30 May - 5 June 2014 #709

“Nature of political regime doesn’t determine growth, governance does”

Pradumna Bickram Rana (pic) is associate professor at the S Rajaratnam School of International Studies of Nanyang Technological University in Singapore. Rana was earlier senior director at the Asian Development Bank. Rana spoke to Nepali Times about democracy and growth, and reviving the South-western Silk Route on which he will be speaking in Kathmandu on Friday.

Nepali Times: What lessons can Nepal learn from the way South-east Asian economies have turned themselves into growth tigers?

Pradumna Bickram Rana: Various factors have accounted for the economic dynamism and resilience of South-east Asian countries, including high levels of saving and investment, good economic policies, and human resource development. However, these are necessary but not sufficient conditions for growth. Economic upliftment requires good governance meaning good management including sound economic policies, adherence to the rule of law, and getting rid of corruption. The three Cs of good governance are committed, credible and capable government. The need for good governance is the most important lesson that Nepal can learn from South-east Asia.

Is that why there is a school of thought in South Asia that democracy may need to be curtailed or postponed until a nation state achieves a healthy growth path?

Research has firmly established that the nature of a political regime has no impact on economic growth. What matters, is good governance. East Asia’s experience shows that both authoritarian as well as democratic countries can have good governance. 

Are there lessons for Nepal from the way countries like Indonesia, Philippines and Vietnam managed to maximise benefits from their migrant overseas workers?

They have maximised benefits by facilitating the flow of remittance, to channel them to more productive areas, and to protect the rights of migrant workers. In Nepal, remittance accounts for about 23 per cent of GDP - even more than in the Philippines which is one of the largest exporters of labour in the world – making us a remittance-driven economy. However, Nepal lags behind in policies to protect the welfare and rights of migrant workers and should establish an agency to oversee the recruitment, deployment, training, and welfare of overseas workers as the Philippines has done. It should also enter into bilateral agreements with destination countries to protect workers’ rights. 

You have been working on the South-western Silk Road concept, can you tell us why this is important?

The Silk Road concept is important because improved connectivity reduces trading costs and thereby enhances trade competitiveness and economic growth. Our research has found that historically there was not one but two Silk Roads in Asia: the Northern and the less well-known South-western Silk Road. The southwestern Silk road began in Yunnan, passed through Burma, India, Nepal, and Tibet and looped back to Yunnan. Subsequently, the Silk Roads went into disrepair. Now for various economic, security, and political reasons it is once again making a comeback. These include the “Go West” and the recent “New Silk Roads” policies of China, “Look East” policies of South Asia, opening up of Burma, and the growing importance of supply-chain trade.

So, is there a real possibility for trilateral growth opportunities for India, China and Nepal?

Yes, indeed. As has been well-documented, in the past Nepal used to be an entrepot or a gateway for India-China trade and an important node in the South-western Silk Road. Now Nepal’s role as a land-linked state between India and China needs to be revived, leading to a win-win situation for all three countries and beyond. Distances between major Indian cities and the rapidly growing inner cities of China (such as Kunming, Chongqing, and Chengdu) will be reduced by more than half if land routes via Nepal are used instead of the sea route via Hong Kong. Our study proposes 4 conceptual multimodal economic corridors passing through Nepal to connect South/Central Asia with southern China and East Asia.

There is a debate currently in Nepal about channeling aid to infrastructure sectors rather than social issues. Where is the balance?

Development of both physical and social infrastructure is expensive and a proper balance must be found. When I joined the ADB several decades ago, the bank was keen on physical infrastructure projects such as transportation and energy. The priority then shifted to education and health. More recently, I understand that the ADB is moving back to stressing physical infrastructure projects. 

Pradumna Rana will be speaking on Tuesday, 3 June 2PM at Shaligram Hotel, Jawalakhel at an interaction on ‘Revival of the South-western Silk Road’.

Read also:

The New Silk Roads, Pradumna B Rana

The New Silk Road

“Money from remittances should be used to create jobs at home”

Money in, money out, Puja Tandon

At what cost the remittance economy?, Dewan Rai

Lost priority, New!, Chandan Sapkota