Ex­pert Opinion…

Southa­sia put the fol­low­ing ques­tion to re­gional and in­ter­na­tional schol­ars, economists and jour­nal­ists about how they view the World Bank’s role in South Asia.

Southasia - - Cover story -

Q. What are the long-term aspects of the World Bank/IMF role in South Asian de­vel­op­ment?

M. R. Si­vara­man Former ex­ec­u­tive di­rec­tor of IMF for Bhutan, Bangladesh and Sri Lanka.

With In­dia emerg­ing as a net lender to the IMF and the govern­ment hav­ing agreed to par­tic­i­pate in its New Ar­range­ments to Bor­row, the dy­nam­ics of op­er­a­tion of the mul­ti­lat­eral in­sti­tu­tions in South Asia do not nec­es­sar­ily change. Pak­istan, Sri Lanka, Nepal, and Bangladesh are net debtors to the IMF and are un­der dif­fer­ent pro­grams. Afghanistan is also ne­go­ti­at­ing an ex­tended credit fa­cil­ity from the IMF. None of the coun­tries in South Asia with the ex­cep­tion of Bhutan show any prom­ises to have a trade sur­plus. They have size­able deficits on the cur­rent ac­count. All of them in­clud­ing In­dia are de­pen­dent on the sur­pluses on their invisibles and cap­i­tal ac­count to meet their en­demic trade deficits. These economies bar­ring In­dia, have mul­ti­far­i­ous prob­lems that af­fect the fun­da­men­tals of their economies with at­ten­dant un­cer­tain­ties on the bal­ance of pay­ment front. IMF is there to stay in these coun­tries for some time.

As far as the World Bank is con­cerned, South Asia as a whole will con­tinue to bor­row as its cap­i­tal needs for de­vel­op­ment are so huge that any ad­di­tions would con­tinue to be wel­comed. In fact the World Bank is proud to an­nounce that In­dia is its largest ben­e­fi­ciary in terms of to­tal lend­ing. This will con­tinue for a fore­see­able pe­riod as In­dia gen­er­at­ing a fis­cal sur­plus is nowhere in sight and the In­dian govern­ment needs it not so much as a BOP sup­port but to fill the big hole in its bud­get.

Pak­istan also gets large project fund­ing from the World Bank. The Bank and the Fund to­gether com­mit­ted over a bil­lion dol­lars to Pak­istan to help her out of the flood cri­sis of 2010.The dra­co­nian con­di­tions ac­com­pa­ny­ing the as­sis­tance pro­vided by these in­sti­tu­tions have been coun­ter­pro­duc­tive over time and the coun­tries’ felt needs in their eco­nomic and po­lit­i­cal environment are rarely kept in view while lay­ing down the con­di­tion­al­i­ties. Mr. Strauss Kahn tried to change this but he prob­a­bly did not en­tirely suc­ceed. The staff de­ployed by these two in­sti­tu­tions to over­see their op­er­a­tions may be bril­liant economists but do not have the faintest idea how a po­lit­i­cal sys­tem works and also the com­pli­ca­tions of grass root level gov­er­nance prob­lems.

The idea to have an Asian Mone­tary Fund is dead. Coun­tries like In­dia, China, Tai­wan, Sin­ga­pore, Malaysia, Thai­land and In­done­sia who have large for­eign ex­change re­serves could pos­si­bly think in terms of an ar­range­ment by which they could help their needy neigh­bors. As the East is ris­ing it is bet­ter to sink dif­fer­ences born more out of sur­face ten­sions rather than deep rooted an­i­mos­ity and help one an­other to get out of the eco­nomic shack­les that are con­tin­u­ing from a colo­nial past.

Babar Ayaz Se­nior Pak­istani jour­nal­ist, com­men­ta­tor on eco­nomic poli­cies and a com­mu­ni­ca­tion spe­cial­ist.

The World Bank and IMF have dif­fer­ent roles. So let’s deal with them sep­a­rately. The World Bank’s ba­sic role in South Asia is go­ing to be much im­por­tant be­cause it lends mostly for so­cial sec­tor and in­fra­struc­ture projects. Al­most all the eight coun­tries of South Asia, are suf­fer­ing from dis­mal in­vest­ment in so­cial sec­tor like health and ed­u­ca­tion. The in­fra­struc­ture of all these coun­tries needs heavy in­vest­ment also be­cause at present the ex­ist­ing road, rail, elec­tric­ity, water and ports etc. is di­lap­i­dated and in­ad­e­quate. Poor in­fra­struc­ture is se­ri­ously re­strain­ing the eco­nomic and so­cial growth of all the South Asian coun­tries. How­ever, coun­tries like In­dia where the econ­omy is do­ing re­mark­ably well may not rely heav­ily on the mul­ti­lat­eral donor agen­cies. But all other coun­tries like Pak­istan which are not gen­er­at­ing enough cap­i­tal re­quired for in­vest­ment in the so­cial sec­tor and in­fra­struc­ture need a long term role of the World Bank.

Again bar­ring In­dia most South Asian coun­tries are not in the po­si­tion to bal­ance their cur­rent ac­counts hence to bridge their cur­rent ac­count and bud­getary deficit they may con­tinue to rely on IMF fund­ing. But the prob­lem is to meet tough eco­nomic con­di­tion­al­ties of the IMF, which may fur­ther lead to desta­bi­lize the shaky po­lit­i­cal gov­ern­ments of South Asia.

Bar­ris­ter MBI Mun­shi Lawyer in the Bangladesh Supreme Court and author of the book ‘The In­dia Doc­trine – 1947-2007.’

I can only speak on the case of Bangladesh but it seems that both the World Bank and IMF al­ready have a re­duced role in the coun­try with ac­tiv­i­ties pri­mar­ily con­cen­trated on a few sec­tors such as bank­ing re­form and su­per­vi­sion, civil so­ci­ety or­ga­ni­za­tions, fi­nan­cial sys­tem sta­bil­ity, mi­grant work­ers, poverty re­duc­tion, madrassa schools and on ed­u­ca­tion gen­er­ally. These all are ar­eas that have seen sig­nif­i­cant im­prove­ments in re­cent years but are also highly sen­si­tive is­sues po­lit­i­cally. The govern­ment in Bangladesh has in re­cent times been less re­liant on the World Bank and IMF and less in­ter­ested to lis­ten to their ad­vice. A case in point is the open­ing of new banks in Bangladesh which is op­posed by both the IMF and WB. Bangladesh leans more to­wards the ADB who tend to help fi­nance im­por­tant in­fra­struc­ture projects and is in­volved with the Asian High­way project and fa­vors con­nec­tiv­ity in South Asia. These are is­sues that ap­pear po­lit­i­cally sig­nif­i­cant for the present govern­ment as well as In­dia. It seems clear that where a par­tic­u­lar econ­omy is ro­bust and the poli­cies of the WB and IMF are not in tune with the po­lit­i­cal re­quire­ments of the re­spec­tive govern­ment, it will have less in­flu­ence and in­volve­ment in that coun­try. This is prob­a­bly the same for most of South Asia but then should the WB and IMF pan­der to the po­lit­i­cal sen­si­tiv­i­ties of gov­ern­ments who may one day re­quire their as­sis­tance when there is an eco­nomic down­turn?

Mo­hi­ud­din Aazim Karachi-based eco­nomic an­a­lyst and a reg­u­lar colum­nist on eco­nomic is­sues in var­i­ous re­gional pub­li­ca­tions.

Led by In­dia within the re­gion and China in the neigh­bor­hood, eco­nomic growth in South Asia should re­main strong in the long-run. But South Asian economies in­clud­ing In­dia would need to fo­cus more on aug­ment­ing en­ergy re­sources, de­vel­op­ment of in­fra­struc­ture and in­no­va­tion in high-tech busi­nesses, agri­cul­ture and in­dus­trial pro­duc­tion. So, the World Bank’s help would re­main crit­i­cal. Pak­istan, Bangladesh and Sri Lanka may also have to bat­tle with bal­ance of pay­ment prob­lems be­cause these coun­tries would find it dif­fi­cult to com­pete with In­dia and China in exports and in at­tract­ing for­eign in­vest­ment. They would, there­fore, con­tinue to seek oc­ca­sional IMF sup­port to over­come BOP is­sues.

Safiya Aftab An eco­nomic an­a­lyst and re­searcher with Pak­istan’s Strate­gic and Eco­nomic Pol­icy Re­search (Pvt) Ltd.

The IMF is now con­cen­trat­ing on main­tain­ing sta­bil­ity in Europe. Small pro­grams will con­tinue in South Asia, but are un­likely to have a ma­jor im­pact on lo­cal economies. In­dia’s in­flu­ence in the Fund will grow as the coun­try made a loan of $10 bil­lion to the Fund in 2009, which has im­pli­ca­tions for its vot­ing pow­ers. The World Bank is in­creas­ingly mov­ing to­wards in­vest­ment in in­fra­struc­ture – orig­i­nally its core func­tion. Given that this is a pri­or­ity need in South Asia, the Bank’s in­flu­ence may grow.

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