`South Asia can replace China in time’

Let me try to put this in perspective because South Asia could draw the wrong lessons from the East Asiacrisis. To begin with I would say that East Asia is like an elegant, well-built car. Now it has developed a flat tyre which will be fixed fairly soon. South Asia, on the other hand, is on a bicycle and we should not conclude that it is very comfortable on a bicycle because we are not going to be buffeted by international waves and that we must not open up like East Asia did.

Nothing has happened to East Asian economic prosperity today. They started behind us, they have gone 27 times ahead, they have $10,000 average per capita income compared to our $300-$400. That economic prosperity stays. It is true that (South) Korea may now have only a 1 per cent economic growth where it had 8 per cent earlier, and India may have 4 per cent growth. But Korea’s 1 per cent growth rate means an increase of $100 in income. India’s 4 per cent growth rate means just a $12 increase in income. The problems of a rich man are very different from the problems of a poor man. If anything has happened that is more permanent, it isChina. China took away the East Asian markets. It is producing everything that East Asia was producing, at half the price. The lesson is that East Asia in the next phase cannot produce low technology and medium technology goods it will have to go to high technology goods like Japan did.

Your report suggests that South Asia has the potential to get where East Asia is. Isn’t that being overly optimistic?

The basis of my optimism is just the natural course of history. After all, the model in the first three great Asian development waves has been similar.

Your poverty can be your asset. Combine your cheap labour with education and relevant technical skills, open up your economy and you can take over the global market. In the ’40s, Japanese goods were dismissed as shoddy. Today, they set the international standard. Later, East Asia followed that strategy, now China is following suit. Surely, in 10 or 15 years, China is going to be prosperous and that will create its own problems. It will have tomake the transition to the next phase. So who will take its place? Who will cater to the growing middle-class of the world? The natural positioning is that of South Asia. It can take the chance or miss it.

But do we have the resource base to do this, given our poverty levels?

Money is not the issue, it is political commitment, it is organisation skills. We can see that some parts of South Asia are already shaping up to face the challenge. Take Bangalore. Only 10-15 years ago, you started combining your low-wage economy with high technical skills. Within 10 years, you took over as the second largest exporter of software, beating Japan and East Asia. If it can be done in one field it can be done in others.

Unfortunately, too few of our children are going into technical education — less than 2 per cent in fact. Then we are struck with the wrong technologies. We are still going into textiles, footwear, leather goods and carpets. The world market for these exports expanded by one per cent a year inthe last decade. We are thus stuck in a stagnant pond.

But how can privatisation help something like primary education. Whatever we have achieved, in India for instance, is because of State initiatives.

I would say there would have to be a partnership between the government and the non-informal sector. Which means communities, civil society, NGOs, a partnership in which the government does not abdicate its role. The State must provide the policy framework, it must supervise but it must not be the implementing agency — implementation must be left to local communities.

This is far more effective, and far less expensive. Let us make the constitutional provisions to ensure that within the next five years all children will be put in school. A provision in the budget for them will be the first claim on the budget. That every child will be born with a voucher for education and citizens are in a position to sue the government if this commitment is not fulfilled.

Many countries did just this.Zimababwe and Cambodia accomplished the task in three years.

There is an interesting statistic in the report that while there is 1 Indian doctor in the USA for 1,325 Americans, there is only 1 doctor for 2,400 Indians in India. How do you reverse the brain drain?

We in South Asia despite our poverty are aiding the rich nations, they are not aiding us. Both financially and in a human sense. Financially, the transfer of money that is taking place from this region every year through capital flight and other factors, exceeds $10 billion. What we get back by way of foreign assistance, with a lot of conditionalities attached, is less than $2 billion in net terms. When we add to that the manpower flows, the figure is enormous. The human capital, if it returns, is far more important than even financial capital. We must work at getting this human capital back by looking into reasons why people are leaving. Clearly, there are not enough employment opportunities. When you acquire skills — as a doctor,engineer, computer scientist you are internationally mobile. These skills are internationally transferable. If we create a climate where these skills can be used, like you have done by setting up computer software units in Bangalore, it can make the difference.

One of your concerns has been cutting down on defence budgets and diverting it to education. But this has raised suspicions about your intentions. What has been the response of government heads to it?

Let me say first, peace is never a popular issue. Let me also say that there is a tremendous amount of vested interest in ensuring that it does not happen the greatest corruption is always in arms purchases. So it is difficult. When I first started talking about it in Pakistan after my return from the UN in 1995, a resolution was moved in Pakistan’s Parliament declaring that I was a traitor and should be tried for treason. Yet, two years later, in 1997 Pakistan actually cut down its military spending by 10 per cent. Both in India andPakistan, military expenditure has slowed down, but mainly because of the compulsions of cutting down budgets under IMF and WB regimes. It hasn’t resulted in this peace dividend being diverted into education, health, nutrition, which is what we need.

But now there’s talk of the nuclear option.

I think that is a dangerous sign. There is a lot of talk that India is going nuclear. There is also talk about a new missile race between the two countries. But I hope this remains only talk, because it will be very expensive for India and totally unproductive for the whole region.