Month of June, 2008

It has been a long time since I’ve written, but the past two months have been quite hectic for us!  I just returned from China, where we were working with the capital market supervisor, and the issue of the financial sector regulatory architecture, or how market supervisors should be organized, was a topic of discussion.  In early June, there was a conference with all of the key financial supervisors on the topic of integrated regulation and supervision, and again, the policy makers are keenly focused on this issue now.

Across Asia, this topic has largely been in the background since the years immediately following the Asian crisis in 1997-1998.  However, the sub-prime mortgage crisis in the United States, beginning in the summer of 2007, has once again brought this issue to the forefront of policy discussions among Asian financial supervisors, particularly those in the developing economies.  Given the global turmoil and the new domestic challenges in emerging Asia (i.e., high inflation, rapid credit growth, and equity market turbulence, etc.), effective supervision of financial institutions and markets is clearly a hot topic.

Talking to some of the students, many of which are preparing for the college entrance examination.

As I toured earthquake-devastated parts of Sichuan last week, what struck me most was the continuation of ordinary life in extraordinary circumstances. 

Beichuan middle school was the site of one of the great tragedies of the earthquake.  The old building of the school collapsed completely and the new building pancaked, crushing the lower level.  About half of the 2,000+ students and teachers died.  Beichuan county seat has been completely abandoned.  The middle school has temporarily been relocated some miles away, on the campus of a training ground for a big appliance manufacturer.   The facility had some good classrooms to begin with, and new temporary ones were added quickly.  The students are living in tents on the grounds.

Approaching the mountains from the Chengdu plain along the main road to Beichuan County, red banners with large white characters expressing support for the earthquake victims and thanks to the rescuers, are strung across the road, as if creating an arbor for all to pass through.  Driving up this road doesn’t feel safe, even now, six weeks after the quake.  The steep slopes of the mountains on both sides of our vehicle loom above us.  Huge boulders are scattered everywhere on the mountain sides, landslides are all around, and I cannot stop thinking about the description given by a group of tourists of the moment the quake struck: “the mountains exploded as if hit by a megaton bomb”. 

At the 700 year-old Er'wang Temple in the Dujiangyan World Heritage Site.

Six weeks and one day since the massive 8.0 earthquake hit Wenchuan County in Sichuan Province and I am participating in the first World Bank mission to the earthquake-affected area.  In the last six weeks the relief effort conducted by the Chinese government and citizens has been widely applauded.  Now the attention is turning to the future – damage assessments are under way and reconstruction planning has commenced.  The purpose of our mission this week is to better understand the impact of the earthquake and to see how the Bank could best provide assistance during the reconstruction period.
   
Today’s site visit took us to Dujiangyan, a city that I first visited almost exactly 12 years ago.  The city sits beside one of China’s greatest engineering achievements – the Dujiangyan Irrigation System – a massive water diversion project built in the 3rd Century BC on a scale that only the Chinese, ancient and modern, could conceive. 

Checking out Mongabay.com, I came across a very cool application of Google Earth to see the levels of deforestation across the world, including short data sheets per country. So you can quickly see that Malaysia has lost over 6% of its forest cover between 1990 and 2005 (according to different data sources), while China has increased its own by 25% over the same period of time.

The nicer discovery, though, were the other maps the same developer, David Tryse, has been creating on environmental issues (check them all out in his website): the top 100 most Evolutionarily Distinct and Globally Endangered (EDGE) mammal and amphibian species, 34 biodiversity hotspots according to Conservation International, and protected area networks --or national parks-- worldwide, among others.

Note that the sources of data are rather varied. To view and explore the maps, you need to download Google Earth and install it in your computer, save the KML file/s provided for each map (KML is a file format used to display geographic data), and open them from Google Earth. At the bottom of that list of maps, you will find a link to download all files at once if you want, and you can also subscribe to updates for new maps that David may come up with.

A significant feature of the Bank’s new Governance and Anticorruption (GAC) Strategy (pdf) is the emphasis on mainstreaming the focus on governance work into the sectors, such as health, education, and natural resource management.  Governance, which the strategy defines as “the manner in which public officials and institutions acquire and exercise the authority to shape public policy and provide public goods and services,” clearly refers not only to the functioning of central government administration, but also to the way services are delivered and public resources managed. 

The World Bank released the China Quarterly Update —of which I’m the lead author, full disclosure here-- today at a press launch in our Beijing office. The economic journalists noticed that the Bank’s projection for GDP growth in 2008 is now 9.8 percent, more than 2 percentage points lower than the outcome in 2007. Several journalists asked whether it is not time to stimulate growth by loosening macro economic policies and/or what would be the most appropriate policies to relax.

Somebody living in Dallas or Dusseldorf may find it difficult to understand why a government would want to stimulate the economy when growth falls to 9.8 percent.

The difference in perspective is related to a question that has been raised many times since the sub-prime problems broke out in the US: What will happen to growth in developing countries and emerging markets when the US economy, and the European one as well, slows down considerably? Many developing countries and emerging markets had been growing rapidly in the years preceding the sub-prime problems—much more rapidly than high income countries. But exports to high income countries are important for most of them. So the question was: can developing countries and emerging markets “decouple” from the high income countries?

The World Bank released a couple of days ago a new interactive database on trade, the World Trade Indicators. It allows benchmarking and comparison among 210 countries and customs territories, and it includes multiple trade-related indicators. The data comes from the International Trade Centre (ITC), the World Trade Organization (WTO), the United Nations Conference on Trade and Development (UNCTAD), and the World Bank itself. Take a look at the intro page to find your way around all the options, or go straight to the sections dedicated to country rankings, country snapshots, country or overtime comparisons, or maps generated with your selected indicators.

In 2008, growth in China, the rest of East Asia and the Pacific, and other developing regions together will fall from 7.8 percent to a still-strong 6.5 percent while their high-income trading partners like the United States slow to between 1 and 2 percent and import less. This is the forecast of the Bank's Global Development Finance 2008, the annual review of global financial conditions facing developing countries.

The report highlights that it was domestic demand and non-US exports which drove growth in the Region in 2007, and alerts that steep declines in East Asian securities markets could pose risks. Take a look at the full outlook on the EAP Region and to the interactive data site, which is now also available in Chinese.

As I made my way down route 13 last week I wondered how many times I had been to Nam Theun 2 since my first visit in October 2006. I’m certainly not one of the people that go there the most, and yet I could recall at least 20 visits.

Last week I posted some reflections from the field visit portion of last month’s Experience-Sharing Program on Development between China and Africa.  The program covered key aspects of China’s development experience including agricultural and rural reforms, infrastructure development, the process of opening-up the economy through trade and foreign direct investment, and China’s growing engagement with Africa.  David Dollar has also posted some thoughts about the program.

Two massive natural disasters in two East Asian countries – Myanmar and China – over the past five weeks have brought home just how quickly and dramatically life and livelihoods can be destroyed. Our experts in natural disaster recovery and reconstruction know this only too well. These are people who specialize in assessing the extent of damage that a cyclone, an earthquake or a tsunami can wreak and what to do to get the basics of life back up and running.

The Bank is full of hot passion.  Indeed we are expected to fight passionately in our work, and for a small group of us recently the subject of that passion has been tigers.  Passion in the World Bank makes for noisy meetings, adrenalin and angst. I thus find it fascinating that when colleagues are about to retire they send around an email which almost invariably mentions that their most treasured memories will be of the colleagues alongside whom they fought.  Our biennial staff surveys typically find us moaning about management and work-life balance, but when it comes to the questions of whether we enjoy our work and feel proud of working here, the ayes have it overwhelmingly.  

One of the reasons I enjoy my work so much is that wherever I go there is part of the conservation network to plug into and it is invariably people who feel passionate about the need to save the world’s last wild places and natural ecosystems. It makes for close bonding because we all face the slaps or disinterest with which biodiversity is often greeted. 

Looks fertile to me...

Ever since I posted field notes describing my conversations with Vietnamese rice farmers, I've been plagued with statistical doubt. Most sources (FAO and  USDA  both pdf files) indicate an average rice yield of a little under 5 tons/hectare (or 5t/ha) in Vietnam in 2006/2007. My rice farmers claimed to be harvesting twice that amount per season: 1ton per "cong" or 10t/ha.

I hoped briefly that the discrepancy was a case of comparing apples and oranges: milling, the process of removing husk and bran layers from rice after harvest so it becomes edible, can be very wasteful. In Vietnam, the ratio of milled to rough rice is about 65%. But farmers and statisticians, it seems, all talk about rough, straight-from-the-paddy, rice when they compare yields.

Thirty African officials visited China for 12 days in May on a pilot South-South knowledge exchange organized by the Chinese government with assistance from the World Bank.  My colleague, Phil Karp, has written about the program, including the study tour around China that he accompanied.  I met the officials in Beijing both before and after their travels and would like to add some personal reflections.  Most of the officials had never been to China or had only attended a conference in a big city.  Visiting farms, local governments, economic zones, and enterprises was a real eye-opener.

A coworker recently emailed me an article about corruption in Vietnam.  Both that article, which talks about the arrests of several journalists who had done extensive reporting on corruption, and some others I’ve read about anticorruption efforts in China have made me wonder whether it’s possible to really measure corruption.  Most of the existing, accepted measures, as the Washington Post noted in an editorial, rely on “perceptions” of corruption or on individual experiences of bribery.

I recently had the pleasure of accompanying a group of 15 senior officials from East and Southern Africa on a field visit to Guangxi Autonomous Region and Guangdong Province.  Prior to the field visit, the officials had spent three days in Beijing at a workshop on China’s development experience. The visit to Guangxi and Guangdong gave them a chance to see the results of China’s reforms for themselves, and to interact with local government officials, farmers, villagers, and entrepreneurs.  As one participant noted, “I’ve never been so reminded of the old saying that seeing is believing.  I came here a bit skeptical of all of the hype about the Chinese miracle, but now I’ve seen for myself what they have achieved in terms of poverty reduction and development”.  

Apart from the formal briefings and visits to farms and factories, the field visits afforded a few light-hearted moments, including an impromptu sing-along led by the Vice Governor of Guangxi Autonomous Region, and a mock-wedding ceremony in a Yao-minority village in Guangxi with two of the African officials serving as grooms.  

Using data from the Food and Agriculture Organization (FAO) and the OECD, BBC News online created some interesting graphics showing the impact of and factors in the current food crisis. They include a 30-year look at food commodity prices, US ethanol production, world population growth, changing eating habits, and demand for biofuels among others. Worth a look.

Kids in rural Laos are now exposed to a world their parents didn't imagine at their age. How does this change their expectations for the future?

Last week, as I walked through Boun Ma, one of the resettled villages in NT2, I wondered what the villagers think when they see another falang ("foreigner" in Lao, originally referring to French people but now encompassing all nationalities). There are many, many of us coming through the villages of NT2. Last Thursday when I was there, I was accompanying a group of journalists from Finland. There were six journalists plus another six of us (five Lao), so in total seven white faces wandering aroundm looking at the children and snapping pictures. The cynical side in me thought “great, what a circus”.