Save the tiger: Environmental dividend from economic development

This is the Chinese year of the tiger and people are interested in saving the tiger from extinction more than ever. Several conferences are being held, and a lot of money is being thrown at saving the tiger, but all this can't work if the Government can't mitigate the conflict between locals and wild animals. The lack of agricultural productivity forces farmers to encroach on the habitat of the tigers. This has to be resolved. China and India can save the tigers by cooperating with each other, writes Barun Mitra.

A shorter version of this article was published in The Wall Street Journal.

Asia’s economic potential was first demonstrated by the four tiger economies. In recent decade, the focus has shifted to China, India and others. While economies are growing, the real tigers in the wild are living a precarious existence. It is time to reap the environmental dividend from growing prosperity, and save the tiger from extinction.

This is the Chinese Year of the Tiger! Undoubtedly, the focus is once again on ways of saving the wild tiger from extinction. This coming weekend the international Tiger Forum will meet in the north-eastern Chinese city of Hunchun. Next month a tiger summit is scheduled in St Petersburg, Russia. Last month 13 nations - Bangladesh, Bhutan, China, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Thailand, Vietnam, and Russia agreed, at a meeting of the Global Tiger Initiative (GTI), to double the tiger count from about 3200 at present to 7,000 by 2022. Incidentally, the tiger numbers have halved since 2002, when the claim was 7,000. Many today believe that these numbers were grossly inflated due to faulty counting procedures.

In 1900, it is believed that there were about 100,000 tigers in the forests of Asia. The number declined to about 40,000 by the 1950. Today, billions of dollars are being spent to save one of the iconic animals in the world, but the future of the tiger continues to be bleak.

According to estimates used in draft documents for the St Petersburg Tiger Summit, the economic benefit of ecological services coming from forestry and wildlife estimated in 1997 to be as high as $ 33 trillion annually, and would be much higher today. But another estimate claimed that for the people living in tiger forest in countries like Cambodia, the annual economic benefit per household to be barely $675. The numbers don’t add up!

Over the past decade, just the central government in India increased its allocation for Project Tiger, from $ 16 million (Rs 75 crore) in the 9th five year plan, to $ 32 million (Rs 150 crore) in the 10th plan, and $ 128 million (Rs 600 crore) in the current 12th Plan (2007-2012). This is equivalent of about $ 25,000 per tiger per year, for a mere 1200 animals. Compare this with the flagship rural employment programme for the poor that promises about $ 70 per family per year.

There seems to be growing gulf between the prescriptions offered by many international, largely western experts, and what domestic policy makers in China, India, and elsewhere confront on the ground.

Many of the international experts agree on the need to commit larger sums of money, monitoring of the tigers and their habitat, and almost military style enforcement to keep people and poachers out.

But these old prescriptions don’t inspire confidence any more. Indian policy makers are increasingly aware of the rising aspirations of the people, and the demand for land, for agriculture and other developmental purposes. For some others, the biggest threat to tiger comes from the growing intensity of conflict between man and wild animals. They would not like to stake everything on counting tigers.

Just in the past two months, two people lost their lives in the vicinity of the famous Ranthambore tiger park. Typical compensation for a life lost is only $2200. This is barely 10% of the annual allocation by the central government for every tiger each year, at present. Just this week, in the same park, a forest ranger who was bravely trying to shepard a tiger that had strayed near a village, armed only with a stick, was mauled.

Last year Bangladesh reported 50 deaths from tiger attacks in the Sundarbans area of the Gangetic delta. In India, the annual death toll from wild animal attacks range from 200-300 each year, in addition to injuries, loss of property and crops. Tigers and other wild animals will have a future, only if this conflict can be diffused. Otherwise the beasts will stand no chance against the ire of man.

The problem in India, and some other tiger range countries, is not that there are too many people living in close proximity to wildlife. Typically, in such areas agricultural productivity is abysmal, poverty is endemic, and non-farm economic opportunities non-existent. Without resolving this human problem, neither a proliferation of conferences nor throwing cash will help the cause of the tiger.

But this need not be the situation. If India doubles its agriculture productivity the demand for agricultural land could fall by almost 40%. If non-farm opportunities are allowed to spread, dependence on subsistence agriculture will decline rapidly. One can already see glimpses of how the natural environment can recharge once the human pressure declines.

This is most dramatically visible in China. China’s agricultural productivity is almost double of India’s. The rapid movement of millions of people from rural to urban, and changing economic structure from agriculture to industrial, explains the rise in forest cover.

Between 1990 and 2007, according to World Bank database, China’s Per capita GDP increased 8 fold, from $ 314 to $2,566, while for India it just tripled, from $374 to $ 1,046. During this same period, China’s agricultural GDP shrank from 27% to 11%, and forest cover as a share of total area rose from 17% to 22%. It is this 30% increase in forest cover in 17 years, which makes it plausible for China to attempt to rebuild wildlife habitat, and reintroduce animals. In contrast, for India, agricultural GDP declined slowly from 29% to 18%, but forest cover stayed almost the same from 22% to 23%. This indicates that in India, there is a much higher pressure on forest from people who are not able to move beyond rural livelihood, and explains the continuing conflict between man and animal.

China and India, are neighbours and competitors in many fields. But in the arena of tiger conservation, they could greatly complement each other. China barely has 45-50 tigers in the wild, mostly near the Russian border in Siberia. India has among the best wildlife experts with capacity to manage tiger habitats.

India is already trying to reintroduce tigers in to two tiger parks where all the tigers were lost in recent years. India is also toying with an ambitious effort to reintroduce the Asiatic Cheetah, which had gone extinct in 1947. But today, India’s economic transformation is not yet deep enough to remove the potential for man and animal conflict. But it will happen. Working with the Chinese on tiger conservation would help build up Indian capacity to reap their own environmental dividend.

By cooperating with each other today, China and India would not only save the tiger in the wild, but redefine the meaning of “Asian Tigers”. Wildlife and forest are not mere intangible resources, whose values are only determined by creative book-keeping. For instance, in the US, the tangible economic benefit from wildlife and nature tourism, including fishing and hunting, was estimated at $125 billion in 2005. Asia could surely give the US a run for its money, if it manages the environmental resources better.

This will require a see change in thinking. Only when people profit from forest and wildlife, will they have any interest in preserving them, and then counting every tiger will become irrelevant. Tiger economies are better equipped to secure the future of the species too!

China is now the second largest economy in the world

Chinese officials have acknowledged that the Chinese economy has overtaken Japan's, and is now second only to the US.

Mr Yi Gang, China's chief currency regulator, mentioned the milestone on Friday, 30 July 2010. "China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.

"China's economy expanded 11.1% in the first half of 2010, from a year earlier, and is likely to log growth of more than 9% for the whole year. China has averaged more than 9.5% growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic," Yi said.

"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.

While China's economy has grown substantially over the past few decades, per capita income stands just at $3,800, which is a fraction of that in the developed countries.

A Reuters news report on this was published in the Times of India, on 31 July 2010.

Do awakening giants have feet of clay?

China and India’s rapid rise has spawned many books and controversy. YaleGlobal, the online journal has two new articles that looks at the diverse strategies in China and India.

In the first article, economist Pranab Bardhan, author of "Awakening Giants, Feet of Clay," takes a contrarian view, detailing challenges often overlooked by the financial media in celebrating short-term growth. He points out that both nations have lifted millions from poverty but cautions that political incertainty could hamper growth.

For the financial press, China and India have become poster children for market reform and globalization, even though in matters of economic policy toward privatization, property rights, deregulation and lingering bureaucratic rigidities both countries have demonstrably departed from the economic orthodoxy in many ways. If one looks at the figures of the widely-cited Index of Economic Freedom of the Heritage Foundation, the ranks of China and India remain low: out of a total of 157 countries in 2008, China’s ranks 126th and India 115th. Both are relegated to the group described as “mostly unfree.”

Contrary to popular impression, the level of economic inequality is actually lower in globally more integrated China than in India...

The relationship between democracy and development is quite complex, and authoritarianism is neither necessary nor sufficient for development. In fact, authoritarianism has distorted Chinese development, particularly as powerful political families distort the allocation of state finance and unaccountable local officials in cahoots with local business carry out capitalist excesses, both in land acquisition and toxic pollution.

Democratic governance in India, on the other hand, has been marred by severe accountability failures. Nor can one depend on the prospering middle classes to be sure-footed harbingers of democracy in China. In many cases the Chinese political leadership has succeeded in co-opting the middle classes, including the intelligentsia, professionals and private entrepreneurs, in its firm control of the monopoly of power, legitimized by economic prosperity and nationalist glory. Indian democracy derives its main life force from the energetic participation of the poor masses more than that of the middle classes.

While both China and India have done much better in the last quarter century than they have during the last 200 years in the matter of economic growth, one should not underestimate their structural weaknesses. Many social and political uncertainties cloud the horizons of these two countries for the foreseeable future.

You may read Prof Bardhan's complete article here.

In the second part, Börje Ljunggren, Sweden’s former ambassador to China, argues that the rise of Asian powers has momentum. In particular, China’s rapid economic development is likely ”the biggest change” of our lifetime. China’s pace as an economic power is more rapid than India’s, Ljunggren argues, and its global status could depend on increased investment in public goods like infrastructure, education and health. Empowering greater numbers of Chinese would rally popular support for the government system.

The established notion is that China has become a much more unequal society than India. Bardhan questions this, saying that the Gini calculations have been based on income in the case of China but consumption expenditure in the case of India. Bardhan’s analysis goes, however, far beyond the question of income distribution as such as he explores the “initial conditions” for equitable growth. This is where India has failed. Land reform was very haphazard, and a vigorous policy to develop basic education wasn’t launched. The sad fact remains that 44 percent of the Indian labor force is illiterate (World Bank, 2009). In China’s case, the foundation was, laid already in the pre-reform era when literacy increased more than three times and life expectancy by more than 50 percent.

One aspect ignored by scholars like Bardhan is the dimension of what is happening in research and development. In this sphere, China in recent years has done much better than its authoritarian nature would suggest, and India less well than its smart industry and “Bangalore image” suggests. According to a study by Thomson Reuters for the “Financial Times” (January 25, 2010), “China has experienced the strongest growth in scientific research over the past three decades of any country” with a 64-fold increase in peer-reviewed scientific papers, and the pace does not show any sign of slowing. This growth has put China in second place to the US, while India has not moved up the ladder. The quality was naturally very uneven, the figures just telling about the number of articles passing the peer-review threshold. Chemistry and material sciences are areas where China was found to do very well. The same is true for nano and energy technology, two areas where China will likely surprise the world.

One weakness common among many authors analyzing China’s rise, and Bardhan is no exception, is a failure to appreciate the nature of the Chinese authoritarian state. They fail to recognize fully how repressive and arbitrary the seamless Chinese party state is at its very core.

The Chinese party state will to have to manage increasingly rough weather, not least the IT revolution, which Bardhan mentions only in passing. IT will have a big impact on both societies, but put the Chinese authoritarian structures in particular to fascinating tests. An online civil society is emerging with “rights activism” as an important feature. This development will have profound consequences in just a 10-year perspective...

India has the advantage of a being an electoral democracy, but hostage to vested interests and short-sighted politics that have left India developing far below the potential of a more open economy and a more inclusive society.

You may read Ambassador Ljunggren's complete article here.

China and India in the decade ahead

As 2009 came to a close, and the new year dawned, two prominent Indian economists and columnists picked up their crystal balls, and looked at the decade ahead. Among other things, both of them compared the future economic trajectories of both China and India.

Sawminathan Aiyar makes eight predictions in his article "India to overtake China in 2020" in Times of India, on Jan 1, 2010. The first prediction compared China and India.

India will overtake China as the fastest-growing economy in the world. China will start ageing and suffering from a declining workforce, and will be forced to revalue its currency. So its growth will decelerate, just as Japan decelerated in the 1990s after looking unstoppable in the 1980s. Having become the world's second-biggest economy, China's export-oriented model will erode sharply - the world will no longer be able to absorb its exports at the earlier pace. Meanwhile, India will gain demographically with a growing workforce that is more literate than ever before. The poorer Indian states will start catching up with the richer ones. This will take India's GDP growth to 10% by 2020, while China's growth will dip to 7-8%.

In a more ominous vein, Mr Aiyar foresees the possibility of a water war between China and India.

China, alarmed at India's rise, will raise tensions along the Himalayan border. China will threaten to divert the waters of the Brahmaputra from Tibet to water-scarce northern China. India will threaten to bomb any such project. The issue will go to the Security Council.

Please Read Swaminathan Aiyar's complete article here.

Surjit S Bhalla, in his column, "The new decade will belong to India; when will this reality be recognised by Indians?" in the Business Standard, on Dec 26, 2009,

Two key conclusions emerge about Indian GDP growth. First, that this growth is now at a plateau level of 8-9 per cent. Second, that very soon, analysts and punters will have to change their Word documents to “India is the fastest growing economy in the world” rather than, “excepting China, India is the fastest growing economy”.

There are three separate reasons for this, all of which have been outlined numerous times before in these columns (and a detailed assessment was provided in Bhalla-2007*). The reasons refer to the broad determinants of economic growth — capital, labour and productivity. On the first, India is investing at the same rate as China (approximately 40 per cent of GDP), on the second, India’s labour force growth is about 1.8 per cent per year faster than China, and on the third, China has outpaced India by about 2 per cent per annum (for the last five years). Most of this outpacing has had to do with the deep and deeper currency undervaluation practised by the Chinese authorities which led to two unsatisfactory outcomes: the great financial crisis of 2008, and now the largest and fastest growing polluter of the world. For how long will the international community stand idly by? Not very, and this is the first big forecast for the ensuing decade: China’s exchange rate will appreciate significantly starting 2010. How significantly? A first year appreciation to about 6 yuan per dollar from the present 6.8 level.

This scenario will have predicted effects — China’s GDP growth should moderate to a less polluting 8.5 per cent in 2010 and then proceed on a declining trend for the rest of the decade. This will mean jobs for the rest of the world.

Please read Surjit Bhalla's complete article here.

It would be interesting to know how some of the Chinese and international economists are looking at the decade ahead. If you come across other interesting analysis, please do share it with us.

Conference on India China Financial Cooperation

India China Economic and Cultural Council (ICEC Council) and the Federation of Indian Micro and Small & Medium Enterprises (FISME) hosted the Roundtable Discussion on 'India-China Financial Cooperation' on 13th November 2009 at the India International Centre as part of the concluding session of the 3rd High Level India-China Finance Conference. (The conference this year was held from 10 - 13 November 2009 hosted by India China Economic & Cultural Council (ICEC) in partnership with Indian Banks Association (IBA) in Mumbai and New Delhi).
The Roundtable Session today addressed financial issues facing Small & Medium Enterprises (SME's) in India and China.

Dr. Abid Hussain, Chairman, ICEC; Mr. P. S. Deodhar, President, ICEC; Mr. Mohd. Saqib, Secretary General, ICEC; Mr. Sandip Ghose, Regional Director, Reserve Bank of India; Mr. Anil Bharadwaj, Secretary General, FISME; Mr. Dinesh Rai, Secretary, MSME; Mr. Paul Joseph, Principal Advisor, MCX; Mr. Arun Agarwal, President & Global Head (International Banking), Yes Bank and Mr. Ashwini Mehra Executive Vice President & Head, SBI were some of the prominent faces representing India. A twenty member delegation from China headed by Mr. Ma Delun, Deputy Governor of the People's Bank of China was here on a week-long visit to India for the conference. The Deputy Governor was accompanied by senior officials from other Chinese regulatory bodies and financial institutions, such as Deputy Governor Mr. Ma Delun, Dr. Yi Cheng, Deputy Director General Research Bureau, PBC and Mr. Li Xiangyang the Deputy Counsel General of China in Mumbai.

Dr. Abid Hussain, Chairman, ICEC Council, in his opening remarks noted that, there are striking similarities & experiences in economic growth of India & China. He also added that, both countries need to work together to foster mutual confidence and alley fears.

Mr. Dinesh Rai, Secretary, MSME, highlighted the role of entrepreneurs in pioneering the economic growth of the country. He stressed that the growth of the SME sector was very crucial since it provides a large employment base and were the roadmap for the future. There are several issues that SME's faced which needed to be tackled and he identified them as - labour issues; quality; taxation and exim policy.

Mr. Anil Bhardwaj, Secretary General, FISME, said that China has earned considerable experience in SME stock exchange. Innovative financial strategies have helped China to infuse equity in SMEs. In view of SEBI's recent decision to allow SME stock exchange in India, the need of bilateral cooperation can be easily understood.

Prof. Anwarul Hoda, Ex-Member, Planning Commission, pointed, that in view of the huge infrastructure finance deficit, India & China should consider strategies, to work together. Such cooperation will not only bring the investment but also the technology which China has used while developing its infrastructure.

Mr. Mohd. Saqib, Secretary General, ICEC Council, expressed that there were hiccups in getting the government to completely take on the responsibility of building roads and improving infrastructure and we had to work on the PPP model. He was very forthcoming and invited China to join hands with India and form an "India-China Infrastructure fund" that would function as a guarantor for both the countries to trade in finance and technology enabling the growth of modern infrastructure in India.

Mr. MA Delun, Deputy Governor of the People's Bank of China, outlined the key areas of bilateral cooperation between India & China. SME Finance, Rural Banking & Infrastructure finance are the areas where the two countries can mutually benefit, he added.
Mr. P.S. Deodhar, President, ICEC Council, in his concluding remarks, highlighted the cultural similarities in India & China and placed high importance of continued dialogue between the two countries.

Chinese delegates expressed their appreciation at the growing trade and socio-cultural ties between India & China and shared that they expected India-China trade to grow to US$60 billion by 2010 (it has already surpassed US$51.8 billion in 2008).

While both countries maintained that the financial crisis last year had a limited impact on their economies because of their prudential banking regulations, distance from the severely affected western markets and the culture of saving; they also agreed that post the financial crisis, regulations that balance innovation and risks needed implementation.

This report was filed by India China Economic and Cultural Council (ISEC Council).

China and India: Idiosyncratic Paths to High Growth

Kaushik Basu, Chairman, Department of Economics and Professor of Economics and International Studies at Cornell University, has just been appointed Chief Economic Adviser to India’s Finance Ministry. In a recent article he looks at the parallel and contrasts between China and India. Here are a few key points.

• The mainsprings of development in these nations are widely different, even though their trajectories of growth are converging.
  
• Industrial recession in the US, Europe and Japan has caused big hardships for the export-oriented Asian economies. Serious though this crisis may be, it does not alter the longrun prospects of China, India and the other Asian economies.
• Thinking in terms of broad categories, such as socialism and capitalism or big and small governments, and trying to link these to growth is the wrong way to approach the problem. Markets and incentives play a critical goal for development to occur, and, as long as the government has the intelligence to weave these into the policy fabric, the stage is set for economic take-off. Further the Chinese government has intervened in macroeconomic markets by keeping tight controls on capital and has kept its exchange rate deliberately undervalued in order to break into global markets with its exports.
• With the growth spurt that occurred over the last five years and the rise of the Indian corporations as global investors – on this India’s rise has been more striking than that of China – India’s medium to long-run prospects look very good. In addition, one development of the last five or six years that augurs well for both India and China, and especially the former, is the growth of trade and the flow of foreign direct investment between the two countries.
• One common feature of both China’s and India’s growth experience is the salience of the savings rate and the investment rate. China has always had a fairly high savings rate -- the rate never dropped below 30% from 1977 onwards and, as we know, China’s growth rate showed particular robustness from 1978. For India the sharp rise in savings in the early 1970s did not immediately translate into growth. I believe that there were some infrastructural bottlenecks that held back the economy. And, in any case, by the late 1970s and certainly the early 1980s it was evident that the economy was growing faster. Interestingly, India has witnessed another very sharp rise in its savings rate over the last four years. The rate climbed up from 24% to 34% – according to the latest Economic Survey, the savings rate is 37.7% (Government of India 2009). For the first time India is saving and investing at rates which have been associated with the Asian tigers. This is so recent that this has not yet been analysed sufficiently. But this augurs extremely well for the country.
• Despite the market-oriented reforms of 1978-80, which were significant in comparison to the draconian control of the Chinese state previous to that time, in China the “socialist planning system still operates, ….the labour responsibility system determines where a person can work legally and where it cannot, … all land is owned and controlled by the State,” and the Chinese Communist Party continues to vet all senior appointments in firms and “even if the CEO is not a party member, there will be a party member (or group of members) ostensibly junior(s) in the organisation who can over-rule him on ‘ideological’ grounds, …in China banks are not intermediaries but instruments of the State… .” These quotes are from Virmani (2006), who in his comparison of India and China has repeatedly stressed the importance of free-market policies.
• India’s big problem now is that its government is in the wrong places. It is not a problem of size as much as location. In terms of the fraction of the national income that is produced by stateowned enterprises, India is not an outlier in Asia; and compared to the communist and former communist nations, India is a very privatised economy. While the output emerging from stateowned enterprises in 1990 in India was 14.1%, the figure for China in 1985 was an astonishing 70%. Though state-ownership has been declining, even today it is around 50% in China, which is way higher than other Asian nations. It is not just that, as Huang observes, “As late as 1998 much of the Chinese officialdom held private ownership in utter contempt”. In 1978, South Korea had a larger share of output coming out from the state-owned sector than India. The ranking had changed by 1990 but that gap was not large. Indonesia looks similar to India; Malaysia has a distinctly larger share of state production and the Philippines is the most privatised economy – with a large part of that, at one time, in the firm private grip of Marcos.
• Where government is needed and inadequately available in India is in the provision of infrastructure and in the social welfare sector. On infrastructure the awareness is now high in government and there is reason to expect large changes over the next five years. On social welfare the situation is still bleak. Poverty is still very high with around 250 million people below the poverty line (and India’s poverty line is quite a bit below one dollar a day). If the poor and the dispossessed develop some other identity – for instance, based on caste or regional origin, then this can be politically destabilising. Government needs to do much more in eradicating poverty.
• The risk of political destabilisation is there also for China and may be even greater than what India faces. These risks manifest themselves in different ways in China. I have attributed a large part of China’s success, despite its government’s overtly interventionist behaviour vis-à-vis the market, to the fact that it was intelligent intervention. Contending with the same argument Yao argues that China succeeded because it has had a “disinterested government”, meaning it has not played one group against another but has been a neutral referee. This is a valid argument. But what stands out even more is that China has had the luck of an intelligent government. It has cleverly held back damaging intrusions into the market. This, however, always has the risk of changing. As argued, when an agent is as powerful as China’s government is, it can easily fall prey to the temptation of exercising that power in the interests of itself or a small group. This can also be not a response to temptation but self-preservation in times of turmoil. China’s excessively pliant civil society could cease to be that under times of stress, for instance, a period of growing unemployment or inflation. Its attempt to dislodge those in power can easily result in a siege mentality on the part of the government, whereby it becomes impossible for it not to exercise the vast powers that it already has.

Read Prof Kaushik Basu's article "China and India: Idiosyncratic Paths to High Growth" published in the Economic and Political Weekly, Sept 19-25, 2009.

A shorter version of the article is published in the Hindustan Times newspaper, "Use your head".