South Asia is a region marked for its turbulent history and its endemic poverty and misgovernance. Much has been written about how certain states in India are worse off than Sub Saharan Africa in terms of social and economic indicators. Or that Pakistan and Bangladesh have millions of people struggling for a meager income to keep their families alive. The truth is that despite the recent gains made in economic growth in most South Asian economies, the structural causes of poverty persist and haunt the national planners.
The World Bank, or the rather grandiose title – the Bank – has remained a major player in the South Asian economies aiming to help these countries in reducing poverty and enhancing economic growth. The Bank has gained more traction in countries such as Pakistan and Bangladesh where the unelected executive is eager to engage with the IFIs and decisions on lending are achieved quickly. India has remained engaged but its complexity and federalism makes transactions more intensive. Having said that the country has emerged as World Bank’s favorite in the recent years. For instance, the Bank, committed USD 9.3 billion in financial assistance to India in the 2009-10 fiscal, more than the aid committed by the U.S. and the European Union. Although this is a small sum for India’s U.S. $1.2 trillion economy, it represents a sharp increase from the U.S. $2.2bn lent to India by the Bank last year – Bank lending to India has traditionally averaged about U.S. $2.5-3bn a year. Similarly, for Pakistan the average lending level has been around $1-2bn, this has increased lately due to the recent recession and food and energy shocks.
While it is not the intent here to compare the lending levels and sector based support by the Bank, a few comments can be made on the states of South Asia. The post-colonial states of South Asia have not reformed the way they should have after gaining Independence in 1947. The national bourgeoisies of India and Pakistan for instance were the major backers of the new states and they focused on retaining the central state’s might at the expense of the provincial, local and the subaltern. While in India, a contested political process led to more autonomy at the state level, the national bureaucracy is largely an inheritor of the colonial state. The duality of populist politician and the well-trained bureaucrat continues to date. In Pakistan, the role of the military as the paramount institution led to the emergence of a national security state that has continuously placed defense and countering the external threats above the social change agenda. Even Bangladesh, which broke away from Pakistan in 1971, witnessed at least two military interventions in its short history.
Pakistan has experienced high growth rates under military rule when the international aid flows are the high for geo-strategic reasons and there is engineered political stability and policy continuity. However, as William Easterly says Pakistan is growth without development, since growth gains have not turned into social development outcomes. India embarked upon a liberalization program in the 1990s and since then India has made tremendous gains in terms of economic growth (with rates exceeding 8% in the recent years). India’s economy needs sustained growth of 8-10% to pull out 400-500 million people out of poverty. Infrastructure and energy deficits of India will be corrected with assistance from global actors such as the World Bank in the future. Bangladesh has also made advances in terms of growth and jobs by expanding exports and due to a vibrant private sector. Despite political instability and obfuscated state structures, its gains in social development have been impressive.
Despite the heavy investments in policy reform supported by the Bank, the experience has been mixed. According to the evaluation of the effectiveness of development assistance of the Bank to India during 1990s, carried out by Independent Evaluation Group (1999), the overall result of the assistance for the decade was moderately satisfactory. India started the 1990s by de-regularizing the trade with the strong support from the Bank but failed to sustain the reform process. The Bank had a limited impact when it came to devising an effective strategy for rural poverty reduction. Modest results were achieved in institutional development. Fiscal imbalances and governance issues had risk sustainability of many projects. As the decade ended, there were improvements in the designs of assistance strategy of the bank.
On the other hand, World Bank project financing in India during the recent years has led to many gains. For instance, interventions to provide clean and reliable drinking water have been successful in states such as Karnataka. Similarly, thousands of kilometers of rural roads have been constructed in several less developed Indian states and electricity supplies have improved due to the infrastructure upgradation through Bank financing.
The Bank’s Country Assistance Review (1998) tells us that over the years, the financing provided to Bangladesh produced moderately effective results with few notable successes. The country’s growth outlook was transformed in the last few decades despite the political turbulent circumstances. Progress in infrastructure is noticeable while IDA has been effective in issues related to flood and drainage control. Due to the intricate nature of political, social and economic issues of Bangladesh, the results are not consistent in all areas. The governance and structural issues lie at the heart of slow progress in most sectors. Efforts for creating a healthy and a resilient financial sector by the Bank have not borne fruit.
World Bank’s CAE for Pakistan (2006) notes progress achieved in the banking sector, infrastructure, the capacity of the power sector and agricultural production. Its support to improve governance was marked by a lack of strategy. However, as the CAE notes, “the Bank had difficulty defining a clear strategy.” More importantly, the CAE states that “outcomes of Bank assistance were unsatisfactory in poverty reduction and social sector development, governance, agriculture and natural resource management, fixed infrastructure, and revenue mobilization and expenditure management” thereby rendering the overall “outcomes of the Bank’s assistance program as “moderately unsatisfactory”.
This is alarming coming from Bank’s own documents. Critically, the Bank project performance remains â€˜uneven’. The perennial issues of political commitment and institutional capacity are major obstructions to project implementation. This brings us to another key finding that should be relevant to South Asia as a whole: “project design did not do enough to take these ongoing problems into account”. The clinical designs of the projects removed from the political economy realities is therefore an area that needs to be properly understood and addressed.
The problem with international aid in general is that it bypasses or at least attempts to do so the political economy imperatives of the countries that it operates within. A proxy for this has been the inclusion of good governance in the development agenda. Bound by its Charter, the Bank also finds the route of ‘institutional reform’ much easier to manage.
In the South Asian context it is in the domain of political society, and not in the limited construct of civil society that the crucial questions relating to citizen participation and demand for good governance are deliberated and struggled. The poor view the state in large measure through the lens of a political society; and this opens up the contentious question of the ‘outside’ view of civil society undertaking the ‘political’ role of fostering and negotiating accountability of state actors. In effect, civil society is embedded in the concept of political society and cannot be viewed separate from the political context.
Of late, calls for a “capable state” have been noticeable in development thinking. Such concerns of poverty and exclusion have fostered development consensus on issues of citizenship, civic engagement, and state responsiveness thus replacing the vision of poor as consumers or ‘clients’ for service delivery and phased reduction of state commitments under structural adjustment. The Bank and other development partners should take stock of issues related to citizenship and moving beyond the framework of neo-liberalism.
At the end of the day, reform and development agenda need to emerge from the national debates and institutions. Politics cannot be bypassed. For instance, in the Indian context, states such as Kerala and West Bengal demonstrate successes in terms of civic engagement and local state responsiveness where a “supportive” political environment is available. Both Kerala and West Bengal states in India have high levels of political participation and state governments with ambitious social agenda. Whilst the overall performance of these state governments has been mixed, their active concern for citizen interest and mediating development through the political route[s] is noteworthy. The Bank needs to focus on these lessons and revise its strategy and focus accordingly. Over time, South Asia must become free of the lending cycles and find its way through trade, regional cooperation and indigenous knowledge.
An edited version appeared in South Asia Magazine in its October issue.
Raza Rumi is a policy advisor, writer and editor based in Lahore