"... I am not an engineer, I am not a technician and everything that I have done in my life is only law. So, I need expert advice and I am going to put experts and not politicians at the Head of the CEB and the CWA. I am not going to do appel international and all that."
Ivan Collendavelloo, in Parliament, March 2015
"... Nun fini konpran ki nu bizin lasistans de la bank mondyal pu ki nu kapav fer bann bon developman dan sekter delo."
Ivan Collendavelloo, Feb 2016
The World Has No Time
For This Kind Of Nonsense
So reported The Economist at the end of last May. It referred to a study by the World Bank on the popularity of its policy reports. As almost half of them are supposed to at least improve public debate the two authors of the report – Doerte Doemeland and James Trevino – looked at how many times 1,611 of these policy documents were downloaded. Turns out that almost a third was never downloaded. I am not surprised. I got to read a few them over the years and I must say there's a lot of rubbish in there. So I perfectly understand that no one is bothering about so many of these reports. Who has time for crap in this fast-moving, intelligent and hyper-connected world?For This Kind Of Nonsense
Maybe The World Is Wrong?
And that many of her problems would go away if more people read those reports and implemented the recommendations spelled out in there. After downloading them that is. Because after all the World Bank's mission is to end poverty. Maybe that's what Mauritius needs to do to get out of the middle-income trap where we've been stuck for 27 years? And start breathing down Singapore's neck.
Nah, not really when we consider a number of things. We could start by looking at what Lee Kuan Yew had to say to Foreign Affairs about the World Bank – one of two controversial Bretton Woods institutions, the other being the International Monetary Fund (IMF) – back in 1994: "The World Bank report's conclusions are part of the culture of America and, by extension, of international institutions. It had to present its findings in a bland and universalizable way, which I find unsatisfying because it doesn't grapple with the real problems. It makes the hopeful assumption that all men are equal, that people all over the world are the same. They are not." It's quite a handy quote given that we celebrated 50 years of our sovereignty barely two months ago. Let's look at a few more examples.
But six months later the country was "falling like a stone." The model country saw its economy contract by 13% in 1998 and unemployment increased by a factor of ten. Mallaby mentions that when news broke out in the second half of July 1997 that 30% of the loans made by the World Bank to Indonesia had disappeared in corrupt hands the bank released a statement whereby it "knew exactly where our money is going, we don't tolerate corruption in our programs." But an internal memo in October that same year confirmed that the loss was between 20% and 30%. So there we have a confirmation of what LKY and many others have diagnosed namely that the World Bank "doesn't grapple with the real problems." A worldview that's way too rigid to allow basic common sense in doesn't help.
We can stay a little longer on this topic and look at what Bertrand de Speville former ICAC Commisioner of Hong Kong said on attempts to roll back corruption in an interview to Le Mauricien in May 2007: Pourquoi rien ne marche et pourquoi ne voit-on que du flat lining. Pour vous dire franchement, je realise que ce qui s'est passe est que les institutions internationales se sont trompees. Elles ont demarre du mauvais pied. Il faut voir de plus pres ce qu'ont fait les donateurs internationaux. En verite, c'est leur faute. En verite, le principal responsable, je regrette de le dire, c'est la Banque mondiale. It's true that humility is not the middle name of The World Bank but her sister institution, the IMF, is even more arrogant.
Bretten-Woods Ali
And Policy Spaghetti
The fundamental thing we have to note here is that all of this has been done without any affermage contract or assistance from the World Bank. And that too on the watch of a Minister who said he has done only law in his life and who is clearly out of his depth. This is no big surprise as managing water in Mauritius is so low in the food chain that rapid progress is possible. There is another aspect that makes this affermage thingy quite fishy. We've shown that 24/7 should be a reality for all 360,000 households by 2023. Why then would you give a 15-year affermage contract that would start in 2019 and end in 2034 or eleven years after everybody had been provided with a round-the-clock water supply? Hmm...
Nah, not really when we consider a number of things. We could start by looking at what Lee Kuan Yew had to say to Foreign Affairs about the World Bank – one of two controversial Bretton Woods institutions, the other being the International Monetary Fund (IMF) – back in 1994: "The World Bank report's conclusions are part of the culture of America and, by extension, of international institutions. It had to present its findings in a bland and universalizable way, which I find unsatisfying because it doesn't grapple with the real problems. It makes the hopeful assumption that all men are equal, that people all over the world are the same. They are not." It's quite a handy quote given that we celebrated 50 years of our sovereignty barely two months ago. Let's look at a few more examples.
How Malawi Ended Extreme Poverty
An interesting 2007 New York Times article tells the story of the role played over two decades by the World Bank in pushing our fellow SADC member "to eliminate fertilizer subsidies entirely... its theory was that Malawi's farmers should shift to growing cash crops for exports and use the foreign exchange earnings to import food...". It always starts with one of their dumb theories doesn't it? The result was famine in the country until the then President stopped listening to the World Bank and reintroduced the fertiliser subsidies. The return of common sense did not only rolled back acute child hunger but also enabled Malawi to sell food to neighbouring countries. Jeffrey Sachs summed up the cause of the hardship endured by Malawi nicely in that article: "The donors took away the role of government and the disasters mounted." That's not the only problems that donors create.
Meet Indonesia,
Star Client of The World Bank
Flip through Sebastian Mallaby's excellent The World's Banker to go back to July 1997 in Indonesia. Dennis de Tray is heading a big country office of the World Bank there – a staff of more than a hundred – when the Thai baht loses value fast after its peg to the US dollar is abandoned. De Tray reassures the bank's board that Indonesia will not be adversely affected and that his staff was giving corruption the attention that was required.Star Client of The World Bank
But six months later the country was "falling like a stone." The model country saw its economy contract by 13% in 1998 and unemployment increased by a factor of ten. Mallaby mentions that when news broke out in the second half of July 1997 that 30% of the loans made by the World Bank to Indonesia had disappeared in corrupt hands the bank released a statement whereby it "knew exactly where our money is going, we don't tolerate corruption in our programs." But an internal memo in October that same year confirmed that the loss was between 20% and 30%. So there we have a confirmation of what LKY and many others have diagnosed namely that the World Bank "doesn't grapple with the real problems." A worldview that's way too rigid to allow basic common sense in doesn't help.
We can stay a little longer on this topic and look at what Bertrand de Speville former ICAC Commisioner of Hong Kong said on attempts to roll back corruption in an interview to Le Mauricien in May 2007: Pourquoi rien ne marche et pourquoi ne voit-on que du flat lining. Pour vous dire franchement, je realise que ce qui s'est passe est que les institutions internationales se sont trompees. Elles ont demarre du mauvais pied. Il faut voir de plus pres ce qu'ont fait les donateurs internationaux. En verite, c'est leur faute. En verite, le principal responsable, je regrette de le dire, c'est la Banque mondiale. It's true that humility is not the middle name of The World Bank but her sister institution, the IMF, is even more arrogant.
Tunisia, Egypt and the Arab Spring
An institution that deals with so many countries should be able to anticipate major problems in any one of them. Yet in April 2010 the IMF "commended the authorities' sound macroeconomic management and the reforms implemented since 2004, which had strengthened the resilience of the Egyptian economy in the face of the global crisis." This is ten months before Hosni Mubarak resigned as President of the land of Pharaohs.
They didn't do any better in the case of Tunisia. A mere three months before Mohamed Bouazizi set himself ablaze its "executive directors noted that Tunisia weathered the global crisis well, largely reflecting its sound macroeconomic management and structural reforms over the last decade and timely responses since the onset of the crisis." This is precisely what LKY and many other right-thinking people have said of their typical analysis: it's too bland to pick up social volcanoes that may be brewing right under the surface.
The report listed its "lack of understanding of its role in exchange rate surveillance" as one of its failings. It is good to remember at this point that exchange rate surveillance is a core skill of the IMF which is as Mallaby remarked a one-product institution. Read the summary a little further and find that "the effectiveness of the dialogue was hampered in some cases because staff teams did not bring with them sufficient expertise and experience." So there you go. Another institution which doesn't seem to know what it is supposed to do and how to do it. Looks like it has a massive skills mismatch. We can also look at an experience that all Mauritians can relate to.
They didn't do any better in the case of Tunisia. A mere three months before Mohamed Bouazizi set himself ablaze its "executive directors noted that Tunisia weathered the global crisis well, largely reflecting its sound macroeconomic management and structural reforms over the last decade and timely responses since the onset of the crisis." This is precisely what LKY and many other right-thinking people have said of their typical analysis: it's too bland to pick up social volcanoes that may be brewing right under the surface.
The IMF Doesn't Put Out Fires,
It Starts Them
That's the title of a December 1998 article in Business Week by Robert Barro from Harvard. In it he went as far as suggesting that the IMF change its name to the IMH (the Institute for Moral Hazard), "admit that it was insolvent and go out of business." Sachs who we mentioned above described the Asian crisis as a case of the Wrong Medicine. We can also look at the reports published by the IMF's own Independent Evaluation Office (IEO) to get a better sense of its performance. Or if you're pressed for time the summary of the one for May 2007 – which by the way was out just before the start of the Great Financial Recession – where it found that the Bretton Wood institution "was simply not as effective as it needs to be in both its analysis and advice, and in its dialogue with member countries." The report listed its "lack of understanding of its role in exchange rate surveillance" as one of its failings. It is good to remember at this point that exchange rate surveillance is a core skill of the IMF which is as Mallaby remarked a one-product institution. Read the summary a little further and find that "the effectiveness of the dialogue was hampered in some cases because staff teams did not bring with them sufficient expertise and experience." So there you go. Another institution which doesn't seem to know what it is supposed to do and how to do it. Looks like it has a massive skills mismatch. We can also look at an experience that all Mauritians can relate to.
 |
| The HQ of the World Bank in Washington, DC might be a lot more useful as a shopping mall or a pet shop. |
Bretten-Woods Ali
And Policy Spaghetti
So far we've seen a number of things about the two institutions from Bretton-Woods: 1. that about a third of the reports of the World Bank are never downloaded; 2. following their advice has led to famine; 3. ignoring them can lead to massive improvements; 4. people that are not completely brain dead find their recommendations too superficial; 5. they cannot see the elephant in the room; 6. they probably have a fantasy that they have been elected by voters and 7; they are not too sure what their role is.
Still it is possible that many of these reports contain a lot of good stuff and some countries have had mostly positive experiences with these two institutions. What if someone had sifted through enough of them, picked those that had worked and adapted them to our local context? Well, this is precisely what Ali Mansoor said he was going to do – he has worked at the World Bank or the IMF for a long time – when he was given the job of Financial Secretary by his university buddy at the beginning of 2006. Don't we have enough vivid examples of the crappy kind of statements and policies that were implemented by him for almost eight years or by his alter ago for five? We do. But let's focus on a couple. For now.
The distribution of the national cake has also become more lopsided. At the end of 2012 the weakest 20% of the households saw their share fall to at least a 25-year low while the top 20% got their biggest share. This record inequality has played a central role in generating the streak of persistently low growth rates. Yet another proof that trickle-down economics doesn't work.
Mr. Mansoor did not come cheap. At Rs500,000 per month he must have cost us upwards of Rs40 million. That's a lot of money to pay someone for what looks like a sabotage of our economy. He also made quite an interesting statement in 2011 namely that our water problem is essentially one of management and implementation and not due to lack of funds. Kind of funny given that by 2011 there was already a revenue shortfall of about Rs36.8 billion. Or enough to change all of the 1,600km of leaking pipes of our water network twice.
Still it is possible that many of these reports contain a lot of good stuff and some countries have had mostly positive experiences with these two institutions. What if someone had sifted through enough of them, picked those that had worked and adapted them to our local context? Well, this is precisely what Ali Mansoor said he was going to do – he has worked at the World Bank or the IMF for a long time – when he was given the job of Financial Secretary by his university buddy at the beginning of 2006. Don't we have enough vivid examples of the crappy kind of statements and policies that were implemented by him for almost eight years or by his alter ago for five? We do. But let's focus on a couple. For now.
Implementing Bretton Woods
Policies That Work
Mansoor wanted to give a shock to the system. He surely did with the 15% flat tax. This mindless reduction of top tax rates was to generate average growth rates of 8%. Well, not only we never got anything close to that over the past twelve years but in fact the average growth rate has been about 4%. This has led to a GDP shortfall of Rs1.2 trillion at the end of 2017. That's a ridiculously large number. It is our GDP for 2005, 2006, 2007, 2008 and 2009 put together. So there's five whole years of GDP missing. And if we assume that Government revenue is 20% of GDP then there's Rs240 billion missing in the national till. That's enough to change all the leaking pipes more than twelve times over. So the flat tax is one of the World Bank policies that works? Now just wonder what one that doesn't work is like :)The distribution of the national cake has also become more lopsided. At the end of 2012 the weakest 20% of the households saw their share fall to at least a 25-year low while the top 20% got their biggest share. This record inequality has played a central role in generating the streak of persistently low growth rates. Yet another proof that trickle-down economics doesn't work.
Mr. Mansoor did not come cheap. At Rs500,000 per month he must have cost us upwards of Rs40 million. That's a lot of money to pay someone for what looks like a sabotage of our economy. He also made quite an interesting statement in 2011 namely that our water problem is essentially one of management and implementation and not due to lack of funds. Kind of funny given that by 2011 there was already a revenue shortfall of about Rs36.8 billion. Or enough to change all of the 1,600km of leaking pipes of our water network twice.
It's Not The Management, Stupid
We can also use the number of people enjoying a 24/7 supply to further fact check Mansoor's statement. Collendavelloo was congratulating himself in Parliament last year for having increased that number from 161,000 to 211,000 over two years (see chart). This is a 50,000 increase or 25,000 per year. As there are about 360,000 households there are 150,000 households that are left to get that kind of water supply. That should take us six years (150,000/25,000) or bring us to 2023. It can happen earlier if more money is invested into the network. Which is kind of easy for Pravind Juganuth to do because top tax rates (corporate and personal) need to go up to 30% to reduce inequality so the economy can grow faster and to solve national problems.
No Basis To Increase
the Price of Water
That's kind of obvious. Just like the Lepep Government doesn't have a mandate to get into an affermage contract. Here are five reasons:- The profitability of our utilities should be considered on a consolidated basis. The combined surplus of the CEB and CWA was Rs1.7 billion in 2014 and Rs2 billion in 2015. Not bad but we need to estimate the impact of those abusive IPP contracts on these numbers.
- The replacement of the leaking pipes will increase the amount of water available for consumption and hence improve the surplus of the CWA. The GM has reported that losses in some areas have dropped from 50% to 10%.
- The Minister wanted to increase the water tariffs to spark the interest of strategic partners. We've seen how it took only two years for an extra 50,000 to enjoy a 24/7 supply. This has happened with the existing structure that the Minister found faulty. Mauritian voters are in no mood to throw hundreds of millions of rupees if not billions of rupees in an crazy affermage contract simply because an incompetent Minister wants to implement the recommendations of a report hatched by a very controversial institution. Mauritian voters are more in the mood of seeing that Minister get sacked right away.
- We collect only 5% of the rain we get. Some countries have an abundance of oil. We are blessed to have an abundance of water. Its price could actually go down in the rainy season when some of our reservoirs are full.
- Government has been cash-starved because of the stupid flat tax. This has caused many of the problems we've been having since 2006. The problems will start going away as soon as top tax rates (corporate and personal) go back to 30%.
No comments:
Post a Comment