economy. greatly arrested. Studies show that the Village Domestic Product has increased in proportion to the investments Civil society's role made in water conservation. With dozens of villages In urban areas, rapid economic growth across Asia has led undertaking water harvesting activities in the same water- to a decline in environmental quality which poses an shed, nearly five rivers of the area have changed from extremely serious threat to public health. Few policymak- being monsoonal drains to perennial rivers - a remarkable ers realize that the Western technological model, built on ecological achievement. In one of the river basins, over 25 intensive use of materials and resources, is a highly toxic villages have come together to form the country's first model. And unless massive investments are made in clean- community-based River Parliament to jointly manage the up technologies or inherently more efficient technologies, regenerated river. pollution will grow by leaps and bounds. As in the West, In 1994, Digvijay Singh, the new chief minister of a powerful civil society is needed to generate the necessary Madhya Pradesh, a state which has large areas of degrad- public pressure for the political system to start incorporat- ed highlands in which poor tribal populations live, ing sustainability as a key element of growth programs. In impressed by the outstanding work in Ralegan Siddhi, the absence of such a civil society, progress in this direc- decided to undertake a statewide, community-based water- tion will inevitably be slow. A civil society which is itself shed development program. 'Within four years, some weak in scientific issues and does not have access to data 8,000 villages were managing over a million hectares of on environmental health and pollution abatement options watersheds. Unlike many other watershed development will also find it difficult to convince the public of the need programs launched with great fanfare in the country, this for urgent action. For Asian countries it is clear that program was the only truly participatory and multi- maintaining the integrity of their natural capital will be departmental program. For the first time, the community increasingly a matter of high priority in the years to come. was put in charge with the bureaucracy playing a support- ive role. The experience has shown that a committed chief A n l Agareral e e. chairperion, Ce,nter Tor Scifelice minister can even get a state bureaucracy to promote a and En'ironmoenzt itn Neff Delbi, India. people's movement for good land and water management. As elsewhere, villages which had done good work had Visit: w ww. c s e india. org water in their wells, leading to improved agricultural out- 20 W 0 R 1, 1) B A N I I N 5P lI T E ' E Accepting Fore9/n Capital: essons from Recent BY ROBERT E. LITAN Crises N | o one questions the importance of a sound financial system to the amount or the "quality" of growth. When they work well, financial intermediaries and markets efficiently channel a country's savings - and its cap- ital inflows - into productive invest- ment, which is a prerequisite for growth. It is imnporetant in managing Financial risks not to treatdenly withdrawn- is all foreign capital alike. For emerging markets that do not "too hot" for emerging mar- have well established reputations in the capital markets ket countries to handle. It is l and must borrow, if at all, in other countries currencies, tempting to answer "Yes," policy makers must take into account both the costs and since short-term capital benefits of different types of capital before welcoming inflows are also like fire: if not handled properly or used in each unconditionalny. Moreover, the outcome of that calcu- the right environment, they can burn down a country's lation depends critically on macroeconomic factors and financial system - and its economy - in very short order. institutional conditions. What is a right policy for one set Moreover, if the structures that are burning - in this case of conditions may not be right for another, countries - are located close to one another, at least in the psychology of investors, then a raging fire can spread Short-term capital quickly, much as the currency depreciations during the Perhaps the central issue raised by the Asian and Russian Asian crisis swept contagiously through the region. financial crises is whether short-term capital - borrowings So much for the downsidcs of short-term money, which with short maturities and portfolio equity that can be sud- have been all too evident. There are also advantages that D)E V ELOP N1E NT O U TRF,A CH Si% WIN FE R 2, R1 21 can be too easilv ignored. Foreign purchases of equities causing a loss of confidence in that can add needed liquidity to domestic securities markets, nation's economic management and in _Which in the long run are important for financing the its currency. The damage arguably growth of new,v businesses in emerging market countries would have been significantly reduced and weaning financial systems aw,ay from reliance on had the Thai baht been floating all banks as intermediaries. A key advantage of the capital along. In that event, domestic borrow- markets is that investors take their risks without implicit ers would have had to factor in or explicit guarantees of being protected if they are proven exchange rate risk when borrowing wrong. In contrast, bank depositors are often implicitly or funds abroad and almost certainlv explicitly provided with government insurance on their would not have been so enthusiastic in deposits, which can encourage excessively imprudent lend- running up foreign debts in the first ing by the banks unless properly supervised and place. restrained (which even regulators in developed countries have proved incapable of doing from time to time). Long-term capital Moreover, even short-term borrowed money can have The cost-benefit calculation for long- its benefits -1by enabling domestic companies to borrow at term capital inflows - foreign direct cheaper interest rates than would be the case if no such investment - is quite different. The funds were availahle at all. Presumably, it was these bene- costs of FD1 are largely psychological fits that induced the International Monetary Fund to or political: citizens and their policy makers may feel that clhange its policy in 1997 to encourage the dismantling of their national cultures are threatened by the purchase of capital controls of any type. what are viewed to be "national assets." Such feelings are not confined to many developing countries that, until Deceptive costs recently, have resisted FDI. Not until its economy ran into A key lesson learned from the recent financial crises, how- trouble did Japan begin to open up to foreign investment ever, is that the costs of relying on short-term money - - primarily as a way to minimize the costs of rescuing especially funds borrowed in a foreign currency - can sig- bankrupt companies or financial institutions. Even the n" ficantlv outweigh the benefits, under certain conditions. United States, the leading destination of FDI in the world, Most importantly, the costs of borrowing short-term in feared the buyout of certain famed buildings and compa- foreign currency can be especially deceptive and ultimate- nies in the 1980s (but now no longer seems to mind when ly quite dangerous wvhen a nation pegs its exchange rate to much larger acquisitions are completed). another, such as the dollar. The costs are deceptive The benefits of incoming foreign direct investment, in because in the sbort run, such borrowing looks like an contrast, are quite tangible. Unlike portfolio capital, FDI easy way to make money: borrow at low interest rates in inherently is "sticky": significant equity stakes in domestic the foreign currency and invest the proceeds in higher- companies cannot be readily liquidated, especially during a yielding assets in the home countries. But this only works crisis. Moreover, with foreign funds comes valuable foreign sc, long as the exchange rate is pegged. At the first sign know-how and skills, which gradually seep out throughout that a country's foreign exchange reserves are insufficient a local economy as employees move to other firms or start to meet the demand, domestic borrowers will dump their their own. The United States, for example, learned much owvn currency in a frantic effort to obtain the foreign cur- from Japanese companies that came to the country during rency in which they borrowed. That, in essence, is what the 1 980s - just-in-time inventory management and work- happened in Asia in 1997-98. er-dominated quality control circles - which have revolu- Short-term borrowing in foreign currency can also tionized much of the U.S. manufacturing sector. prove dangerous if a nation's financial institutions are Just as significant, the influx of FDI can help local reg- wveak and not well supervised. After all, it wvas the failure ulators as well by bringing cutting edge technologies to of Thai banks that triggered the Asian financial crisis by local shores. This is especially important in the financial 22 w o R 1. [) 1 A N K I \ 'I 'I UI 1 The IMF's role q3. I _ i | : NFinally, no discussion of crisis management can be com- plete without dealing with the role of the Bank's sister organization, the International Monetary Fund. Although I do not have the space here to give the subject the treat- ment it deserves, I conclude with two observations. First, to its credit, the Fund has established with its refusa] to lend to Russia in the fall of 1998 and, to a lesser extent, its similar stance vis-a-vis Ecuador several months later, that emergency financing is not automatic. Investors now have been put on notice that their funds are at risk, and it is vital that the Fund does not change that impres- . sion in the future. Toward that end, the Fund should not hesitate to allow, if not insist upon, thie imposition of _11 istandstills on repayment of both public and private debt in order to buy time to allow more orderly restructurings. In the meantime, the Bank and the Fund should continue to arena, where foreign financial institutions not only help work with countries to establish viable bankruptcy proce- w fdures and instituhions so that if another crisis should educate domestic regulators about sophisticated financial duresuan institutins s t ither crisis sould practices, but in certain cases have seen their top officials occur, such restructurings - either formal or voluntary - will proceed far more smoothly than they have done so far move to the helm of domestic central banks or bank super- i in most Asian countrites. visory agencies. Second, at the same time, the Fund must avoid impos- Safety nets ing a laundry list of conditions on its loans, elements of hety fnan which have little to do with restoring credibility (such as The financial chapter in The Quazlity of Gro" th, while devot- w ing relatively little attetireducing tariffs on selected commodities). Extraneous con- ing relatively little attention to crisis management, con- ructivelv oints out te importanc of the often neglect- ditions not only undermine the legitimacy of the borrow- strutiviv oint ou th imortace f te ofen eglct- ingr country's government, but the credibility of the Fund ed role of adequate social safety net programs in cushion- in country's g nment but the cdility of theF ing the economic pain that financial crises inevitablya 'vII trigger a cutoff of the Fund's emergency loans. entail. The chapter does not discuss, however, the impor- vi I tant role that unemployment compensation programs, in In sum, the world has come a long way since the 1997- 98 financial crises. By and large, the economies of the prIclr ca Ipa in minimizing this pain. Yet these, too, onre aebucdbc,wieitrs have their limitations in emerging markets because of lim- countries have bounced back, while interest and exchange ited government budgets and other pressing social needs, rates have returned roughly to pre-crisis levels. The hope In addition, much of the labor force in these countries is that all concerned have learned at least some lessons In addition, much of the labor force in these countries that can help avoid such crises in the future. often is informal and thus cannot be counted on as a source of revenue for financing unemployment compensa- Robert E. Litan is i4ce president and director, tion (as employees in developed countries are, with their modest payroll contributions to these funds). An impor- Ecnm icS i Prorae and Cabo tily tant role for such international financial institutions as the World Bank is to assist in the initial financing of unem- Visit: wxvw.brookings.edu ployment compensation programs, perhaps on a matching basis, with the size of the government match scaled to the per capita income of' the country. I) E VE L \LO I' A N I O U T R E A I C 11 _ W1 N T E K 2 o 01 23 The Case of S-outh Africa - njgrowing number of citizens around the world no longer accept that the responsibility of governing society is solely the responsibility of governments. Today, we talk about co-governance; we talk about governance being a partnership venture between elected officials and the organizations and institutions formed by citizens acting in the public interest, and we talk about governments needing to have ongoing dialogue with their citizens so that our world is managed in a way in which the most just social outcomes can be achieved. 24 W' O R L 1) B A N K S I N 5 T I T U 'I l~~~~~~~~~~k 0 l t.Y a k gL < a | g ment we need to recognize that creating the conditions for the full participation of citizens can neaningfully contribute to soci- eties meeting their social develop- mnent goals. Political leaders are increasingly coming to accept, somewhat grudgingly and cer- tainly not uniformly, that citizen- inspired organizations have tremendous experiential knowl- edge that can brng important perspectives to the policy making process. More importantly, they also have the ability to make ianportant contributions to the meeting of basic needs in ways that government's are sometimes unable to. This does not mean that tbe role of the state is less important, as some erroneously suggest, but certainly means that the notion of governance is changing in important wavs, in Which we see a greater role for citizens and the organizations they form to promote the comp- Mon good. These global trends found much currency in the transition away from apar-theid in South Africa. Since iNelson M'vandela's Winning an election, should not be read as a blank release and particularly after the first democratic elections check issued to governments to do as they will till the next in April 1991, the following trends were discernible: election, especiallY given that representative democrac,v Fwradfwrpol atcptddrcl npbi increasingly appears to have the form of democracyr with- life beyond the act of voting in the national, provincial out th~e substance. Put differentlty, we run the risk of rep- adlclgvrmn lcin,we oprdt h resentative democracy on i'ts own degenerating into a pre- levels of energy that prevailed in resistance to the ordained 6lite legitimnation process. Citizens cannot fulfill aprhigoen nt their responsibility in a demnocrac:y simply by par-ticipating in oenetprone aefo h G in an election, and voting is but the minimum responsibili- mvmn,popigteie ht"G"i h rn ty of citizenship. mvmn,popigteie ht"G "i h rD Some ave uggeted hat choce neds o bemadesitional context in South Africa stands for "next govern- betwen devlopmnt an demcracy Howver, ivenment official' instead of non-governmental organization. that democracy is central to promoting equitable develop- Tholsklsforaingmcesndptssad mass rallies were insufficient to undertake meaningfuil [Cl ELV AL PM N T O U TrR L.C H ~WIi N 'IER 2 0 0125 advocacy and development work on their own and The campaign to increase support for children needed to be complemented b1y a range of new skills and living in poverty. competencies. In 1996, the government was seeking to de-racialize a * There was now access to the mass media. social welfare grant for children living in poverty. In seek- * There was a new sense of openness and willingness on ing to do this, the Mlinister of Welfare said that this made the part of government to work with civil society. it necessary for her to drastically reduce the prevailing It wvas in this context that the South African National level of the grant. Additionally, there were other issues NGO Coalition (SANGOCO), the umbrella body of some about how this grant would be implemented, which 4,500 non-governmental organizations and community included some problematic ideas such as means testing the based organizations had to undertake their work. Those health of the children as a determinant of eligibility for the civil society groups that were part of the broad liberation grant. movement found it incredibly difficult to initially take on a There was an excellent relationship betsveen the critical stance towards the new Mandela government. Minister of WVelfare and SANGOCO. In fact, as There was concern that this would be seen as tinpatriotic Executive Director of SANGOCO I was at that time serv- and that it would play into the hands of those that were ing on a policy advisory structure set up by the minister opposed to the new post- around welfare issues, as well as serving on a task team to apartheid order. However, write the non-profit organizations act. There were serious after two years of demo- concerns regarding both the minister's suggested new level cratic rule, civil society of the grant as well as the implementation process, partic- organizations began to ularly among children's and women's organizations and talk of the need for "criti- the welfare sector as a whole. cal solidarity"; shorthand SANGOCO's position was that it was important for the for the need to support minister to offer about 50 percent more than she was government when it was offering on the level of the grant and to rethink a range of appropriate and offer the elements regarding the implementation of the new system. appropriate criticism In order to influence government policv, it became clear when it was necessary. that both organized civil society organizations (CSOs) and Most NGOs were the broader public needed to be mobilized to shift govern- involved in some form of ment thinking. social delivery, and the Firstly, SANGOCO joined several CSOs and made a political transition had detailed presentation to public hearings of the parliamen- brought with it a great tary standing committee on social welfare, laying out its amount of financial uncer- concerns and urging the minister not to proceed wvith the tainty, leading to the plans as they stood. This required consulting with affili- demise or downsizing of ates, allies and researchers to develop a well thought out several important organi- presentation to parliament, recognizing that there were zations. Initially, some ele- multiple audiences that were being addressed: members of' ments in the new bureaucracy were of the view that devel- parliament, the minister and other cabinet ministers, the opment should be driven solely from within the state, with general public, and civil society itself. Secondly, SANGO- only a peripheral role for NGOs. This logic was success- CO built up a unified front of a large number of CSOs, fu-lly contested as large numbers of government leaders and for the first time since the first democratic election, realized that it was important to draw on the expertise of the ANC government faced a broad alliance of civil socie- civil society groups, both in the development of policy and ty organizations that could not be dismissed as anti-patri- in the implementation of development initiatives. otic or "counter revolutionary." Thirdly, SANGOCO threatened a national day of action if the Minister did not 26 w o R L L) B A N E I N S TI T L- E The campaign to halt violence against ./ women and children. South Africa has one of the highest levels of vio0- lence against women and children in the world. For years the women's move- M ment and children's advo- cates have struggled to get the issue on the national agenda. While much lip service gets paiod to the issue by mainstream insti- tutions, the pace of legisla- tive and policing reform has been excruciatingly slow given the scale of the problem. Furthermore, public awareness about the seriousness of the problem was still low in meetoswith iv society groups and consider the pleas made the m id-1990s. The issue was also seen exclusively as a by various organzati womens issue. Even though South Africa's political inst- govedia pressulre, including opinion pieces b poinent tutions can now show a sign ifcant level of women's part people, appeared in various newspapers as a result of ipatilon, most instittutions are still dominated by men. This SANGOCO's facilitation. SANGOCO specifically lob- might account for why, even though significant resources bied NMPs and won over many supporters, suggesting that were allocated for this work by the ANC government, the minister might need to find a compromise. progress has heen slow with many serious setbacks. The national minister and her nine provincial ministers In early 1997, SANGOCO, in consultation with organ- agreed to meet a delegation led by SANGOCO and made izations working in the Field and its members, decided that up of its members and the South African Council of a national men's mnarch against violence on women and Churches. At this meet'ing both sides put forward their children would support the commendable efforts of both respective cases, and even though no finality was reached, the government and NGOs in this area of deep concern. the milnister agreed to look at the proposals again. Organizing under a slogan, "Real Men Do Not Abuse The result of this campaign was that the lev'el of the Women and Children," there were several opportunities grant was increased by 25 percent per month, and the for awareness raising, resource mobilization and accelerat- Minister invited SANGOCO and its allies to work on a ing the reform steps that were undeova. task team to remedy the deficiencies in the implementation SANGOCO, helped build one of the biggest coalitions proposals. In retrospect, many'In the government around the issue, with high levels of participation from acknowledge that citizen activism around this issue helped government and the private sector. 'I'he campaign gener- government develop a more acceptable and just position ated the highest mnedia coverage yet seen on the issue and and helped reduce the huge numnber of logistical difficul- brought together for the first time the issues of violence ties, though many problems remained, in implementing the against women and violence against children. SANIGO- initiative. CO and its allies organized a march of some 5,000 men DLV~ELOPAININT OUTRiEACH . WINTER !0(,l 27 including political leaders, trade union leaders and other poverty came forward to participate. People were mobi- prominent men who committed themselves to advance the lized to say how poverty impacted on their lives, what issue. President Mandela addressed the marchers, secur- they thought needed to be done, and what they themselves ing prime-time slots on all news shows. were prepared to do. Through an innovative media strate- SANGOCO's campaign helped support the w,ork of gy these voices of the poor were mainstreamed into the women s organizations who had been lobbying for the national policy dialogue. Several government departments passing of a domestic violence act, helped generate were lobbied and their performance was challenged. national awareness around the issue, and helped secure Diverse CSOs were engaged in assisting to plan and the commitment of various ministries to do their part to implement the hearings. deal with the deepening and ongoing crisis. T'he efforts of The result of this effort was the rapid adoption of a the women's movement and their ability to mobilize men national plan of action for poverty eradication six months and women was probably central in helping to secure after the poverty hearings ended, with support from a some of the limited progress that has been achieved to broad spectrum of South African society. Issues raised at (late. By drawing high levels of citizen activism it made it the hearings were taken up and dealt with by various difficult for the government not to act with the appropri- agencies, although many unfortunately did not get off the a,te urgency that was called for by the situation. starting blocks. While there has undoubtedly been incre- mental progress towards meeting some of the poverty The national poverty hearings. eradication goals, many who spoke so eloquently and sen- South Africa's apartheid legacy has bequeathed the coun- sitively during the hearings have not seen substantial try deep structural poverty and the highest levels of eco- improvement in their lives, and inequality grows at an nomic inequality in the wvorld. The ANC government's alarming pace. Reconstruction and Development Program (RDP), adopt- WVhile some might be discouraged by the measurable ed after the first democratic election, was believed to have impact of citizen participation in the making of develop- been degraded in 1996 as the government adopted a new ment policy and the implementation of progressive devel- macro-economic strategy that had been seen by many as a opment goals, it is important to bear in mind that govern- turning back on some of the tenets of the RDP program ments and civil society organizations are in for the long and indeed on some of the core elements in its election haul. The unfortunate reality' today is that the global gov- manifesto. ernance system, particularly its economic components, SANGOCO and other civil society groups strongly appears to be ill-prepared, structurally flawed and slow to believed that the eradication of poverty should become the create the enabling conditions for the rapid progress that single most important goal of the government and the poor people around the world seek. However, participa- country' as a whole. While the government agreed that this tion of citizens and their organizations, not simply as vic- was the key strategic objective facing the country, there tims, beneficiaries or spectators but as active and central were fundamental differences about tactics. SANGOCO agents in the development process is simply no longer a consequently adopted the following strategy. Firstly, SAN- "nice to do thing" but an "essential to do thing." GOCO developed an internal position paper on a national poverty strategy. Secondly, it led the development of the Kurnzi Naidoo z j )ecretary genecaal and CEO, National WNar on Poverty Forum, made up of government, CIVIC US, W'orld Alliance for Citizzen Parti'ciepa- the trade unions, churches and the NGO sector. Thirdly, tzotz. it enabled the Poverty Declaration of the Poverty Forum kuni @civicus.org to be circulated widely and popularized. Fourthly, it developed a special alliance with the Human Rights Visit: www.civicus.org Commission and the Commission on Gender Equality, and co-hosted the national poverty hearings that were held in all nine provinces in wvhich some 10,000 citizens living in 28 W o R L D) B A N : I N S T I T L Tr E BY LUIS MORENO OCAMPO STATE CAPTURE :WHO REPRESENTS THEPOR X/ Jf t he principle of democracy established in the late eighteenth century is based on the idea of people representation, where a few individuals represent the interest of the population and make public decisions.The data about state capture developed by the World Bank Institute shows that some repre- sentatives go against the llluministic princi- ple, and actually sell their decisions for money.They put aside the interest of the people to favor the interest of their clients. DSVELOP MAl EN o V R F A G-II NV I 1 14'R 2 01 29 The data suggests that this is not an occasional problem denounced in Kenya in the last years relates to a company but a stable situation. Formal institutions are crossed and that supposedly exported gold from Kenya, receiving controlled by a network of people who interchange favors approximately $500 million in reimbursement. But there is and use the government for their own interest. In order to no gold in Kenya. And vet, the company imported the control or distort public policies, these networks maintain gold, exported it, received the export incentives, then guhlic management at a very low level. Money flows are imported the gold again, exported it again, and received especially difficult to control, and misallocated resources the export incentives again. Similarly, in Argentina, one of tend to end up in secret the most important corruption cases over the last years bank accounts. In this con- relates to a company that supposedly exported gold from text, democratic represen- Argentina, receiving approximately $300 million in reim- tation is seriously distorted. bursement. But there is no gold in Argentina. And yet, the The poorest, especially company imported the gold, exported it, received the those living in developing export incentives, then imported the gold again, exported countries, are not repre- it again, and received the export incentives again. sented by the public insti- Although there are no cultural or economic relations tutions, because they can- between Argentina and Kenya, the public management not afford to buy decisions. outcome is exactly the same. These institutions, which This does not affect only the poor. The WBI surveys theoretically represent the find that firms that purchased parliamentary laws, presi- interest of every citizen are dential decr-ees, and influence in central baanks inflict a captured by elites that have large indirect cost on the development of the rest of the direct access tc, their deci- enterprise sector. So, state capture is a good business for sion-making processes. As some private and public entrepreneurs who can create James Wolfensohn put it in national and international netwrAorks to coordinate their his Foreword to The interests. Companies outside the corrupt network, acting Quality of Growth, the gap uncoordinatedly, are damaged as they cannot stop the net- between the rich and the work's practices. These companies are as powerless as the poor yawns wi(ler. poorest of the people. These conditions, the The non-representation problem is reproduced in the non-representation of the multilateral organizations. The national networks that poor and the public man- control governments choose one of their members to rep- agement's inability to exert resent the country. The power structure is such that the control, are present in World Bank's functionaries cannot seriously dare to affect almost all developing coun- the network's interest. That's why the word "corruption" tries and produce similar was not part of the Bank's language before James effects throughout. Wolfensohn's times. The issue of corruption is a ver' dan- Countries with apparently gerous one. To improve the efficiency of the growth no relation suffer from the same appropriation of the gov- process, the World Bank has to avoid to be captured by einment by the elite's networks. these "bad" political and business networks and, most important, promote "good" networks. Resource misallocation Let me put forward an example of resource misallocation The creation of "good" networks in Kenya and Argentina, both related to export incentives, Let me take the public procurement process as an example to show bow countries with no apparent relations yield to illustrate how existing networks can be broken, and similar outcomes. The most important corruption case new, more beneficial ones, installed. The public procure- 30 xk o R I . 1< A N K , N s I I 'i C, I'1 mnent process can roughly be divided into four phases: attempt to break this practice, the government of Mor6n, 1) the decision to purchase, 2) the elaboration of the a municipality in the Province of Buenos Aires, together respective tender, 3) the tendering process, and 4) the with the Citv Council in which the opposition hold the deliverqv of the purchased goods and services, majority, called for a Public Hearing in order to discuss the tender conditions on the draft of its -Waste Collection 1) The dect'iLOn to purvhaoe - z1cer del Plata cudt pub/A' Contract. referenzdumns The Public Hearing led to important changes in the In public procurement, the purchasing decision is usually tender specifications. In the tender draft comnpanies were made in isolatilon from civil society, but often in close co- required to showy five years of exilstence to participate in operation with important business. This closed-door prac- this tender. Many companies argued that this requirement tice and lack, of citi'zen involvement gives interested poii left out most companies. In the new tender, this require- cians leeway for making important purchasing decisions ment was lowered, xvhich allowed new companies to par- witout considerations for spending efficiency. The only ticipate, including the one that ended up wvinnina h retributions they fear are general elections or over-board- award. Furthermore, the labor union demanded that ing public opinion resulting from large-scale scandals. whichever company won the contract should be obJliged to M'ar del Plata, a citv in Argentina, introduced a novel keep the xvorkers under contract at that time, a request approach to making impor-tant purchasing decisions: the that was taken into account in the Final tender document. final decisioni becomnes binding upon citizen approval. In The neighbors participated demianding the resolutioni of 1995, the newly elected mayor called for a referendum on speciFlc problems they had wvith the former company. An the construction of the twenty-sx public works which he expert advice established that the tender should be based intended to build during his mandate. If implemented, on required specific outputs, instead of being based on these would bring about significant improvements in infra- inputs. Again, this suggestion was incorporated. structure -a vital asset for a city as dependent on tourism The results are stunning. First, a new company entered as Mlar del Plata. Citizens were offered to see the projects the market. The company that xvas awarded the contract is and than vote on them. The referendum set out an ear- hardl~y known in Argentina, and is operating in only two marked tax, to be paid over four years for the project other municipalities. Second, the total contract value over implementation. The vote tuirned out positive, the project four years ($52.16 millioni) is SI]2.96 million less than th~e went ahead and all works wvere finished in time -months former contract's value, representing a 28.7 percent in say- before the mayor was postulated for re-election, which he ings. The second highest bid, which came from the former won overwhelmingly. This experience demonstrates the contracting company, was of $49 million. The $16.84 mil- ecnmcand political limpact of establishing a social net- lion between the winning offer and the second offer rep- wvork. resent an annual savings of 4.7 percent with respect to Mor6n's total budget. This is an example of the benefits 2) Th2e Tender documnents - Moron aPub/dc' Hearin~qs that can be achieved by breaking old-established networks The elaboration of tender documents is another- example and clubs. of a closed-door process. Interested companies and citi- zens are generally only presented with the final document. 5)The teizderiiw processo - Th7e Internlet ez,' a too/to de/leer Often, the tender specifications are drafted in conjunction hjiorn1ictioni wit h the one company~ that'is meant to win, making the Difficult and scarce access to information on public pro- successful par-ticipation of any other company impossible. curement opportunities and the relevant tender documents In Argentina, the wvaste collection tender is the largest ten- inhibits the participation of comnpanies in the public pro- der to be awarded by municipalities. The Waste Collection curement process. The information tends to be published Industry is generally kinown as a very strong and closed highly disaggregated, in a great number of publications, club which is extremely difficult to join, with secret ties making it difficult for interested companies to find it. betwveen the companies and the major office. In an Furthermore, most inf'ormation is incomplete and it is pub- DLV,'E LO0P>IElzN I Ot-TR~E A C HI" W IN FL R2( 31 lished too late. In the City of Buenos Aires, for example, monitor for citizens, which makes them a focal point of tenders are announced with an average of five working government inefficiency. days until closing date. The tender documents have to be The Swahhimana Initiative in Bangalore, India, has obtained at the purchasing office, which can be quite cost- taken a novel approach to this problem, by implementing a ly when the purchasing office is geographically distant. program that monitors public works. Volunteer engineers All of these time-consuming and costly impediments dis- and architects monitor the city's public works directly at courage the participation of potentially interested compa- the site, providing a complete contract follow-up and hold- fies. A Gallup survey on the public procurement process ing the contracting company accountable for the contract in Argentinal revealed that whereas the majority of com- fulfillment. They thereby notably improve the quality of panies were interested in selling their goods and services civic life in the city. This forum not only performs a to the Argentine governments, most companies were not watchdog function, but also experiments with new participating in the public procurement process because approaches to solve problems. the relevant information is not available in a timely and reliable way and because the application process is often Conclusions very tedious and costly. Additionally, companies perceive The technological development of the twenty-first cen- that there is no open access to contracts, which are award- tury allows the reformulation and improvement of repre- ed to a selected group. sentative democracy. Current forms of connectivity and Experiences in Canada, the United States, Mexico, and transportation permit to form networks at a speed and dis- Chile, among others, are powerful examples of how the tance which were inconceivable in the eighteen century. Inlernet might be used to increase participation and lower Transparency International, established eighty national prices in public procurement. The sites agglomerate the chapters in only seven years. The current challenge lies at information on all tenders and provide on-time and easy expanding this networking capacity to include the poor. access to this information, including the corresponding New networks, which include all those currently excluded tender documents. In Canada, the number of suppliers has from power must be formed to counter state capture. been increased two-and-a-half fold and the prices paid by the public administration fell 10-15% over the course of Luai, Miore no Ocam,zp i.J presIdent of TI,a no- only threeyears. Taking into account that Canada is per- parelncy Internatio;za/ for Latin Almzerica and the ceived to have far lower corruption levels than most devel- Cari/bean. aping countries, the price decreases in other countries are potentially still much larger. In fact, a very small pilot I Gallup Survey. Septe-ber 2000. Comissioned by Mercados project in the City of Buenos Aires, based on simple price Transparentes.com amongst 417 small- and m,edium-sized com- comparisons of homogeneous services across hospitals led panies in Argenrina, 1 14 of which are t I a drastic price fall of45 percent. providers, and 303 of which are non-gover ment suppliers. 4) The deliiely o?f 77ClrMda.ed good~J and3ervicei - Batlore atzd On state capture visit: 0'(,il mon12teiiinzg qf zontraczbt entfo/lc/ement. www.worldbank.org/wbi/governance/pubs/seizestate.htm After the tendering process has been carried out, the con- tract-enforcement process represents some of the worst headaches to administrations. It is not uncommon that a company does not fulfill the terms and conditions set for- ward in the contract, or that the contract is re-negotiated aFter its award to the point where the initial and the final price bear no relationship. Citizens end up paying a very high price for unfinished or badly finished projects. Public works programs, especiallv large ones, are very difficult to 32 W o 1 L I) B A N K I N S 'I I lr L T }. _w -mu atu re BY SARA CALVO EXCHAN RATES: THE 2 ARGETI X H ow to re-establish credibility and thus help resume growth fast is the challenge for emerging markets today. To achieve this, verifiable exchange rate regimes is the current prescription. Is there an optimal exchange rate regime for emerging mar- kets? The optimal exchangeA rate regime varies across countries and over time. g S A S A 5 i History and the nature of the politics and institutions in X the country matter, which makes it difficult to come up with a "one size-fits-all" policy recommendation. This was U the main conclusion of a series of workshops organized by the W World Bank during 2000 to promote debate on whether the choice of the exchange rate regime could help reduce the likelihood of output collapse associ- ated with both a financial crisis and a successful defense of the exchange rate. D e v E L U P V E N T UTR E A C H W I N T E R 2 0 ( 1 33 The need for credible institutions live with more flexible exchange rate regimes than in the The developing world is Cull of examples of costly attempts past to reduce the likelihood of financial crisis. to bail out troubled banks, finance budget delicits and W7villiamson, for example, arguing that competitive adjust the balance of payments by means of discretionary exchange rates were one of the key foundations for the monetary policy. This practice has led to very high infla- East Asian miracle, proposes a "publicly announced monm- tion episodes, massive capital flight and financial system toring band, a range within which the authorities would troubles, leading to slow long-term growth and low policy commit not to intervene, but beyond which they would be credibility. This is not surprising. Much as governments free to intervene to push the rate back toward the band would like to have monetary policy independence, if a and without obligation to defend a particular rate." This country wxirh an open capital account fixes the exchange strategy, Williamson argues, "would provide information rate, monetary policy will be determined by the economy's on the long-term rate the authorities believe is consistent exchange rate commitment. with long-term fundamentals, and hence where they should Whether or not countries claiming flexible exchange expect official action to limit misalignment. This should rates have fared better is still an open question. The truth help stabilize expectations." \Villiamson also proposes of the matter is that, according to recent studies, few devel- ways to determine what exchange rate makes sense as well oping countries that now claim to have freely floating cur- as the width of the band. rencies really do. Governments often use interest rates or ,ntervene in the foreign exchange market to achieve their The case for inflation targeting mplicit target exchange rate. The reason for this "fear of Several developing countries have adopted inflation target- tloating" is the threat of high inflation and/or a financial ing- Brazil, the Czech Republic, Israel, Poland and South collapse, as a result of depreciating exchange rates in face Africa. The ultimate goal of inflation targeting is to reduce of a shock-particularly in the context of high foreign cur- inflation uncertainty by making transparent the central rency denominated debt. Fear of losing competitiveness as bank's policy intention. Under this regime, the central a result of an appreciated real cxchange rate is also a bank announces the inflation rate that its policies will aim rationale for not letting the exchange rate float freely. at in the year ahead. This inflation commitment determines Why worry about discretion in policymaking? It creates the exchange rate behavior. w.vhat in economics is called time-inconsistency problems. But announcing a target inflation rate is not enough for i:n a nutshell, if a government does not meet today s prom- a successful use of monetary independence. Institutional ises made yesterday, the public will not believe future commitment (including legislative support for an independ- announcements. If institutions are not credible, because of, ent central bank) to the target from the rest of the economy sa', the country's politics and history with inflation, should also be there. This requires sound financial systems schemes to restrain governments from using discretionary and fiscal stance. Successful inflation targeting also policies to some extent are needed to ensure investors- requires a mechanism that makes the central bank account- locals and foreigners-that the economic program is con- able for attaining its inflation objectives and relatively low sistent and st]stainakle and that there is not going to be initial inflation rates. As Mishkin and Savastano discuss, high inflation, nor perverse incentives for keeping real in high inflation countries it w ill be difficult to identify the wages and prices from changing. target, hence they will tend to be missed more often, which To achieve credibility fast, a time-inconsistent govern- will jeopardize the central bank's credibility. In light of ment needs fully verifiable policies. Three categories of this, inflation targeting is likely to be a more effective strat- vierifiabledsfuy e geriiate policies.e brei dbated tod: ey' if it is introduced onlv after there has been some infla- verl'fiable exchange rate policies are bemng debated todav: eio reduction tion reduction. (a) intermediate regimes (publiclv announced monitoring An important advantage of inflation targeting is that it exchange rate bands); (b) extreme regimes such as infla- allows the central bank to respond to shocks. It should be tilon targeting; and (c) hard pegs (currency boards and full noted that in shock-prone economies wvith high foreign cur- dollarization). The IMF has no clear choice oF preferred rency liabilities (e.g., dollar debts), inflation targeting will exchange rate regime. lead to volatile exchange rates, threatening the stability of firms and the financial sector. Also, with high volatility in The case for intermediate regimes exchange rates it is very hard to develop long-term finan- The case for intermecliate regimes In Iight of recent financial crises in economies wvith tradi- ciat markets. tional adjustable pegs, e.g., East Asia's, proponents of inter- mediate regimes argue that emerging markets will have to 34 \W R L I) 1B A N K I N S I IE The case for hard pegs: currency board and full mentals right was not there. More recently, El Salvador, dollarization announced that the dollar will be the legal unit of account Like inflation targeting, hard pegs are easily understood by for the financial system starting January 2001. Both the the public. Hard pegs consist of fixing the exchange rate colon and the dollar will circulate in El Salvador. In the to a hard currency, and holding enough reserves to back former case, the aim was to prevent weak fundamentals up the peg. In this category we find currency boards and from becoming even weaker. In the latter case, the aim is the hard-peg extreme strategy, i.e., adopting another coun- faster growth in light of absence of currency risk. The try's money such as the dollar. The case for hard pegs has experience of El Salvador, may prove useful for small been made strongly for emerging economies where the income African countr-ies where the challenge is to attain ability to buffer shocks is limited- economies with under- credibility to attract repatriated private capital. developed financial markets, widespread structural rigidi- Granted, full dollarization would not eliminate fiscal dis- ties, weak political infrastructure -and where government array, default risk, financial troubles due to deflation, and and firms' ability to finance externally is highly volatile. may be a costly exit strategy. Also wage and price inflexi- These are economies where exchange rate movements bility in the public sector may lead to unemployment, if the could be very costly. Cases in point are economies with economy faces a shock. Because of this, proponents of full high dollar debts, as discussed. dollarization advise accompanying this regime with fiscal In emerging economies, as argued by Calvo, "central rules, such as New Zealand's law of fiscal responsibility to banks are not very helpful and may exacerbate growth help achieving fiscal soundness. Likewise contingent volatility due to financial vulnerability and credibility prob- sources of liquidity such as international banking (under lems," as observed in emerging markets during the late the assumption that if faced with liquidity problems head- 1990s. "An effective lender of last resort should be able to quarters will provide needed liquidity) and international borrow or run down reserves during crises. Otherwise, the credit lines, such as Argentina's repo facility, help buffering central bank must print money, provoking large price hikes potential financial sector problems. Indexing public wages and, possibly, hyperinflation. Anticipating that the lender to private sector counterparts, as suggested by Calvo, could of last resort will pour money to solve banking problems, help solve the unemployment problem. raises real interest rates in tranquil peritods.... Thus, a print- In countrics where regional trade, and hence avoiding ing press could worsen credibility problems." In other competitive devaluations is important, but a regional com- words, the lender of last resort capability of emerging mar- mon currency is not politically feasible, for example in East ket central banks de-facto is not there. Asia, as McKinnon explains, "establishing an efficient com- Currency boards. Countries with currency boards include mon monetary standard is much more a matter of collective Argentina, Estonia, Lithuania and Hong Kong. The regula- choice." Policy makers in a region witlh integrated trade tory framework of a currency board embodies a promise to should expend their political capital to ensure that coun- convert domestic currency into a reserve currency, e.g., the tries in the region have similar commitments to stabilize US dollar, at a fixed exchange rate, and on demand. This their dollar exchange rates over the long term. Kawai also means that at all times the monetary authorities must have elaborates on a regional arrangement for the East Asian enough foreign exchange reserves to honor its promise. It economies. Discussing regionally integrated economies is also implies that the government can finance its spending beyond the scope of this note. only by taxing or borrowing. In other words, a currency To sum up, it is not fixed versus flex the exchange rate board "ties" the hands of the monetary authorities and pre- regime. It is whether fundamentals, including sound finan- vents printing of money when it is not backed by reserves. cial systems, are right. In particular, it is whether credible Without a currency board Argentina would not have been institutions set up to get fundamentals right are in place. able to survive the contagion from Mexico's 1994 financial How to sustain or re-establish credibility and thus help crisis nor advance in its fiscal reform today. realize private sector investment plans and achieve stable Eul/ dollarization. Under full dollarization, the central financial markets is the challenge for emerging markets bank capability of printing money is removed, and the dol- today. To achieve this, verifiable exchange rate regimes lar is used for all types of monetary transactions. In appear to be the order of the day. Panama, for example, there is no central bank. Early this Sara Calvo is senio/ econonmiit of the Economic year, Ecuador, in the midst of economic and political tur- Policy Unizt of the Poverty Redazction and moil, implemented full dollarization. Given the political Economic Manag eizent Netu ork, The World structure of Ecuador at the time of the implementation of Ba n zk. full dollarization, inflation targeting would not have For more information visit: worked. Ecuador's political infrastructure to get the funda- vww.worldbank.org/economicpolicy/exchanaerates/index.html D E v E L O P M E N T O U T R E A C H C u I N T E R 2 0 U 1 35 Pp ' y"- - '-p2''iV !: i ' ' - '' ' ' - Af r i c a L a c ks not need biotechnology? This ignores * t' ~A 'c ac sthe fact that there are already biotech- Adequate ~~~~~~~~~~~~~~~~~nology activities ongoing in these 11!_ ' Adequate1! iN . l@ 30 countries." For example, less contro- Expertise to versial biotechnology research such as tissue culture, which does not Tackle involve change in genetic composition E i.b I < a t t w i i 0 | | of plants and animals, is already tak- Biotechnology i ' .a ing place in Kenya and Zimbabwe. In Kenya, most of the agricultural By Emmanuel K or o . c'm biotechnology activities focus on increasing yields of export crops such Experts say African countries do not ' as coffee and pyrethrum flower. They presently have the desired capacity to ,< y. also focus on the improvement of live- assess the disadvantages and advan- , stock with an emphasis on cattle tages of biotechnology products. Dr. breeding and the development of vac- John Mugabe, director of Africa cines. Zimbabwe has made significant Center for Technology Studies, ACTS efforts to define target areas of said, "In Cameroon only two persons biotechnology working through insti- have acquired post-graduate doctoral tutions such as the Department of degree training in science and technol- Crop Sciences at the University of ogy policy. There are eight in Zimbabwe where tissue culture is Zimbabwe anid fouir Ugalndanis who presently have the capacity to assess being applied to develop disease-free are pursuing the course in Europe. It the advantages and disadvantages of varieties of coffee, potatoes and toma is unfortunate that the bureaucratic GMOs," said Coordinator of World toes. nature of most African governments' Resources Institute (WRI), Food and If you have few Food resources political regimes have divorced science Environmental Security Initiative, and also face the challenge to guaran- and technology from national develop- Arthur Getz. "This capacity is much tee food security, vou should not favor ment activities. Unless the countries needed but, apart from merely polic- one technology over another until care- have science and technology- it may be ing the technology and deciding what ful assessment of needs and existing difficult for tlhem to definie technology is to be accepted from other countries, capacltles are made," said Getz. "For plans. African countries should have the African countries and other developing Yet, many of the new crops that capacity to also judge which technolo- countries, choosing biotechnology is reach African and other countries' gies are most appropriate to develop vety expensive. 'I'he largest invest- tables today are produced through locally and those wnhich drawv from ments in genetic engineering technolo- biotechnology, a scientific process that and maintain Africa's unique biodiver- gy at this level are primarily in the transfers genes from one species to s,i" United States and to a lesser extent another. This process creates new However, this is not easy. Dr. Europe and a few Asian countries." crops or animals known as genetically Mlugabe said there are several obsta- Geta, "who it an agro-ecologit, modified organisms (GCMOs). No one cles to the process of formulating added that "what we see now are really knows GMO products' health biotechnology plans and policies in products that benefit the technology or environmental impacts, but one of Africa. providers" and not farmers and the the most cited advantages of biotech- "iMost governments are not con- environment. nology is its capacity to increase crop sulting widely xvith stakeholders production on less land, contributing before accepting GMOs for agricul- Emmonanoelt/Koro ri. Zibn/abs'can envi07i- to food security. Opponents of tural purposes," said Dr. Patricia tO etnajour rnaimi andp pretiidet of Ihe Sulb- biotechnology fear that newly engi- Kameri-Mbote, deputy director of the Li'1iizziz Af't'a Fmj'noi fa,'E,n;i'aii;neii/ neered organisms may interact with Africa Center for Technology Studies Coo,naok'at/n'. (SAFE) surrounding native species, resulting (ACTS), in an interview in Kenya. in unintended negative consequences "Indeed in some countries the debate such as the creation of 'super weeds'. is still at the level of do we or do we "Developing countries do not 36 WORLD ANK INSTI!TiI' Lookingfordevel- eyond Economic - opment informa- G row nth:Bic tion, networking BEYOND opportunities, like- Meeting the Challenges ECONOIV C minded partners, a friendlychatona of Global Development GROIPr topic of interest, orGRO A H a professional MLeeting the Challenges exchange of ideas? A World Bank publication of G/obal/ Development This issue features w1m14y publication for students and learners of interest to those ____ ~~~~of all ages _ m___ l___ the issues of economic -.Il i o A hat is development? How can we compare the - growth and human * VV levels of development achieved by different development. countries? And what does it take to make development sustainable? A new student book published by the World Bank Talyana P SoubboUna Institute offers no simple answers to these complex vvi-lh Katherme A. Sheram questions. Instead, it encourages readers to seek their owvn solutions by exploring and discussing a wide range of development issues - social, economic, and environ- mental. The book treats development as a comprehen- sive process that is broader and more complex than just economic growth. It brings together and attempts to M H P explain the relationships among diverse aspects of_ change wvithin countries, such as population growth and economic growth, shifts in income inequality and H POCCHJI poverty, improvements e education and health, urban- ization, and globalization. Drawing on ststatistical data ';> dAR pa3lf/tWAe/uu u dbVeyccuu and research published by the World Bank over the past several years, the hook uses simple language acces- sible to secondary school students and the general read- ers interested in learninig Inore about global develop- ment. Searching for Answers Together The book asks questions with no single answers and poses problems with no simple solutions. What are the main reasons for a country's successful development? Is more equal distribution of income good or bad for a country's development? Should all countries be equally open to foreign trade? How does the structure of national wealth change as a country develops? Which roles in development should governments play? And many more. Answers to some of these questions may (and LC E VE I 0 P PM EN T UT REA CI '5. S WINT ER 2 0 U 1 37 * agga a * a should) generate debate because they A Unique Country lenges that it faces. Potentially, these books involve value judgements or because they Perspective will contribute to a more open, informed require country-specific analyses. Other Beyond Econotnic Grofrth was prepared as public discussion on national development questions are among those debated by part of an international project under the strategies and help to stimulate wider civ`ic development experts themselves, so dis- World Bank Institute's Development participation. cussing them requires awareness of the Education Program (DEP). The objective latest research. The book provides readers was to create a set of concise and accessi- Beyond Economic Growtbh, hy with helpful tools to promote independ- ble readings about global issues in sustain- Tatynzoa SoahA at/na so/h Katherine ent, critical thinking, including tables with able development that reaches out to the Sherano. The Wosrld Baohks [Inoi- a wide range of statistical data, charts and general public. In addition, the book is maps on almost every page, and a brief designed so that it can be adapted by tvte s Learoniq Reson ccci Series, overview of some newvly emerging devel- country-based curriculum development 2000 npment concepts. For example, readers teams, translated, and used by those coun- are invited to consider a more complex tries to study development in their own To order this book, go to definitioni of "national wealth" as a combi- unique context. NVork on these national www.worldbank.org/publications nation of physical capital (capital in its adaptations has already begun. traditional sense) with natural, human, The first adaptation was The WorLd and To read Beyond Econonic7a Gr-owlth and and social forms of capital. Then "sustain- Ru.iwa, published in Russian and officially The Wordd and Rislsia, ( in its original able development" is explained as a approved by the Russian MNlinistry of Russian language version or in English process of prudent management that aims General and Professional Education for translation), go to to preserve and enhance the total capital secondary school students studying eco- www.xv.X7orldbank.org/depweb portfolio of a country or of the whole nomics, social studies, geography, and wvorld, rather than just its "physical" com- environmental studies. The Russian ponent. The sustainability of development authors of this adaptation come from is also shown to be measurable with the three leading research and educational help of a new statistical indicator called institutions in MNloscow. A the "genuine saving rate." Latvian adaptation, The WMoridand Latvea, is currently To reach a unique iternatl audience Goals and Means of being finalized at the of business leader, policmakers, Development University of Latvia. Anda vt officilsadmics, economic Beyond Economctt Growrth avoids imposing on Belorssian project team is rt its readers any strong opinions on debat- just beginning to work onoraiton able issues by presenting at least two The World and Behirnm draft. a vris in opposing views wherever possible. It does, One of the main artrac- however, offer one proposition that actual- tions of these country adap- D etopmenir hv serves as the backbone for the whole tations is that thev give read- book - it suggests that changes in a coun- ers the opportunity to see UE H try can qualifl' as "development" only if their own country within the PmOrawsc OWe o ttOMN thev benefit the majority of people, global context, and to linproving their quality of life and giving epoehwtercutyi eeomn urahi lghpmgzn them more control over their future. Thus, similar to or different from i one possible way to formulate the goal of others. This may be particu- e which ro development is through the concept of larly pertinent to the former 0 i plh q lynd distributed to "human development." This implies that socialist countries, where r in m than 130 countisAn online econoric grow"th, while critical, is only information flows from versi svlable at: one means of achieving this goal. around the world were for --w-or. nk.rolevoutreacl'i. Mloreover, to be sustainable, economic many years restricted. growth itself must be constantly nourished International comparisons For aes rs,ddlines, and generl by the fruits of liuinan development, for may spur readers to gain a Lawto Asoit example by improvements in people's hetier understanding of their 4 knowledge and skills. country's current status and TE those development chal- 38 WO0R LI) S ANSK IN ST IT UT E lo Inequality Badfor help usher in the knowledge economy. The Wealthy 11 'orld: The Gros th anzd IS IMEIUAUTY 0Iz OurRHealth? by The study focuses on Korea, a country Inplinsatiown of Global Proaperity. by John C. FOR OUR HEALTH? Norman Daniels, with limited natural resources which has Edmunds et al. John Wiley & Sons, 2000 Bruce Kennedy. developed mainlv through an outward-ori- Ichiro Kawachi. ented, industry-led strategy based on large NVorld wealth creation exceeded $2 trillion Amart,ya Sen. firms and economies of scale. Today, how- per month in 1999. The potential for EWRDE3DiArwAC ' Beacon Press, 2000 ever, this industrial paradigm is being world wealth might be as high as $500 tril- challenged hy the rapid rise of knowledge lion or $83,333 for each person on Earth. The authors force us as the principal driver of competitiveness. This rapid and increasing accumulation has to take a closer look the capacity to touch every aspect of eco- at how our health is affected by social The Society and nomic development and exchange. This injustice and inequality. Arguing that it is i Populaztion Health book explains the reasons for this increase not enough to increase access to doctors, £ Reader, Volume2: A and its implications in a world whose they call for improving social conditions - State Peropectize, by financial systems are becoming increasingly such as poverty, lack of education and Alvin R. Tarlov, ed., unified, and lays out a key component of affordable housing, and harmful work 5 at al. New Press, the approaching wvorld economy, including environments-that damage our health. 2000 the impact of the global rise of technology By urging us to work towards equality of and interconnectivity and the implications opportunity for all, the authors situate This is the second of a groundbreaking of these factors on global wealth. health care reform among the larger social txvo-volume reader on the connections problems we must face. Their argument between social structure and public health Th e Thzri)Force. ThJe for reform in early childhood development, (the first volume came out in 1999). The DJTHJf ]hbeof Tran,.national nutrition, work environment, and distribu- two-volume reader collects for the first THH\DI-" Ctezd Society, by Ann tion of income is certain to spark debate. tsme thc substance of the authors' main A Florini, ed. findings: that life expectancy, illness, and X < - Japan Center for Ko -dthba Korea ancd the other health factors across the class spec- - International Economy Knos'leVqc-baded trum are closely related to the structure of - Exchange, Tokyo. Economny: zdialing the a given society, and that variations of and Carnegie pTran,,itj, by Carl health within a populatioui are primarily Endowment for - Dahlman and related tO socio-structural factors, includ- International Peace, Thomas Andersson, ing income inequality, educational differ- Washington DC, 2000 eds. OECD/The ences, lack of opportunities, and racism. VWorld Bank, 2000 The essays collected in this book present Inter-nastioazl hnvtct, Plidea Rbk- fzand the most systematic analysis to date of the Innovations in science, communications, Groreth, by Philipp Harms. Kluwer role of transnational civil society net- and computing technologies are opening Academic Publishers, 2000 works -the emerging third force in global up new opportunities for countries to har- politics. Six case studies examine the ness knowledge and participate more fully Following substantial political reforms in transnational network to curb corruption; in the global economy. This book, which is many countries, the past decade has been the campaign for nuclear arms control; the based on a joint study by the WXorld Bank characterized by a remarkable increase of opposition to large dams; efforts targeting and the Organisation for Economic Co- long-term private capital flows to the governments and their democratic operation and Development, breaks new developing world. However, the bulk of processes; the campaign to ban landmines; ground in developing a comprehensive set these investments has concentrated on a and the human rights movement. Florini of national policy responses to the knowl- few economies at the intermediate level of concludes that the power of transnational edge revolution. It defines a knowledge- the international income distribution, civil society is growing and sustainable, based economy as one where knowledge is wvhile the large number of low-income with limits, but argues that civil society created, acquired, transmitted, and used countries has been mostly neglected by groups must adopt measures of trans- effectively by enterprises, organizations, international investors. The book analyzes parency and accountability similar to individuals and communities; and presents the potential growth effects of liberalizing what they have asked of governments, a framework for analyzing a range of poll- investment regimes in developing international organizations, and corpora- cy options in education, information infra- economies and offers an explanation for tions. structure, and innovation systems that can the apparent bias of private capital flows towards middle-income countries. D E V E L O P MI E N 1 0 U r R E A C it a W I N T E R 2 U o 1 39 J an u a r y 200 1 30-Feb 2 ECOSOC Organizational Session 14-17 Comparative and International . . . NewYork NY ~~~~~~~~~~~~Education Society Meeting 15-Feb 2 Committee on the Elimination of New York, NYW ton DC Vin D)scrimination against Women February 2001 hito n,uDCg Vis New York, NY http://groups.co1gate.edu/cies Contact United Nations 5 World Commission on Dams Forum 15<17 World Economic Forum China Division for the Advancement of Cape Town, Souh Africa Business Summit 2001 Women Visit: www.dams.org Beijing, China dawvCun.org 5-9 Asia and Pacific Forum 15-26 9th International Training Program on Manila, Philippines 19-21 lDd Annual Meetings Utility Regulation & Strategy Visit: www.adb.org/povertv/forum Gainesville, Florida 8-9 Parliamentarians- II EuroMed 26-30 Commission on Population and Visit: www.purc.org or e-mail Parliamentary Forum Development Dr. Sanford V. Berg at: Brussels, Belgium Contact: population~un.org purcecon@dale.cba.ufl.edu Visit: www.europarl.eu.int/ Visit:www.popin.org and 22-27 International Seminar on Integrating conferences/euromed www.unfpa.crg New and Traditional ICTs for 13-14 Third Annual Latin American April 2001 Development Private Equity Fcrum (LAPE) Kothmale, Sri Lanka Gables, FL, USA 20-22 Third Summit of the Americas Contact Stella Hughes at: 13-23 Commission for Social Development Guebec City, Canada s.hughes@unesco.org New York, NY Visit: www.americascanada.org/ 25-30 DAVOS World Economic Forum Visit: www.un.oro/esa/socdev menu-e.asp Davos, Switzerland Visit: www.weforum.org/davos.nfs March 2001 , b2 PrepCom for General Assembly, spe- 5-16 Commission on the Status of Women cial session to review the achieve- New York, NY ment of the goals of the World Visit: www.un.org/womenwatch Summit for Children New York, NY There is a subscription fee charged to the following developed countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Kuwait, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Oman, Portugal, Saudi Arabia, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States, and Vatican City. 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E-ma I us at books5,oridbank.org 4th International Workshop on 2nd International Workshop on Strategic Management and Marketing of Innovative Marketing Communications (IMC-2): Strategic Management ~~~~~~~Promoting and Selling Training in the Competitive Global Market Training (SMMT-4): CM Cairo, Egypt: May 14-21, 2001 ^ Ensuring Sustainability & Financial Health of Learning Institutions 4T Th e Id Manila, the Philippines: Feb. 19-Mar. 2, 2001 W orld Amedican H-n Bank University The ~~~~~~~~~~~~~Co,a in Caimo Rib The ffr World Bank Institute (WBI)/The World Bank, in collaboration with the {el 1 i Worldi . Institute of Management Development of the American University in Cairo Bank AThT and SPAAC Human Empowerment Center, will organize this workshop as a Ai IMVI collaborative learning opportunity for training executives and managers to discuss and master innovative strategies, methods and tools for the promo- tion and selling of training services and products, in the context of cost- WORLD BANK INSTITUTE (WBI)/THE WORLD BANK IN PARTNERSHIP recovery and ensuring program sustainability and financial viability of train- ing institutions. WITH THE ASIAN INSTITUTE OF MANAGEMENT (AIM) AND THE Through "state-of-the-art" presentations, peer-based learning methods, and ASSOCIATION OF DEVELOPMENT FINANCING INSTITUTIONS IN ASIA case-method analysis, workshop participants will be expected to improve their conceptual know-how and practical skills in developing creative and AND THE PACIFIC (ADFIAP) WILL ORGANIZE THIS SMMT-4 WORK- cost-effective marketing communication approaches, including publicity and sales promotional techniques, especially for fee-based training. SHOP AS A COLLABORATIVE LEARNING OPPORTUNITY FOR TRAINING EXECUTIVES/MANAGERS TO DISCUSS AND MASTER MODERN MANAGE- For further information on this Workshop, please contact: Rosa L. Abde Malek Ronny Adhikarya MENT PRINCIPLES AND INNOVATIVE MARKETING METHODS WHICH ARE SPAAC/ World Bank Institute (WBI) APPLICABLE TO TRAINING INSTITUTIONS AND THEIR SERVICES/PhOD- Human Empowerment Center (HEC) The World Bank 21 Ahmed Hashmat St., Zamalek 181 8 H Street, NW UCTS. Cairo 1121 1, EGYPT Washington, DC 20433, USA Phone: (20-2) 735-8160 Phone: (1-202) 473-0305 Fax: (20-21 735-4338 Fax: (1-202) 522-1492 This Workshop is an initiative supported by E-mail: spaac@ritsecl.com.eg E-mail: radhikarya@worldbank.org the World Bank Institute (WBI)'s www.worldbank.org/wbi/imc-2 , Knowledge Utilization through Learning WorkshopSponsorsgi r-c Technologies (KULT) Program | IK O ~NO S | -r For further information on this Workshop ROME I WASHINGTON Ramses Hilton and/or to obtain the Application Form, please contact: Orlando Pena, Secretary Genieral Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) SKyland Plaza, Sen. Gil Puyat Ave., Makati City 1200 Manila, PHILIPPINES L Tel: (63-2) 816-1672 or 844-2424 Fax: (63-2) 817-6498 Email: sandy@adfiap.org r11M1. Tr ti-It M L* Market .com or: E Ronny Adhikarya, Senior Training Off. & KULT Program Manager World Bank Institute (WBI), The World Bank 1818 H Street, NW., Washington, DC 20433, USA 4 Tel: (1-202) 473-0305, Fax: (1-202) 522-1492 Email radhikarya@worldbank.org Or visit the Workshop Website at: www.worldbank.org/wbi/smmt-4 Workshop Sponsors AEWETC Looking for training? 4 w W Search for a world of training providers and offerings. Iz K N O SI-] T,& Ct-rVes LTD I RTD CProviding training courses, products, or services? M I WaSHINGTO Add your offerings to our globally accessible directory. ROME i WASHINGTON j bAIM TeI:11-202)721-0341 Em:info@globaltrainingmarket.com CONFERENCE ProducedbytheWorldBankGroup CENTER 'DsitHoLeIfkiko Developed and marketed by -- - . '"" ' CommunicationsDevelopmentincorporated "@' 'Global Development Learning Network Linking the World Through Leaming w-a y vUdeoconferencn aaXternet the world-wde web other aqvanced comnimuniations technoogies ;Thkhng together in a globa network o[ean,ng centers cost-effective learnrng opportunities and capacity4buiidtng programs for a wide audience .>AYre in fo:mnaton, Parti§panls PrVga Prtners Donor Partners Visit our w e - 9fgoge ??nfoiEmatlor, \ \ _ /~~~~~~~ec i05 ?3ar?iCis?Ja?lt5 ~ ~ ~ ~~~~~~~~~~~~ d\ l p