Ef­fects of So­cial Sec­tor Re­forms

The World Bank has im­ple­mented a num­ber of so­cial sec­tor mea­sures in South Asia but un­less home-grown pro­grams are not suc­cess­fully brought into play, the re­gion will con­tinue to lag be­hind.

Southasia - - Cover story - By Hadia Ma­jid

South Asia has seen the im­ple­men­ta­tion of sev­eral so­cial sec­tor re­form pack­ages that in­clude ed­u­ca­tion and health ser­vices. In­ter­ven­tions by lo­cal and for­eign donor agen­cies have re­sulted in bet­ter en­roll­ment pat­terns as well as lower in­fant mor­tal­ity and to­tal fer­til­ity rates. Yet, the re­gion still lags be­hind coun­tries with equiv­a­lent in­come per capita in ar­eas of hu­man de­vel­op­ment, san­i­ta­tion, demo­cratic in­di­ca­tors, envi- ron­men­tal pro­tec­tion, etc.

The World Bank con­tin­ues to spon­sor re­form pack­ages for the re­gion. For ex­am­ple, in 2009 the Bank pledged $350 mil­lion for re­duc­ing poverty in Pak­istan by sup­port­ing the govern­ment’s Poverty Re­duc­tion Strat­egy Pa­per. The main goals for this PRSP were to “main­tain macroe­co­nomic sta­bil­ity, im­prove man­age­ment and ef­fec­tive­ness of pub­lic ex­pen­di­tures, and as­sist power sec­tor re­forms.” Sim­i­larly in Sri Lanka the Bank has pro­vided as­sis­tance since the 1990s to im­prove the coun­try’s in­fra­struc­ture, pub­lic ad­min­is­tra­tion and qual­ity of so­cial ser­vices.

A quick look at pro­gram eval­u­a­tion stud­ies for the re­gion in­di­cates that although there has been some head­way in im­prov­ing ac­cess to ameni­ties such as clean water and power as well as a gen­eral in­crease in hu­man de­vel­op­ment in­di­ca­tors, there is still a long way to go. In fact there is con­sis­tent ev­i­dence of gaps

be­tween pro­gram tar­gets and de­liv­ery. Given the in­abil­ity of donor agen­cies to meet stated tar­gets, there are some fun­da­men­tal is­sues that re­quire at­ten­tion. These con­cern pro­gram struc­tures which may be lead­ing to un­met tar­gets and ques­tions re­gard­ing con­tin­u­a­tion of World Bank spon­sored pro­grams in the re­gion be­ing ben­e­fi­cial to the so­cioe­co­nomic lives of the peo­ple.

The pres­ence of a healthy and skilled la­bor force is a boon to any busi­ness ini­tia­tive look­ing to set up its op­er­a­tions in the coun­try. Ad­di­tion­ally, a re­li­able power sup­ply along with an ex­ten­sive road net­work is fac­tor that par­tic­u­larly for­eign in­vestors take into ac­count when choos­ing a site. Other fac­tors likely to make it eas­ier for both lo­cal and for­eign busi­nesses to setup in­clude the ex­tent of red-tape in­volved at in­cep­tion along with tax breaks as­so­ci­ated with in­dus­try. So, the fact that the Bank con­tin­ues to as­sist gov­ern­ments in South Asia in pro­grams aimed at im­prov­ing power sup­ply, in­fra­struc­ture as well as the stock of hu­man cap­i­tal while also re­duc­ing the ex­tent of pa­per­work for ini­ti­at­ing com­pa­nies sends a strong sig­nal that the re­gion re­mains ea­ger to at­tract in­vestors.

In­no­va­tion has a strong as­so­ci­a­tion with com­pe­ti­tion that thrives in a pros­per­ous busi­ness com­mu­nity. The in­ter­ac­tion of lo­cal and for­eign enterprises has been shown to re­sult in a shar­ing of knowl­edge lead­ing to the trans­fer of su­pe­rior tech­nol­ogy from one agency to an­other. As a re­sult, aside from hav­ing a pos­i­tive ef­fect on the re­gion’s GDP and per capita in­come lev­els, in the long-run high lev­els of in­dus­trial ac­tiv­ity is also im­por­tant for tech­no­log­i­cal ad­vance­ment.

As in­di­cated above, a skilled la­bor force is a pri­mary in­gre­di­ent for strong com­mer­cial ac­tiv­ity. The pri- mary ar­gu­ment here is that bet­tere­d­u­cated work­ers are more lit­er­ate which should make them eas­ier to train and in­crease their ca­pac­ity to pro­duce. It should also be eas­ier for them to learn more com­plex tasks and they should have bet­ter work habits, par­tic­u­larly aware­ness of time and de­pend­abil­ity. An ed­u­cated pop­u­la­tion has also been linked with re­duced fer­til­ity lev­els and lower crime rates. All of these fac­tors, along with the higher abil­ity of lit­er­ate work­ers to in­no­vate, are es­sen­tial ingredients for the longterm eco­nomic growth of a na­tion. How­ever, the main caveat is that it is un­clear what kind of and level of ed­u­ca­tion con­trib­utes most to growth —gen­eral school­ing, tech­ni­cal for­mal train­ing, or on-the-job train­ing, pri­mary, sec­ondary, or higher ed­u­ca­tion.

For many, school­ing can also be a source of so­cial mo­bil­ity. In­di­vid­u­als im­prove their life-time earn­ing po­ten­tial through in­vest­ment in school­ing. At the same time, it is im­por­tant to note that ed­u­ca­tion is not just a means to an end but rather an end in it­self as well since a per­son’s sense of well-be­ing and self-worth is strongly as­so­ci­ated with his/her school­ing achieve­ment.

In or­der to have quick and con­certed ef­fects on the eco­nomic growth of South Asia in the near fu­ture it is im­por­tant to un­der­stand which level and type of ed­u­ca­tion has the great­est ef­fect on pro­duc­tiv­ity. This is par­tic­u­larly vi­tal given the lim­ited avail­abil­ity of funds faced by donor agen­cies. How­ever, in the long-run the nu­mer­ous so­cial and pri­vate pos­i­tive ex­ter­nal­i­ties as­so­ci­ated with all lev­els of ed­u­ca­tion dic­tate that the re­gion con­tinue to work on pro­vid­ing its pop­u­la­tion with the high­est level of ed­u­ca­tion pos­si­ble, re­gard­less of its im­me­di­ate pay­off.

World Bank-as­sisted so­cial sec- tor re­forms in South Asia have the po­ten­tial to sig­nif­i­cantly bet­ter the lives of the peo­ple of the re­gion. Es­pe­cially for pro­grams re­lated to ed­u­ca­tion and health, mar­ginal rein­vest­ment into the pro­gram has the po­ten­tial to al­low the ben­e­fits to in­crease man­i­fold. Per­haps the best illustration for this re­lates to the health ed­u­ca­tion of a mother. Con­sid­er­able re­search has shown that im­prov­ing the aware­ness of the mother about water borne dis­eases, nu­tri­tion and health has an im­pact on not just the mother’s health but of her chil­dren as well. In the pres­ence of such strong ex­ter­nal­i­ties as­so­ci­ated with health and ed­u­ca­tion and de­spite the con­sid­er­able and lengthy pres­ence of the Bank work­ing to im­prove a broad range of so­cial in­di­ca­tors, why have we not seen greater progress to­wards achiev­ing de­vel­op­men­tal goals in the re­gion?

The an­swer to this is two-fold. The first lies in the in­abil­ity of the Bank to fo­cus on just a few key ar­eas of so­cial sec­tor re­forms re­sult­ing in its funds be­ing spread too thinly. This in turn means that it is un­able to have a sig­nif­i­cant ef­fect any­where. A more se­ri­ous ef­fect of the Bank’s pres­ence in the re­gion is the crowd­ing out of the govern­ment it­self. While it is true that Bank has as­sisted in point­ing out the gaps in the re­gion’s so­cial sec­tor agenda, its con­tin­ued in­volve­ment im­plies that gov­ern­ments have the lee­way to slash their de­vel­op­men­tal bud­get and pass own­er­ship to the Bank. As long as the onus of the de­vel­op­ment agenda re­mains with an out­side party, South Asia will not see the lon­grun ben­e­fits of large scale so­cial sec­tor re­forms fully re­al­ized.

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