PSD Blog - The World Bank Group

Doing Business in India

If you wanted to start a business in India, what city would you pick? The just-released report Doing Business in India 2009 has an answer: Ludhiana. Hyderabad and Bhubaneshwar would also be good choices. Why? These were ranked as the top three cities in India (out of 17 included in the ranking) in the overall ease of doing business. 

Thinking the unthinkable in Indian higher education

Greater financial autonomy for Indian universities? I can almost hear an audible gasp. Nevertheless, that's what Santosh Mehrotra, a senior adviser of India's Planning Commission, has recommended in a recent article in International Higher Education:

...The pace of expansion in the new few years may well turn out to be frenetic. The most serious problem that this sudden expansion will entail is finding faculty of appropriate quality in the public higher education system. Therefore, an initiative to be seriously considered involves giving greater financial autonomy to universities, to enable them to mobilize resources from sources other than the government—partly to attract Indian academics teaching abroad back to India. Salaries have risen sharply recently, thanks to the Sixth Pay Commission’s recommendations to make returning home attractive for nonresident Indians. However, the requisite autonomy of universities is also needed to encourage them to attract faculty back to India.

What can Chindia do to cope with the crisis?

One of the oft-cited causes of the financial crisis are the huge macroeconomic imbalances that developed between the United States and a number of emerging markets, particularly China. Neil Gregory, a senior adviser at the World Bank and author of New Industries from New Places, offers China and India some advice on coping with the crisis that should also help deal with these imbalances. From an interview with Neil on China and India's IT markets in India's Financial Express:

Serving the poor through markets

I just ran across a useful compendium of market-based solutions to poverty. Not too long ago an organization called the Monitor Group put out a publication called Emerging Markets, Emerging Models. It's filled with instructive examples - here is one of them:

The Byrraju Foundation provides a good example of a promising pay-per-use operation in water purification. In India, one typical low-cost business model is to provide individual activated carbon water filter units to low-income families at costs ranging from Rs. 900 to 1,500 ($18-$30), with replacement filter cartridges needed every three to six months at the cost of Rs. 400 ($8). With a monthly cost of Rs. 60-90 at normal usage rates, this is often too much for families living on Rs. 3,000 or less.

The verdict is in on microfinance

And it's not pretty. The results from the first large-scale randomized trial of access to microfinance indicate that it comes up short in many areas of human development. 52 of 104 slums in Hyderabad were randomly selected to receive new branches of a microfinance outfit called Spandana. Abhijit Banerjee and the other randomistas from the Poverty Action Lab describe the results in The Miracle of Microfinance? Evidence from a Randomized Evaluation:

...microcredit does have important effects on business outcomes and the composition of household expenditure. Moreover, these effects differ for different households, in a way consistent with the fact that a household wishing to start a new business must pay a fixed cost to do so. Existing business owners appear to use microcredit to expand their businesses: durables spending (i.e. investment) and business profits increase...

The best 419 scam so far

Apologies if you've already seen this, but I thought this clever satire on a 419 scam from the India Uncut blog deserved a shout-out.

The Access to Justice Programme in Pakistan

To reduce the enormous backlog of court cases, Pakistan enacted the “Access to Justice Programme” in 2002. Case-flow management techniques were taught to judges in 6 pilot districts out of 117, with the aim of facilitating rapid case disposal. Beyond this immediate aim, a more efficient judiciary can also have important economic effects by, for example, providing more secure property rights and better enforcement of creditor rights. Greater security of property rights increases the return from investment, which encourages entrepreneurship, and the better enforcement of creditor rights makes it easier for banks to lend to current and future entrepreneurs. In short, one would predict an increase in entrepreneurship as a result of a more efficient judiciary. Did this prediction come true in Pakistan?

Microfinance and the very poor

...the overriding importance of rules and management practices emerging from our data suggests that...even groups comprised of very poor borrowers in high risk conditions can achieve high repayment rates if proper rules and management practices are adopted.

That is the conclusion of a recent paper on the Determinants of Repayment Performance in Indian Micro-Credit Groups. I think the most fasinating finding in the paper is that the optimal number of members of micro-credit groups is exactly 14. If a group is larger or smaller than this number, the probability of repayment is lower. Is this number specific to conditions in India, or could it be similar to the Dunbar number in the sense that it reflects some inherent and universal feature of human social networks? 

Dutch Disease in the Himalayas?

Is Bhutan suffering from an acute case of Dutch Disease? Despite its status as the Shangri-La destination for A-list tourists, Bhutan’s land-locked status and nascent private sector pose enormous challenges for a country that is gradually moving to a more market-based economy. Thinking about this question is enough to transform one Bhutanese MP’s happiness to national economic fretting.

Paro International Airport

Looking beneath the surface

Existing studies on business regulation – its determinants and effects – are largely focused on aggregate level measures. These aggregate level measures attempt to summarize many different types of regulations into a single monolithic whole. The key question then is how similar the underlying sub-components are in terms of their effects on economic activity and their determinants.

A few studies that attempt to address this question suggest that the picture at the aggregate and micro level can be very different. For example, in a study on labor laws in India’s manufacturing sector, Ahsan and Pages (2009) find that employment protection legislation and dispute resolution legislation have very different effects. For instance, labor intensive industries are hardest hit by stringent employment protection legislation, while capital intensive industries are hardest hit by dispute resolution legislation.

Are rigid labor regulations driving greater computer usage?

A handful of studies that address this question have answered in the affirmative. In theoretical work, Alesina and Zeira (2006) and Blanchard and Philippon (2006) argue that rigid labor laws may encourage firms to substitute labor with computers. One implication is that we should find greater computer usage in countries or regions that have more rigid labor laws (other implications discussed below).

Amin (2009) tests this hypothesis on 1,948 retail stores in India using data from Enterprise Surveys, a regular World Bank survey on firm performance, firm characteristics and the business climate. These data are ideally suited for answering the question at hand. The study finds that the percentage of retail stores that use computers rises by 6.2 percentage points as we move from the state with the least to the median level of rigid labor laws. This is a large effect given that only 19% of the stores in the sample use computers. The theoretical predictions mentioned above are therefore confirmed.

The costs (and benefits) of shopping till you drop

Do non-workers increase competition in retail markets? A recent study (Amin, 2008) on retailing in India suggests that the answer is yes. The study shows that for each additional non-worker per household in the city, the level of competition increases by about 42% of its mean level.

(Disclosure for the methodologically inclined: The retailing study is based on firm-level data on 1,948 retail stores in 41 large cities of India collected in 2005 by the World Bank’s Enterprise Surveys, which gathers data on business climate, firm performance, and the like. Data on adult non-workers per household (averaged at the city level) are taken from the Census of India where adult non-workers are defined as those above 7 years of age and who voluntarily opt out of the labor market (neither working nor searching for a job).)

The underlying motivation for the study is that competition in the retail sector depends on how intensively consumer-households search for the best prices and deals. Consumers look at the benefit and cost of time spent shopping and decide how much time to spend searching. Add to this the fact that internet shopping is still rudimentary in developing countries, and we’re quickly talking about a significant amount of time spent on comparison shopping.

Private sector finance in Asia

The Asian Development Bank (ADB) has taken a real interest in private sector finance, releasing a publication earlier this year called Private Sector Finance: Catalyzing Private Investment in the Asia and Pacific Region. The ADB argues that a lot of their work revolves around building confidence:

...financial institutions across Asia are awash with liquidity. This is a situation that evokes an underlying problem—the absence of investor confidence. The absence of investor confidence continues to ail most developing economies, as investors remain wary of risks that abound across the region. This is where the strategic role of ADB lies.

They have their work cut out for them. The Institute of International Finance has some harrowing predictions for private capital flows to emerging Asia - a falloff to $64.9 billion in 2009 from $314.8 billion in 2007, a drop of nearly 80% in two years. This places it behind only emerging Europe in percentage terms.

The century of Chindia?

A just released book published by the World Bank looks at the potential for economic cooperation between China and India in the IT sector. It's called New Industries from New Places, and it's been coauthored by Neil Gregory, an adviser in the World Bank's Financial and Private Sector Development department.  

From the description:

This book represents the first rigorous comparison of China and India's new growth sectors. It compares the emergence of India and China as global leaders in hardware and software production as well as the growth performance of private enterprise in the IT manufacturing and IT services sectors in China and India. It examines the economic context and the business environment for private enterprise in China and India, and considers how far differences in economic policies or the business environment explain the observed differences in growth performance. The book concludes by evaluating explanations for the growth performance of each sector in each country and by drawing conclusions for future economic policies and business strategies.

So, will this be the century of Chindia? I'll get back to you after I've read the book...  

The biggest threat to the Big Three?

While the financial crisis has the Big Three reeling, perhaps the biggest threat is the tiny Tata Nano. This Monday India saw the release of the world's cheapest car, starting at £1,350. Although the Nano was designed for the Indian market, Ratan Tata, the chairman of Tata Group, has big plans:

The European Nano will be rolled out within two years and the US Nano within three. "Given the present indications of the buying preferences in the US, we felt that we could further develop the European Nano to meet the requirements of the US," he said.

Speaking to the Guardian, Tata said he had the Indian family in mind when he designed this car. "Here in India we see four people travelling by motorbike ... I thought they could travel more safely by car," he said. "However, in the United States it could be for younger [people] who want a low-cost car."

Where do I sign up?

(Hat tip: Chris Blattman)

Update: A paean to the Nano in Forbes: "The brilliance of the Nano lies in its finely judged balance of skimping where it doesn't matter and pampering owners where it does."

PPI projects in the crisis

A new note on Private Participation in Infrastructure indicates that PPI projects have been hit by the crisis but have rebounded somewhat:

Throughout the financial crisis, new private activity has continued to take place in developing countries with projects being tendered and brought to financial closure. In the first months of the full-scale of the financial crisis (Aug—Nov 2008), the rate of project closure was 26% lower than in the same period in 2007. However, since then private activity recovered and the project closure rate in Aug—Dec 2008 was just 15% lower than in the same period in the previous year.

What might explain this modest recovery? At least in two cases, governments and public sector banks have stepped in with additional financing. Brazil's government provided $US 42.6 billion for the national development bank BNDES to finance infrastructure projects, and India has likwise upped public support for infrastructure through IIFCL, a public infrastructure finance company.

The private sector meets randomized evaluations

For nearly a decade now, the gold standard in international development in the public sector has been the randomized evalution. There are numerous examples, perhaps the most famous being that of Mexico's PROGRESA program. Until recently financial and private sector development were more or less ignored or assumed unfit for this type of evaluation - I suspect the (mistaken) assumption was that survival in the marketplace was enough of an evaluation.

However, a new newsletter called FPD Impact promises to rectify this oversight. And it looks like new evaluation work on private sector development is bringing to light some very provocative findings. The first edition looks at Which Microenterprises have High Returns to Capital?. David McKenzie, the author, examines experiments where microenterprises in Sri Lanka and Mexico were randomly selected to receive grants of between US$100 to $200:

Income (in)equality among the professoriate

“Salary progression”—the difference in salary between junior and senior professors—in general appears modest compared to the situation in the professions outside academe. According to our research, for most of the 15 countries in the study, salaries seldom doubled between entry level and senior ranks. The major industrialized countries (including Germany, France, Canada, the United States, and the United Kingdom) stood at the bottom, in terms of variations between junior and senior ranks, and the developing countries (such as China, South Africa, Argentina, and others) at the top. India ranks poorly on both progression and on basic salary. The lack of possibilities for improved salaries is a problem for the profession in general, but it is particularly damaging for the most productive academics. The latter are the most likely to leave academe or to go to countries with higher salaries.

That is from a new article by Philip Altbach, Director of the Center for International Higher Education, called The Intricacies of Academic Remuneration. Of course, we must take into account the many types of non-income remuneration that academics receive. But still I wonder - what are the chances that the professiorate (or Ministries of Education) would permit the kind of income dispersion that is normally seen in the (purely) private sector? I'm not holding my breath. 

Doing Business in Bhutan

One blogger thinks it's time to make it easier to do business in Bhutan:

Meanwhile, our vision of strengthening the private sector and making it the “engine” of growth remains just that – a distant vision. And, in spite of the impressive numbers, our economy is actually very weak, which manifests quite clearly in rising inequalities, youth unemployment and widespread poverty.

So what should we do? Make it easier to do business in Bhutan. Make it easier to for our people to realize their full entrepreneurial potential. Make it easier for businessmen and women to contribute to the economy. Review rules and regulations. And make them business friendly.

(Hat tip: Jason Resendez)

Debating sweatshops

Nicholas Kristof, a columnist for the New York Times, recently wrote an article in support of sweatshops, citing what he sees as the relevant counterfactual:

...the vast garbage dump here in Phnom Penh. This is a Dante-like vision of hell. It’s a mountain of festering refuse, a half-hour hike across, emitting clouds of smoke from subterranean fires. The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. Then the smoke parts and you come across a child ambling barefoot, searching for old plastic cups that recyclers will buy for five cents a pound. Many families actually live in shacks on this smoking garbage...

Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.

Kristof goes on to argue that we should be skeptical of labor standards in international trade agreements, as these can serve indirectly as barriers to trade, thus reducing demand for the products from factories in the developing world. But is he setting up a false choice between scavenging and sweatshops and between free trade and labor standards?

What the mafia can tell us about microfinance

The folks over at the India Development Blog have a very interesting post that points out that the Italian mafia has been flourishing during this financial crisis. According to Alastair:

The report comes from Naples, a bustling southern Italian city that sits below the famous and picturesque Mt. Vesuvius – infamous for the people in Pompeii. Of late, the southern mafia (camorra) have never had it so good. Due to the credit drought in Europe, the Italian mafia’s lending activities have earned them an estimated $200 billion profit this last year – 6% of the country’s GDP.

Not too shabby - at least for the mafia. But the bigger concern is that the financial crisis might be pushing microentrpreneurs and others who would normally borrow from microfinance institutions to more traditional money lenders:

In India the financial downturn and the recent attacks in Mumbai are likely to limit credit further. If the events in Naples are anything to go by, small MFIs may have a tough time and the more informal moneylending institutions might see their business pick up.

Off the mark on microfinance

Writing in the Ethical Corporation newsletter, Rajesh Chhabara recently opined on the near-term prospects for microfinance in Asia. Their take? Things are just hunky-dory:

Despite the trouble in global financial markets, investors continue to put money into Asian microfinance. A $40m fund aimed at financing start-ups in microfinance was launched in October by the India-based Institute for Financial Management & Research Trust, supported by a group of investors including India’s Icici Bank. In May, ASA International of Bangladesh, ranked number one on the Forbes list of top 50 microfinance institutions, raised $125m in funding – the largest ever by a microfinance institution – through private equity firm Catalyst Microfinance Investors...

Legislating for doing good

While the financial and economic crisis has prompted much soul searching on the appropriate government and business boundaries and the right balance of regulation, it will be interesting to see how this filters down to emerging markets such as India and China -even at the local level there are now efforts to legislate for corporate responsibility.

In China the focus to date has mostly targeted clarifying and increasing standards in production – see CSR Asia’s report on labor standards being tested in Yiwu City. This makes sense when companies are reliant on export markets sensitive to such issues, but as exports decline and consumers focus even more on price savings, the momentum may be sucked from such efforts.

In India, the states of Gujarat and Karnataka exemplify an alternative approach. They are considering legislation to make CSR mandatory via required funding of social projects. As reported in Indian Express, Gujarat already requires public enterprises to use 30% of profits before tax for social initiatives. It is now set for extension to private firms.

A deluge of kidnappings in Afghanistan’s investment climate

Editor's Note: Arvind Jain is a private sector development specialist working on survey implementation in the Enterprise Surveys group. Welcome!

What does it take to get data on Afghanistan's investment climate? It's a lot harder than simply figuring out an appropriate survey design. During recent fieldwork in Afghanistan, the Enterprise Surveys group found out exactly what it takes. Although one might assume that the targets of kidnappings in Kabul are Westerners and international aid workers, the primary targets are actually Afghani businessmen. A successful kidnapping provides the perpetrators with quick cash - it is a much larger criminal enterprise compared to abductions conducted for ideological purposes. This meant it was not at all easy for interviewers from Enterprise Surveys to contact businessmen for research purposes.

While the Doing Business project ranks countries on topics such as “Starting a Business," its PSD sibling in global indicators is the Enterprise Surveys group. They conduct surveys of the private sector and produce indicators under themes such as Gender and Corruption. Data is already available for 100+ countries, and among the 60+ countries where survey data is currently being collected, Afghanistan fieldwork is almost complete.

The hidden side of globalization

In debates over globalization, much attention is given to so-called 'North-South' relationships. Often, data on 'South-South' exchanges it too limited to say much. A new paper on Global Migration of the Highly Skilled by Theo Dunnewijk of United Nations University helps shed some new light on 'South-South' brain drain/brain strain/brain circulation (Hat tip: Giulio Quaggiotto). Previous datasets had overlooked diasporas of highly skilled workers in these countries:

• South Africa originating in Zimbabwe, Botswana, Namibia and Lesotho;
• Russia from Kazakhstan, Ukraine and Belarus;
• Ukraine, from Brunei Darussalam;
• Czechoslovakia (former) from Iran;
• Malaysia from China and India;
• Latvia from Israel;
• Romania from Moldova;
• Jordan from Palestine Autonomous Region;
• Tajikistan from Uzbekistan;
• Bulgaria from Greece

Is this brain drain, brain strain, or brain circulation? Dunnewijk doesn't tell us - a topic for another paper, perhaps.

Crunch time for microfinance - final thoughts

CGAP ran a virtual conference last week on microfinance and the financial crisis. (See their website for details and an earlier post on the first round of emails from the conference.) There was a ton of interest in this topic, reflected in the extraordinary volume of communication from all over the globe. To make things easy for you, I pored over the emails to bring you more highlights from the first half of the conference, which focused on MFIs and their clients:

Daniel Mensah from Ghana:

I am a member of the credit union movement in Ghana, West Africa. At a recent meeting of some of the credit union executives, it was reported that the number of members taking loans or withdrawing their savings is going up. Among the many reasons given was that the financial crisis has reduced the inflow of remittances from citizens/relations abroad and so many members now have to fall on their savings or take loans.

Can Islamic Finance go micro?

With more than half-a-trillion dollars in assets and an annual growth rate that has outpaced conventional banks’ by nearly 50 percent, the Islamic finance industry is already making waves among investment fund managers. And this not only applies to the Muslim world: The Banker magazine recently named the United Kingdom to its list of the top 15 countries managing Sharia-compliant assets.

The new CGAP Publication Islamic Microfinance: An Emerging Market Niche argues that the Islamic finance industry, with its unprecedented popularity and growth, may be well-placed to address a critical need in microfinance: reaching the some 72 percent of people in Muslim-majority countries who do not use formal financial services.

Doing Business 2009 - Five years of reforms

Doing Business 2009 is here! The sixth in the World Bank Group's annual series on business regulations, DB 2009 allows us to take a look at five years of reforms since DB 2004. But before I get to that, let me hit the highlights of DB 2009:

• This year's top reformer is...drum roll please...Azerbaijan! Azerbaijan improved on 7 out of 10 of the indicators tracked by DB and moved up 64 slots in the overall rankings.
• Two regions - Eastern Europe and Central Asia and Sub-Saharan Africa - accounted for 7 of the top 10 reformers: Azerbaijan, Albania, Kyrgyz Republic, Belarus, Senegal, Burkina Faso, and Botswana. The other top 10 were Columbia, Egypt, and Dominican Republic.
• Once again, Singapore tops the rankings, followed by New Zealand, the United States, and Hong Kong, China. 

Doing Business in India

Doing business in India may be getting easier in the not too distant future. An article in the Business Standard talks about a proposed law that aims to speed up the enforcement of contracts (Hat tip: Dahlia Khalifa). And what prompted this interest in a new law? You guessed it:

The Centre had taken notice of the World Bank’s Doing Business Report 2007, which said that it takes as many as 1,420 days in India to implement a financial contract. The report had given India an overall ranking of 177 in the report, a rank that remained unchanged in 2008.

In India, it's all about location, location, location

The Financial Times reports today that Tata Motors, the company behind the Rs100,000 (US$2280) Nano mini car, has faced protests over the location of its factory. Some 2,000 state police blocked the road to the factory in West Bengal. Protestors are concerned that farmers have been unfairly displaced from Tata's 1,000-acre site. On the upside for Tata, FT reports that it has received proposals for relocation from at least nine Indian states. I guess the diminutive Nano is in demand. This doesn't seem to be the only case in India's recent history of such protests, though.   

   

Workforce development as a response to information asymmetry

In an earlier post, I discussed the Indian approach to workforce development. A lot of Indian companies spend a lot of money on in-house training for their employees. Although I didn't mention it at the time, one of the things that puzzled me is why companies would invest so much money on in-house training; employees could simply leave after a short tenure, and the company would have lost money on the cost of the training. One explanation could be that the skills provided through this kind of training are highly firm-specific, but I find that proposition dubious. An article in the Financial Times today made me think of another possibility:

Supply and demand in higher education

It might still be an international market with stiff barriers, but higher education is definitely becoming more competitive. The U.S., traditionally dominate, has been losing market share due to increased competition from the rest of the world. A new report from the Council of Graduate Schools drives home the point. While the number of international graduate students continues to increase globally, the U.S. has seen a slowdown in applications from the rest of the world:

The greatest return on investment

I previously posted on the myth of the entrepreneurial middle class. A post on the India Development Blog on What Does Productive Loan Use Look Like reminded me of this issue. Michael Chasnow reports on new research on the use of credit in the slums of Hyderabad. Here are the reasons people took out loans (often not from any microfinance institution, and at interest rates of 80%):

• Health expenses (17%)
• Marriage (13%)
• Temporary difficulty (10%)
• Home construction (10%)
• Consumption (10%)
• Start a new business (7%)
• Business expansion (1.33%)

Outsourcing credit card defaults

The Financial Times reports today that US credit card defaults prove a boon to India. According to the article:

Firstsource, an Indian business process outsourcing company that handles credit recovery for most of the top five US banks and half of the top 10 credit card issuers, said it was increasing staff numbers to win business from growing credit card defaults in both national markets. "There is more demand for that service. If I could add 100 people today, overnight, I would do it," said Ananda Mukerji, Firstsource chief executive, in an interview with the Financial Times...Mr Mukerji said: "There are more credit card outstandings being defaulted on today than there were a year back, so that's a growth opportunity for us."

If I were asked to devise a way to increase protectionist sentiment among U.S. voters, I doubt I could come up with a more effective method than this.

Universities and development

Every year around this time, the Shanghai Jiao Tong University makes waves with its Academic Ranking of World Universities. As always, North America dominates in the short list of top 100 universities, with the Ivy League universities occupying most of the top slots. And as always, aggrieved parties produce howls of pain along with numerous complaints about methodological flaws - see a few examples here and here.

While there are certainly flaws, part of the problem lies in the inherent impossibility of ranking universities. These institutions devote themselves to many different tasks, while the Jiao Tong rankings examine only one task - research. (For an excellent discussion of the debate around rankings, see this commentary from Alex Usher of the Educational Policy Institute.) Jiao Tong ranks research output by aggregating a bunch of data on things like the number of Nobel prizes awarded to faculty and the number of articles cited in Nature and Science. (A full description of the methodology can be found here.) Given that these rankings tell us about the distribution of research output around the world, what might we be able to glean about the prospects for development?

Workforce development, Indian style

A new paper from the Kauffman Foundation talks up the successes of India's approach to workforce development. According to How the Disciple Became the Guru, Indian companies have done such a good job at training their workforce that the U.S. should consider adopting some of India's practices in this regard (thus the title of the article). Or, as the authors of the paper conclude:

Indian companies have learned how to take the output of a weak education system and turn graduates into world-class engineers and scientists. Imagine what could be done with a worker base that has received the high quality of education available in the United States.

Respectfully, I disagree with the authors' conclusion.

Computers in the (Indian) classroom

Some of my previous posts (see here and here) raised doubts about the value of spending gobs of money to introduce computers into classrooms in the developing world. A new study from the Poverty Action Lab at MIT provides some additional insight on exactly this question. Leigh Linden, the author of Complement or Substitute? The Effect of Technology on Student Achievement in India, offers up some truly useful information by asking a better question than others have asked - namely, not whether computers improve learning on average but rather in what context and for whom they improve learning.

Who benefits from the brain drain?

There is considerable debate about whether the mobility of highly skilled labor constitutes a brain drain or a brain circulation. A publication of the Association of Universities and Colleges of Canada makes it clear that to the extent there is a brain drain, then Canada is a large beneficiary (Hat tip: GlobalHigherEd). Between 2001 and 2006, more than 3,000 Chinese PhD holders emigrated to Canada. Another 1,200 Indian PhD holders emigrated to Canada in that same time period. I have to wonder how many yuan and rupees the Chinese and Indian governments spent on educating these individuals before they took their skills elsewhere?

   

Air India and the beauty premium

Over at the New York Times's Freakonomics Blog, Stephen Dubner contemplates the beauty premium. In a recent post, he decided to ask some real people whether looks matter in their career. Most of the people he spoke to said that looks mattered - the only exception was an environmental engineer who works with wastewater! Of course, Dubner's selection of people wasn't exactly random; one of the respondents is in the "adult entertainment" industry. And the respondents rate themselves on average about 8 out of 10 on a scale of attractiveness, which suggests the sample is a bit lopsided (or perhaps just highly self-regarding?).

In any case, while looks obviously matter in the adult entertainment industry, how much looks matter for the rest of us has been open to speculation. Now, at least according to some critics, it appears the High Court of India has decided to enforce the beauty premium as a matter of law. The High Court recently ruled in favor of Air India, which limited overweight staff to working on the ground. Writing in an op-ed in Ethical Corporation, Mallen Baker had harsh words for the decision:

The business of small deposit accounts

In a dispute reminiscent of the Compartamos controversy, the Sahara India Financial Corporation has been ordered by the Indian Central Bank to stop taking deposits. Sahara provides a range of financial services, most prominent among them deposit accounts for the poor. If savers get behind on their deposits, Sahara penalizes them by reducing the interest they receive. According to a report in the Wall Street Journal (subscription required), more than 70 percent of Sahara ’s customers are currently being penalized.

China vs. India - a battle of the brains

In this brave new world of knowledge-driven economies, it is a battle of the brains. And in perhaps the biggest battle of them all—China versus India—a winner is emerging. If you guessed India, I’m sorry, you get the consolation prize. China is far outstripping India in the race to expand tertiary enrollment. Data collected by the UNESCO Institute for Statistics indicate that in 2006, China achieved a gross enrollment ratio of 22 percent, compared to only 12 percent in India. Granted, raw numbers don’t take into account variations in the quality of education. Nevertheless, India is clearly a laggard at 12 percent—and perhaps even less than that, according to data from the Program for Research on Private Higher Education.

What could explain India’s poor marks? One part of the explanation is India’s ambivalent relationship with the private sector as a provider of higher education. While private higher education has grown rapidly in India, both in terms of number of institutions and enrollments, many barriers still remain. According to the Program for Research on Higher Education, there is

Mobile money – an update

Past PSD bloggers have pointed to the growing use of mobile phones to facilitate financial services (see past posts on a workshop on IT and financial services and on regulatory issues related to mobile financial services). These posts suggest that masses of previously underbanked individuals are taking advantage of these services. Until now, this phenomenon has been largely confined to relatively peaceful countries like the Philippines and South Africa. According to a blurb in today’s Financial Times, however, mobile phone financial services (subscription required) may be moving into new terrain. According to Karim Khoja, the chief executive of an Afghan mobile phone company, a partnership he has formed could

…leapfrog the banking system in the same way as we leapfrogged wires in the ground.

Afghanistan seems to be an appropriate proving ground to test this possibility. According to the article, any movement of cash in Afghanistan requires heavily armed convoys. Bank branches have been set up in only five cities throughout the entire country. Perhaps mobile phones will be of even greater value in a conflict-ridden country like Afghanistan than in South Africa or the Philippines.

Aids in Asia: alarming numbers

A new United Nations report, Redefining Aids in Asia: Crafting an Effective Response, was just released and makes an astonishing prediction: 500,000 peaple could die each year people due to AIDS-related illnesses by 2020.

The report released Wednesday also contends that the number of infected people could potentially double to 10 million by 2020 if prevention work is not undertaken. The cost of such an increase in infected people would be great in all levels, including economic cost, since Aids is one of the major causes of death among working-age adults in Asia. According to the chairman of the Commission on AIDS in Asia, Dr Chakravarthi Rangarajan, the cost could be up to $2 billion annually until 2020.

Tsunami insurance for the poor

A new health insurance plan will enable the poor in India to buy health insurance for less than 10 cents a month, and it will cover natural disasters including Tsunamis.

The new program is a partnership between and aid group, CARE International, and a private insurer, Allianz. It is expected that over 200,000 customers will buy insurance within a year. According to Allianz, the communities have been involved in designing the new policies, which will cover death, medical treatment for injuries in accidents, help with funeral and hospital expenses, as well as paying wages during illness.

"Microinsurance provides a comprehensive measure of social security in an area which desperately needs this sort of protection against accidents and shocks that can push poor communities right to the limit," said Wolfgang Jamman, national director of CARE Germany.

But don't be so quick in calling this charity work. With an estimated market of 250 million policy holders in India, there sure is a buck or two to be made.

Calm waters for offshore outsourcing

Despite some evidence that offshoring did little or nothing to help U.S. original equipment manufacturers (OEMs), the practice across industries has doubled since 2004 according to a survey recently published by CFO magazine.

Not only have the numbers grown, but also the spectrum of services using offshore outsourcing. These services range from the traditional information technology services, to legal research, and analysis of medical test results.

Also, favorite offshoring destination is still India with China as a big competitor. On a lighter note, CIO magazine ran a fun head-to-head comparison between these two countries showcasing their respective comparative advantages when it comes to IT outsourcing.

Outsourcing too expensive

A new study by the Boston Consulting Group finds that outsourcing to China and India did little or nothing to save costs for many of the original equipment manufacturers (OEMs).

About two-thirds of the manufacturers in the survey reported unit costs in China equal to or higher than those in their home countries. The authors point to diseconomies of scale and higher quality control costs as main causes.

Unusual champions of global sustainability

It is often assumed that the greatest potential for improving business environmental practice in developing countries lies with foreign multinationals and not with the countries' own businesses.

These case studies reject this common assumption and point to the crucial role of developing-country firms as they serve the world's most populous and fastest growing markets

Says Simone Pulver the guest editor of "Greening Development: The Role of the Developing-Country Private Sector" published in the "Studies in Comparative International Development" [subscription required]. The recent issue is based on case studies of selected firms in China, India and Latin America.

Microfinance regulation according to Yunus

The Nobel Peace Prize laureate and the father of Grameen Bank, Mohammad Yunus, on microlending regulation:

The existing regulations are designed with commercial banking in mind, but microfinance requires a dedicated regulator and a relevant set of rules. Commercial banking is like a super tanker whereas microfinance is like a dinghy boat with which you can reach small corners. If you design a dinghy boat with the architecture of a supertanker, it is sure to fail

Locomotion for $2500

Though above $2000, at $2,500 the Tata Group found a way to build the cheapest car in the world.

Tomorrow, India's biggest company will show what taking out one windshield wiper, radio, moving the engine to the back, and putting in a cheaper, hollowed out steering-wheel shaft can do to a price of an automobile.

Its impact on the environment? It is predicted to be either very positive or negative.

Update: Tata Nano a.k.a the "people's car" is out now.

Does poverty kill?

The relationship between poverty and infant mortality is well known. But does it also hold for adults?

Abhijit Banerjee and Esther Duflo from the MIT Poverty Action Lab studied the data from 15 countries to find out if "the poor die more in developing countries."

See also their earlier study on how the very poor spend their money.