Make hay while the sun shines: Lessons for businesses in emerging markets from the world of farmers.

“The great cities rest upon our broad and fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic; but destroy our farms, and grass will grow in the streets of every city in the country.”

                                                                – William Jenning Bryan, Nebraska Congressman, 1896

 

Introduction

Very often, business leaders responsible for the growth and development of emerging markets units turn to the words and deeds of management gurus, industry leaders, governments, business titans and sometimes even politicians (!) to seek a way to best capitalise on the potential and to frame their actions in order to achieve success in their markets.

However, there is a segment of society that offers businesses an enormous amount of wisdom, knowledge and insight that leaders can benefit from – farmers. Now farmers are, for the most part, an unseen and unheard segment of society. We don’t hear much about them, we don’t see much of them and we don’t know much of how they go about conducting their business. The implications and impacts though which farmers have on society are profound. The food we eat, the clothes we wear and the security we seek for our sustenance come from farmers. Without them, society, as we know it, would not function.

Agriculture is a sector that contributes to roughly 3.8 percent of the world’s total GDP which equates to an industry that is worth over US$2.9 trillion at current prices. If farmers of the world united, they would represent the fifth largest country in the world in terms of total GDP!

Business leaders have an opportunity to use farming as the basis and blueprint for success. Over the last half decade of austerity and uncertainty, the one certain thing for most major organisations is that emerging markets represent more than just a passing phenomenon or a rising force – they are the main elements and pillars of sustained economic growth.

However it is important to note that these emerging markets (even amongst themselves) differ fundamentally from more mature markets. This means that the skill sets and capabilities that help emerging markets business leaders in not only establishing operations but to also flourish are unique. We may need to consider the lessons and experiences from farmers, given that the challenges and opportunities are similar. This is the context upon which the rest of this article is based on.

 

The wisdom of farmers

A book published in 1726 titled, ‘The Country Gentleman’s and Farmer’s Monthly Director,’ by Professor Bradley of Cambridge introduces the role of a farmer as follows: “I consider a Farmer as a Person whose Business depends more upon the Labour of the Brain than of the Hands.”

Almost a century later, Sir John Sinclair, founder of the Board of Agriculture highlighted that, “Agriculture, though in general capable of being reduce to simple principles, yet requires on the whole a greater variety of knowledge than any other art.”

The sentiments above remain true two centuries later. Farming and agriculture has been an outstanding, if not neglected, successful endeavour of human society. In the last century, it has succeeded in feeding an ever-increasing global population, a diverse range of produce and goods more efficiently and at lower prices. It can be argued that farmers have been an integral pillar supporting modern economic growth.

Agriculture is not an industry on the periphery of modern civilisation and the world of business. It is a fundamental element of human society from which businesses can gain significant insight and, if applied appropriately, will lead to success in emerging markets and beyond.

 

A common approach to investment

Established businesses looking to develop and sell their product and service offerings must fundamentally treat the way they consider investment in an emerging market or sector differently to their business as usual sectors. A number of organisations make the error of setting performance objectives and deliverables for an emerging market in the same way they would for an established business resulting in unwanted consequences of de-motivated managers on their emerging front lines.

My argument is that businesses looking to establish an emerging markets operation should consider their investment the same way a farmer approaches his investment in his agricultural practice.

To illustrate this further, let us consider an example of a multinational organisation that supplies professional consultancy services across a range of markets. In an instance such as this, we can expect the organisation to have very clear monthly or even weekly targets for their sales performance as they have an established business model, a recognised brand name and the people on the ground who have the experience and the networks to deliver performance to targets. They key factors of production are within control and output therefore is also more easily controlled. Therefore, makes sense to have monthly (or even weekly) targets, forecasts and delivery and indeed performance should be measured with the same frequency.

If the organisation decides to subsequently enter an emerging market where it has no established presence, a brand name that is not recognised and a team that is relatively new, they will need to alter the way they view performance and the way targets are set. Adopting a monthly or weekly target approach will prove to be unfeasible particularly as conditions in emerging markets are not always entirely stable. This is where businesses in emerging markets can consider the way of the farmers.

Farmers have a different system for targets and performance. Farmers do have seasonal targets and objectives but given that the nature of farming is such that it is impossible to predict all the various factors of production. Factors such as the weather and climate, the nature of seeds used, the crop yield, the animal production, amongst other things, can only be managed and not controlled.

A farmer has to deal with many uncertainties, for instance a cold weather snap will destroy ground crops, affect lambing, cause ewes to abort, which all affect the yield for the farmer.

A farmer also needs to deal with farming regulations, subsidies, and changes in government practices or policies (e.g. the structural changes that happened in the farming community upon the adoption of the Common Agricultural by the EU Commission). As Gary Libecap, Professor at the University of California explains, “Agriculture is the most regulated sectors of the American economy. The production and sale of almost all of its commodities are affected by some government policy through a complex mix of programmes.”

It is this enormous ability of farmers to navigate through uncertainties and their overall resilience to rapidly changing underlying conditions and factors that prove most instructive to leaders of emerging markets businesses.

An emerging markets business leader has to remain nimble and agile to the dynamic and sometimes unstable political and regulatory conditions in emerging markets. Even seemingly straight-forward tasks of setting up a legal entity in an emerging market may become a highly tenuous affair and an emerging market business leader has to retain the patience and the will to deliver through the bureaucratic obstacles. It is this patience and perseverance which successful farmers have  in abundance which allows for their ongoing success and growth.

A successful farmer and a successful leader of a business in emerging markets have more in common than we have assumed before.

 

Of growth and harvesting – the shared goals of farming and emerging markets

The objectives of both the farmer and an emerging market business leader are congruent in many respects. The average farmer is a skilled diplomat, a human resource leader, an effective delegator, a scientist, a chemist, a negotiator, a commercial leader, an innovative marketeer and sometimes even auctioneer. He has to possess exceptional skill and energy to carry out the above roles and tasks and ensure that his agricultural endeavour is a successful one.

An emerging market business leader is similar and has to be able to navigate through sometimes sensitive commercial negotiations in the face of vastly evolving regulatory changes and has to be able to engage both his teams as well as key stakeholders such as regulators, government leaders and suppliers in a diplomatic manner that allows him to achieve his business objectives.

Farmers have always been very adept in ensuring that they adopt relevant approaches to farming based on their location and underlying conditions. This is not a modern phenomenon but one that is as old as agriculture itself. For example, the indigenous Ifgugaos in the Philippines realised two thousand years ago that their mountainous and hilly terrain meant that crop cultivation was going to be challenging and sought to change the underlying condition and created what is now known as the Banaue Rice Terraces. These terraces were built with little tools and water was sourced from the forests which were above the terraces through a unique and ancient irrigation system.

To further illustrate this point, in the northern hemisphere, wheat must ripen in late spring or early summer to get as much sunshine as possible. To grow it, one has first to plough the ground, then sow, harrow (to get rid of the weeds), and eventually harvest. Any anticipation or delay of any of these operations entails losses, which can become serious. For example, ripe wheat, if not cut, would fall on the ground and soon become worthless. In Burkino Faso, land has to be ploughed within days of rain or the land becomes too hard to plough.

Similarly, an emerging markets business leader will need to be swift and decisive in their strategic and market implementation. There needs to be ample planning and analysis in advance of delivery and once a common approach has been agreed, timing becomes critical and execution must take place within defined times to attain the defined aims and ambitions. Delaying or vacillating over decisions will lead to missed opportunities and potentially allow for rivals to take the lead in a potentially lucrative segment.

Farmers also need to be able to think strategically for the future in anticipation of global and local circumstances. Strategic management and optimal operational delivery is a way of life for modern farmers. They have to be able to factor all information, both historic and projected, which allows them to make appropriate and relevant decisions that allow them a sustainable farming business. The farming sector, supported by high commodity prices, has demonstrated enduring resilience during the last economic crisis in 2008. World Bank data shows that in 2009, agricultural value added at world level rose by 4 percent which can be contrasted to a 5 percent fall in global sector-wide GDP. This resilience was more pronounced in emerging economies, where agricultural GDP rose by 8 percent.

Likewise, an emerging markets business leader needs to be able to clearly define and articulate their propositions to their markets and customer segments. They will need to prepare adequately for their specific targets and estimate accurately the required resourced needed to achieve their outputs. In this regard, they can learn from farmers whose entire seasonal output and sometimes even survival depends on their ability to estimate accurately the required resources to achieve a given output.

Emerging markets leaders also need to be assess and understand their market terrain and environment. They need to ‘work the ground’ and understand the local feedback, context and factors that will have significant impacts on their output. The most successful farmers continuously identify their strengths and weaknesses relative to their local as well as international competitors who may be able to offer the same output at a lower cost. An example of how this has been done includes potato farmers in Tasmania who undertook extensive research to understand how lower-cost potato imports from the Netherlands and Belgium are undercutting their business and took steps to address these challenges. Similarly, emerging markets business leaders will need to conduct sufficient levels of quantitative and qualitative market research to ensure that their businesses remain resilient against competition, both local and international, and also achieve their growth targets.

 

Resilience and leadership

Farmers face a range of challenges and issues. The challenges range from external environmental factors outside their control such as climate change. Global economic pressures, livestock disease and climatic changes are the types of issues which farmers have to navigate through.  For instance, there is a loss of arable land due to climate change amounting to as much as a fifth of all agricultural land in South America and Africa.

Events and challenges such as this affects crop yield which in turn affects farmers’ incomes and cause them to become highly volatile. These mean that farmers need to be careful in how they manage their finances and funds in order to ensure that they are able to meet expenses and also correctly anticipate demand. Farmers fundamentally need to navigate through uncertainty and steer their operations and farms through competing pressures and noise to keep producing in a way that meets challenges.

Risk management is a central pillar in terms of how farmers manage their business. They are now being required to produce more food and other agricultural products on less land, with less pesticide and fertilisers, with less water and also manage a lower carbon footprint. Part of the risk management process of farmers has been to understand what their underlying risks and challenges are and to subsequently develop and implement the technologies and practices that counter environmental and land degradation and climate change to maintain sustainable and viable farms.

Examples of this include mixed cropping that have led to better usage of nutrients in soils and more effective pest management systems. In Zambia, for instance, crop rotations have reduced water requirements by up to 30 percent. They also use a new strain of maize which produces a yield which is 500 percent higher than the average yield for the rest of Africa.

The underlying risks have also been managed through a series of other initiatives such as skills development training across a wide range of relevant topics and generation of non-farm income (such as agri-tourism). They also deal with it through diversification into renewable energy technologies and by developing markets for novel and alternative cropping.

Businesses investing in emerging markets also need to ensure there is a sufficient level of risk management and due diligence conducted prior to entry into new markets. They will need to ensure that they have diversified their risks through investment across a wide portfolio of markets. They also need to be able to react appropriately to emerging regulation and underlying economic conditions by reviewing their business operations and investment accordingly.

Farmers globally seek to create viable and resource-efficient farms and agribusinesses that are able to meet demand and yet remain resilient to fluctuations in the business cycle or other natural causes without recourse to significant public intervention.

Initiatives such as the establishment of grain stores in Africa and the creation of dairy hubs in India, Bangladesh and Pakistan are helping farmers to cut costs, create greater income and reduce price volatility.

A successful farmer is a leader who does not micro-manage staff or instruct them to do something they cannot or will not do. The most effective farmers are inspiring (particularly when they are undergoing moments of extreme uncertainty); strategic (by having a good view of the changing conditions and consumer patterns which impact their sales); energetic (to rouse their teams into action towards peak performance); and possess a clarity of vision which can effect great change.

Likewise, a successful emerging markets business leader should have the ability to delegate effectively and provide enough support to their people and inspire confidence. They should also cultivate and nurture their teams towards peak performance and give them a sense of ownership and achievement. It is also vital that emerging markets business leaders ensure their teams have sufficient levels of training and development so that they are constantly building on their capabilities and can support business and corporate objectives even better.

Farmers also remain a source of emotional vitality in their communities and countries. Their critical importance to the well-being of their nations and their role in a profoundly rebalanced world mean that they provide the vigorous inspiration required for growth and development. Their leadership and resilience has led to the innovation, creativity and has the potential to inspire the social cohesion required in a world marked increasingly by differences.

 

Innovation as a key essence to success

Thomas Malthus predicted in the 18th century that there would come a time in the late 20th century where the world population would exceed food supply leading to widespread impoverishment and famine. This has not come to pass and indeed over the last fifty years, agricultural production has tripled and farmers have ensured that the world, for the most part, remains fed and clothed. This has happened due to the constant innovation in farming. Smallholder farmers (who account for almost half of the emerging world’s labour force) have overseen a rise in agricultural productivity.

Farming innovation can be broadly grouped into four categories: biological innovations (new strains of plants and animals); practices of cultivation; technical and technological innovation (including machinery, fertilisers and the increasing use of technology).

The ‘Green Revolution’ which saw India experiment with new varieties of rice and wheat in the 1960s helped to ensure that India averted the pains of starvation. Increasingly, new strains of rice and wheat that can withstand flooding and salinity are being developed that will ensure that the poor agricultural lands are converted to fertile plains.

Increasingly, innovative agricultural practices are also improving farmers’ yields and performance.  An example of this is the way fertilisers are spread to crops. Traditionally, rural farmers applied fertilisers by spreading them by hand.

However more rural farmers are now applying a practice widely known as ‘Fertiliser Deep Placement’ (FDP) which works by using a specialised fertiliser called a briquette about four inches underground which releases nitrogen gradually.

This prevents less nitrogen to be lost through run off. FDP is now being used widely by farmers across Burkino Faso and Nigeria and has helped increase their yields by almost a fifth of total production.

Modern technological innovation is also being adopted by farmers and extended globally. VetAfrica is a mobile app which now allows for farmers to diagnose livestock illness and to apply appropriate remedies and drugs to treat diseases. In India, farmers now have access to various instructional support by the government’s agricultural agencies that provide both online and offline information to rural farmers and their communities.

This spirit of innovation will also place emerging markets leaders in good stead. Businesses that invest significantly in research and development and ensure their people are empowered to experiment and deliver innovative solutions will be better placed to create scalable and transferrable innovations that can support the wider business.

Farmers have remained at the forefront of innovation and have also been very enthusiastic adopters of new technology and solutions. This is despite the fact that agricultural innovation generally entails a high level of risk and many of them yield little or no financial reward to the inventor.

In an era of rising energy costs and greenhouse gas emissions, some researchers are questioning whether conventional agriculture’s reliance on chemical fertilisers is sustainable, and point to its negative effects: pesticide residues, soil erosion and reduced biodiversity. Switching to organic and resource-conserving methods of farming can improve smallholder crop yields, food security and income, a review study by the International Journal of Agricultural Sustainability has found.

Likewise businesses that enter emerging markets should also consider their overall business practices and consider how the implementation of socially responsible practices can help reduce their overall costs and improve their bottom line in the markets they are operating in.

Farmers have also identified increasing demand from a more affluent customer base and have responded to it by shifting towards organic production and cultivation. The amount of land in organic production across Europe has grown by about five million hectares over the past decade, according to the European Union, and has grown by 13 percent annually over the last decade. A similar phenomenon is also observed in the United States of America according to a survey conducted by the US Department of Agriculture (USDA). The number of USDA certified organic farms has quadrupled since 1990 and the area dedicated to organic farming has increased from 1 million acres of land in 1990 to over 4.1 million acres currently. Organic farming is also becoming increasingly popular across South Asia (particularly India) as farmers tap into the increased demand and are evolving their farming practices accordingly.

Similarly, there is significant scope for emerging markets business leaders to learn from the habits of the farmers. The approach to farmers in testing and innovating to arrive at the optimal farming solution (the way they test to see which crop rotations work best given the soil and land conditions for instance) will also help business leaders in emerging markets to test out product launches and to test it in a given market prior to a full-scale rollout. This allows them to obtain a clearer insight into consumer behaviours and the general market sentiment for their product which will allow them to make the necessary improvements or changes required before they invest in a full rollout. This experimentative approach to new markets will become increasingly important particularly as organisations become more risk averse and seek a higher level of returns on investment but within a defined risk framework.

 

Building a force for good and planting the seeds of hope

Farmers and agriculture are vital to the overall betterment of society as well. The Consultative Group on International Agricultural (CGIAR) certainly believe so and feel that agriculture will help nations meet the emerging UN Sustainable Development Goals (SDGs) – the successor to the UN Millennium Development Goals.

Despite the well publicised challenges and adversity faced by farmers and the struggle they undergo on a daily basis, their resilience and their hopeful outlook provides food for further though and reflection for emerging markets business leaders. This is a spiritual dimension that must be noted.

Likewise, an emerging market business leader has to remain cognisant of their responsibilities within the societies they operate. If they are representatives of larger multinational organisations, the general public will expect them to implement world class practices and behaviour. They will also be required to adapt to the culture-specific scenarios presented to them and act in an appropriate manner.

It is vital that emerging markets business leaders look beyond profitability and financial remuneration. They need to ensure that their organisations are acting in the public interest and whilst creating value for their businesses are also creating positive externalities and value for the communities in which they operate in. It is this that sets the framework for a fruitful and sustainable growth and development of both businesses and societies. This addresses both the social and economic dimensions of sustainability.

The final dimension of sustainability is that of environmental sustainability. It is well known that the natural world that agriculture relies on is exhaustible and the relationship with nature and the environment has been a distinctive and intractable feature of farmers.  This is true from the fertile padi fields of Java to the ranging prairies of the Midwest.

Emerging markets business leaders need to give sufficient consideration to environmental sustainability. This not only ensures that they are contributing in a positive manner to the society but also acts as an important license to operate across a number of countries.

In conclusion, farmers can be a powerful source of inspiration and guidance to business leaders in any market. A farmer needs to tend to his flock with loving care and the successful farmer is one who takes an active interest in the welfare of his farmhands, who cultivates and nurtures his crop and animals with passion and tenderness. A successful farmer also flows with the changes to the external environment and navigates them successfully. A farmer also continues new ideas (be it the type of seeds used, the type of farming, consider the impacts of automation and technology on his farms, the use of data to understand the changing crop yields, risk mitigation, etc) and constantly innovates. A successful farmer also has to negotiate effectively with other farmers, with government, with regulators. He has to manage finances effectively and think of new financing to make it through the lean times. All of these skills and qualities are also what contribute to effective and successful business leadership.

 

 

“The prosperity of other industries is not the basis of prosperity in agriculture, but the prosperity of agriculture is the basis of prosperity in other industries…Immense manufacturing plants and great transportation companies are dependent on agriculture for business and prosperity. Great standing armies and formidable navies may protect the farmer in common with other people of a nation but their support comes from the tillers of the soil.”

                                                    

                                                                     – Nahum J Bacheldar, 1908 (Leader of National Grange)

 

Read More »

Advertisements

The inequities of India’s proposed Land Acquisition Bill

The Indian government led by Modi has proposed a series of wide-ranging reforms to the Land Acquisition Bill which, in my personal view, will have a deleterious effect on the nation and her people.

The long and the short of this new Bill is that it will allow for the government to take over land from landowners without sufficient due diligence or understanding the social impacts in the name of ‘public interest’ whilst not actually defining what this ‘public interest’ may mean.

The proposed Land Acquisition Bill fails the most material principles of the Indian Constitution – that of democracy, welfare, justice and equality.

The context

Flawed analysis – leading to incorrect conclusions

The problems with the proposed amendments

Conclusion

Paddy Fields in India
Paddy field in India

.

The context

For almost one hundred and twenty years, India’s land acquisition was governed by the Land Acquisition Act of 1894 which was a fundamentally exploitative, oppressive and inherently unjust piece of colonial legislation. Since Independence, over 50 million people have been displaced in the name of development. A large segment of the displaced includes entire scheduled tribal communities. The vast majority of the displaced have faced declines in the quality of life, received inadequate compensation and have ended up being marginalised in their own lands.

The Land Acquisition, Rehabilitation and Resettlement (LARR) Act of 2013 was subsequently passed with the official mandate to support the twin objectives of farmer welfare along with the strategic development of the country.

When Modi and his government took over, they decided that they wanted to amend a number of major aspects of the LARR as one of their core priorities. The proposed amendments have drawn widespread condemnation and flak, not just from the opposition, but from within the ruling party itself and more importantly the majority of the populace, particularly those within the rural community.
.

Flawed analysis leading to incorrect conclusions

Part of the problem arises from the fact that current Indian administration’s economic analyses predicated on the notion that greater freedom by the State and large commercial interests in acquiring land and property will promote accelerated economic growth. Land acquisition is often cited as an impediment to India’s growth and India’s policymakers and a number of corporate-sponsored industry bodies would have us believe that having a draconian bill to confiscate land is the panacea to India’s economic ailments.

On the contrary, according to a Ministry of Finance-led Economic Survey of 2014/2015, it is less than 1% of projects that have stalled in India as a result of land acquisition issues.

India’s true obstacles to economic progress include corruption (which imposes a cost of between 1% to 3% of total GDP), tax evasion and ultimately a lack of a consistent and coherent economic policy.

Land grabs by the State actually have a huge cost, both economic and societal, for India. An unfair and unjust land acquisition campaign will only serve to further exacerbate the problem of rising income inequality and social disparity that remains a stain on India. The economic, social and environmental cost of displacement and conversion of forests/agricultural land towards industrial assets have never been truly understood or analysed by the government.

The ownership of land is a fundamental basis of livelihood and subsistence for a majority of Indians. Mere monetary compensation, without a resulting benefit in the form of employment will have devastating consequences for farmers, farmhands, artisans and other individuals whose livelihoods depend on agriculture and farming. Forest tribes, adivasis (large segments of tribal and aboriginal groups in India) and dalits (the most marginalised segments of the Indian population) who have been impacted as a result of past land acquisitions will in turn be even more marginalised and suffer even more inequity and exploitation.

The current Indian government is pushing for its “Make in India” slogan. There is no point making in India, if it does not benefit the majority of Indians and only serves to undermine and taint India.

“Make in India” – but not for Indians’ benefit?

.

The problems with the proposed amendments

There are a number of serious problems with the amendments being proposed by the government.

1

First and foremost is the deletion of the clause to consider the social impact assessment of the land acquisition. Without the ability to assess the possible adverse impact a potential land acquisition has on people in an area, how can we truly understand the externalities (negative or otherwise) and make an informed judgement about the wisdom of acquiring the land. How will we be able to say, to a high degree of comfort, that the benefits of the land acquisition will indeed be substantively higher than the resultant costs and consequences and benefit a broader segment of society?

2

Secondly, agricultural land has to be viewed as strategic assets designed to support the development of the nation in order to preserve food security. We have seen countless nations, who in their rush to convert viable agricultural land into vast sweeping industrial or tourist outposts, have lost their ability to feed and serve their people and have had to resort to food import in order to sustain themselves. It can be argued that agricultural efficiencies have improved and that the same output can be delivered with a smaller land area – but in order for this to be truly understood, there has to be a clear understanding and assessment of impacts, which this government does not want to do either. India cannot surrender her independence in her ability to feed, serve and protect her people.

3

Thirdly, the previous Act had a provision which required the consent of 80% of affected individuals prior to the land acquisition. The amendments proposed will allow for the government to unilaterally acquire land without the permission of the people who depend on the land. The principles of democratic conventions are being violated here. Unlike a few other countries, India’s rule of law is not enforced by a dictatorship of some nature or under a command economy where all ownership belongs to the State. India is a democracy – a government of the people, by the people, for the people. With the proposed amendment, the state will be a government of a very small group of people, by the faceless/nameless corporates and industries, and certainly not for the people.

4

Fourthly, the amendments themselves are vague and, it appears, intentionally ambiguous. ‘Public purpose’ has not been clearly defined and no indicators are being proposed to indicate whether the nation benefits and aids the welfare of all. Five categories of projects are being proposed (national security and defence; rural infrastructure; affordable housing; industrial corridors; and infrastructure (including public-private partnership projects (PPPs)) which are being defined in the broadest possible way which will allow for the government and their industry and corporate partners to acquire/confiscate land without a robust case. It is the absence of a sufficiently strong check and balance that is the biggest cause for concern here.

As the law stands, if no development takes place on acquired land within five years, it has to be returned to the people. This has also now been amended and the land can be held on indefinitely from the time of purchase with no recourse made available to the people who are being impacted. Under the amendments, more land than is required can also be acquired by the government, including the purchase of an additional one kilometre of land on both sides of an industrial corridor – which again will have severe debilitating effects on farmers and small land owners. There is also no consideration of efficiency on the part of the industries and the state looking to acquire the land for their uses and it does not spur or promote more efficient use of the land and instead ends up subsidising the absence of efficiency improvements made by industries.

5

Finally and most fundamentally, the proposed amendments to the Land Acquisition Bill violate the principles of individual liberty and human rights. What this Bill does is redistribute land away from the poor and the most vulnerable to the richest and most privileged segments of society. The principles of prior consent and recognition of the societal and economic impacts on the people most directly impacted by any land acquisition is essentially a land grab by those who can from those who cannot do anything about it.


Land Grab

Conclusion

Land is not just a mere economic commodity or factor of production to a large number of people who will be affected by the proposed amendments of the Land Acquisition Bill. Land is a source of life, of sustenance, of faith and of hope. It is a function of the culture of the people who depend on it, be it the farmers, the forest tribes or the dalits. It is a source of livelihood, of dignity through employment and of a symbol of progress and growth.

India can only truly progress, economically and socially, if there is an improvement in the lives of all Indians and not just a select and privileged few.

A nation must be judged not just on what economic progress it has made but on how it has enhanced the welfare of its most vulnerable constituents.

The proposed amendments violate the principles of the Indian Constitution which dictate that India remains a sovereign, socialist, secular and a democratic republic. Socialism and democracy will be the first casualties if this Bill comes to pass – for how can a nation claim to be democratic when it tramples over the rights of its own people to own land without a proper recourse and safeguards.

The amendments to the Land Acquisition Bill must be opposed at all costs. At stake here is not just about India’s principles of fairness and equity for her people but about the future of a prosperous India which benefits all and not just a select few.

 

References:

http://www.dnaindia.com/india/report-land-acquisition-bill-implies-deep-trouble-2072222 (Shivani Chaudhry)

Myanmar’s Development Agenda – Opportunities and Challenges

I was fortunate enough to participate at the recent Myanmar Development Summit held in Yangon on the 10th of August 2014. I participated in a panel discussion on the opportunities and challenges for Myanmar’s development agenda.

 

Panel discussion: Myanmar's development agenda - opportunities and challenges
Panel discussion: Myanmar’s development agenda – opportunities and challenges (L-R: Dr Thet Thet Khine, U Aye Chan, U Kyaw Tin, Dr Maung Maung Lay, Reza)

The panel was moderated by U Kyaw Tin, Chairman of the Myanmar Institute of Certified Public Accountants and I shared the panel with Dr Maung Maung Lay, Vice President of the Union of Myanmar Federation of Chambers of Commerce and Industry, UMFCCI, Dr Thet Thet Khine, Secretary General of the UMFCCI and U Aye Chan, CEO of IMA Group.

Developments to date

Over the last few years as Myanmar has opened up economically and politically, there have been some major strides made in a number of areas:

1. Social and political reforms:

Politically we have seen a greater freedom of speech, improved press freedom and broader steps towards national reconciliation. The ongoing dialogue with armed groups in a number of states is also a step in the positive direction.

In the last three years government spending on education has more than trebled (it was increased by 30% in the last year alone) and government spending on healthcare has almost increased five-fold (it grew by 78% in the last 12 months alone).

The government has also implemented a strategy for greater public financial management reforms to enhance efficiency and transparency of government spend.

 

2. Improved monetary policy and central bank independence

The monetary policy has improved starting with the unification of exchange rates (there used to be a time where the official kyat to US dollar rate was 8 kyat to a dollar whilst the market rate was closer to 800 kyat to a dollar!).

The regulations governing central bank independence have also been brought more in line with international best practices, granting the central bank greater independence and autonomy.

 

3. Improved tax collection and reforms

With support from the World Bank, Myanmar is also embarking on a series of ambitious tax  reforms to strengthen revenue administration, which will increase the effectiveness of tax and non-tax revenue mobilization.

This was further supported by the passing of the Union of Myanmar Revenue Law of 2014 and four other tax bills in March this year.

 

4. Improving business, investment and trade climate

Approved FDI has increased to US$4.1 billion in 2013/2014 (almost 300% from 2012/2013 when it was only US$1.4 billion). The investment has also been distributed across a diverse range of sectors from manufacturing (45%), telecommunications (30%) and hospitality hotels (10%). This will prove beneficial in the long term as it will increase employability whereas investment primarily in the resource sector would have not necessarily created sufficient job opportunities. The investment has also come from unlikely trade partners including Ooredoo of Qatar and Telenor of Norway (both in the telecommunications sector).

This improved business climate has come on the back of passing of the Foreign Investment Law (FIL) in late 2012 which provided better clarity for international businesses seeking to do business in Myanmar along with the removal of restrictions and barriers to foreign investment. The highly efficient Directorate of Investment and Company Administration (DICA) have also reduced the time for businesses to establish operations in Myanmar (this is also on the back of my own personal experience as we established our operations in Myanmar).

 

5. Progressive financial sector developments

The government is working very closely with industry stakeholders as Myanmar seeks to establish its first stock exchange in Yangon – the Yangon Stock Exchange (YSE).  This is following the passing of the Securities Exchange Law last year.  Japan’s Tokyo Stock Exchange (TSE) and Daiwa Securities Group, a Japanese investment company will supporting Myanmar in delivering the YSE by October 2015.

A microfinance law was also passed last year to improve access to finance for small and medium sized firms and to increase the level of liquidity in the market.

Banks are also being held to more stringent regulations and are required to improve their capital adequacy ratios to be more in line with international best practices.

 

Some key facts to consider:

  •  GDP growth was 7.5% in 2013 (forecasting 7.8% in 2014).
  • Agriculture provides jobs for over 50% of Myanmar’s workforce.
  • Government budget for 2014 was US$ 19.5 billion (a third of Myanmar’s GDP)
  • Inflation has been creeping up and is expected to increase to 6.6% in 2014 from 5.8% in 2013. This is as a result of the weakening of the kyat vis-à-vis the US dollar, increasing wages (both in the private and public sector), a real estate boom/bubble and increased credit.
  • According to McKinsey, Myanmar has the potential to achieve a GDP od US$200 billion per year by 2030 (it was just under US$60 billion in 2013).
  • The average productivity of a working individual in Myanmar is currently only US$1,500 per annum (which is 70% less than other Asian economies including Thailand, China, Indonesia, India, Vietnam, etc). This low productivity also results in the low GDP per capita.

 

Key areas of focus for sustained development and progress:

Below are seven areas I view as critical for Myanmar’s continued development and progress. The achievements to date remain delicate and can be easily derailed if some of the below trends and developments are not addressed sufficiently.

 

1. A need for harmonious development.

One of the biggest perils faced by rapidly emerging economies is a severely widening income gap. It is vital that Myanmar addresses the issue of income inequality by providing broader employment opportunities and increase the number of middle-class Burmese.

It is also important that Myanmar’s leadership resolves on-going ethnic and sectarian tensions and friction in the country. This can severely destabilise the country and reduce the quality of life for Myanmar’s people. There has to be greater social and religious tolerance. Persistent incidences of communal violence between the Buddhists and Muslims are exacerbating the tensions. The government should support further initiatives by centrist leaders of the Muslim and Buddhist communities and support greater dialogue between the various communities. There needs to be greater efforts to reform education starting with the primary levels, to encourage greater tolerance for the different ethnicities and religions in the country.

The role of the military is still not entirely clear and this ambiguity needs to be resolved for a greater entrenchment of democracy taking root in the country so as to produce the optimal opportunities for further growth.

 

2. Improving access to education and creating educational opportunities for all.

Myanmar’s investment in education has increased significantly over the last three years but it still has one of the lowest averages of schooling the world at just four years. The universities and institutions of higher learning remain chronically underfunded and after four decades of neglect, do not yet have adequate infrastructure. However, this is slowly changing with the likes of Yangon University, Yangon University of Economics and Dagon University striking up partnerships with other top universities and organisation. This will help improve the teaching faculty and also provide greater exposure for the students and staff of these universities which will in turn improve overall performance.

A good national education is also essential for enhanced social mobility. The notion of social mobility is critical in helping people move out from the cycle of poverty and in increasing the middle class segment of a nation. Social mobility can only take effect if the right opportunities and education is provided to the people. As Myanmar continues its growth and development, the educational institutions will need to prepare Burmese youth with the right skills and capabilities so that they can gain meaningful employment and support Myanmar’s development.

 

3. Improving employability, productivity and efficiency

For growth and development to remain inclusive and sustainable, it is important that investment continues in the areas of labour intensive industries and sectors such as manufacturing.

The majority of the population still live in poverty (GDP per capita based on purchasing power parity is about US$3.60 per day)

The government is focusing on an export-led growth supported by productivity gains in agriculture and industrial development. President Thein Sein’s ‘Framework for Economic and Social Reforms’ launched in 2011 emphasised the need for a market-driven economy to support economic growth and to provide jobs and opportunities for Burmese.

There must be greater support provided to farmers and the agricultural sector (which as I’ve stated above provides employment for more than half of Myanmar’s working population) to introduce modern practices and improve productivity. Over time, this ensures greater food security for Myanmar and it also helps to boost the export-driven economy which Myanmar is gearing up towards as food production increases. Myanmar’s agricultural sector is also endowed with the 25th largest arable land in the world and has ten times the per capita water endowment of China and India. This gives the opportunity for Myanmar to be a true powerhouse in agriculture and help feed the world’s growing population.

 

4. Increasing access to finance

As Myanmar’s banking sector continues with reforms, increasing access to finance for smaller and medium sized businesses will help increase further growth, productivity and employment. There isn’t sufficient liquidity in the market and SMEs in Myanmar do not yet have the same impact as SMEs in other ASEAN countries. Part of this is due to a lack of sufficient access to finance which will allow for Myanmar SMEs to compete with their regional counterparts.

On an individual level, more than half of Myanmar’s population have no access to financial services, 30% are using unregulated services and only 20% have access to regulated financial services. The limited access to regulated financial services not only impose significant costs on poor people given interest rates of up to 240%-a-year compared to up to 36%-a-year for regulated services, but informal mechanisms also offer individuals limited protection, less choice and lower returns.

 

5. Sustained commitment to reforms and global standards.

Myanmar has adopted international standards in a number of areas. They adopted the International Financial Reporting Standards (IFRS) along with the International Standards on Auditing (ISA). The government, in an effort to boost transparency and greater fiscal control and management have also adopted the International Public Sector Accounting Standards (IPSAS).

Myanmar is also currently reforming the Companies’ Act which is still loosely based around the 1914 Burma Companies Act! This will ensure greater clarity for enterprises operating in Myanmar and also improve business and investor confidence and sentiment.

Myanmar has also recently become a signatory to the Extractives Industries Transparency Initiative (EITI), a global anti-corruption scheme that requires member governments to disclose payments earned from oil, gas and mineral wealth. Burma’s EITI arrangement could also be expanded to include hydropower and forestry.

Such initiatives will support Myanmar’s reform efforts and development and pave the way towards strong frameworks that support sustainable and inclusive growth.

 

6. Greater transparency, accountability and robust governance

President Thein Sein set up an anti-corruption committee to weed out corrupt public officials. Corruption poses one of the most severe threats to Myanmar’s reforms and development. Crony capitalism exacerbates issues of income inequality and social discontent and the government will need to continue to act to curb corruption.

He also implemented various initiatives to improve administrative reform and cutting red tape.

Though efforts have been made to establish a stronger rule of law, the daily papers recount stories of land grabs, ethnic and sectarian conflicts and corruption and the pervasive conflicts of interests across all levels of government and business. There needs to be grater efforts in the areas of establishing an independent judicial system that will allow for a stronger implementation of rule of law. A clear and robust rule of law improves public confidence, enhances investor sentiments and paves the platform for sustainable growth.

 

7. Capacity building with an eye on sustainability

Myanmar has to undertake sufficient capacity building – both in terms of people capacity as well as physical capacity.

Myanmar’s current physical infrastructure is not adequate to meet future growth demands needs. Massive infrastructure investment in the areas of power, water, rail, road are being planned both locally and with foreign investors’ assistance. However, as Myanmar builds more roads, more railway tracks, better power grids and improved water systems, it will be important that there is effective and well-managed town planning and resourcing. We already are witnessing severe traffic congestion and delays, particularly during peak periods, and it this continues, Yangon’s traffic issues could well rival Jakarta’s or Bangkok’s and this becomes a huge social and business cost. Investment in technological upgrades and telecommunications must also continue as Myanmar’s telecommunications and Internet infrastructure still lags that of the rest of ASEAN.

These infrastructure improvements must also consider the wider impacts on sustainability (including social, human and environmental). Myanmar’s decision to suspend the construction of the Chinese-backed Myitsone Dam in Kachin state due to environmental concerns was a step in the right direction. It is important that Myanmar’s leadership consider the longer term impacts over the possible short-term benefits when making infrastructure plans and decisions.

Physical capacity building must be matched by sufficient human capacity building too. As has been described earlier, there needs to be appropriate educational, training and development opportunities for people to ensure that they have the right skill sets, aptitudes and capabilities necessary to support Myanmar’s development. People and physical infrastructure development go hand in hand and a holistic approach needs to be taken to ensure longer term, viable and sustainable development for Myanmar.

Ultimately, it is vital that the right implementation approach is taken to the policy developments taking place in Myanmar. Policy must translate into action or inclusive growth, economic and social progress and sustainable development will merely remain a pipe dream for Myanmar.

 

References:

  1. Myanmar Economic Update, Asian Development Bank
  2. Myanmar’s Moment, McKinsey
  3. Myanmar:  Between Economic Miracle and Myth, Institute of Southeast Asian Studies (ISEAS)
  4. Sustaining Myanmar’s Transition, Asia Society

 

The Ice Bucket Challenge – a rudimentary cost-benefit analysis

image

 

Roughly 1.5 million video shares of the Ice Bucket Challenge (mostly US based and not including out of US video shares).

The UN states the average person needs 50 litres of water per day (in Africa – they do with 20 litres – with a billion people with little or no access to water)

An average small bucket holds about 10 litres of water.

On a low estimate (ignoring group ice bucket challenges), roughly 1.5 m X 10 l = 15 m litres of water has been used (the Washington Post estimated 5 million gallons or roughly 18 m litres of water used till 13 August)  across the videos.

Which translates to the water usage of 750,000 individuals in Africa for one day.

The ALS has raised about US$80m as a result of these challenges (they raised US$2m the same time last year).

I’m not sure whether the costs and benefits add up necessarily here.

Don’t want to pour cold water on good intentions though…..

 

Some interesting reading:

http://www.un.org/africarenewal/magazine/october-2007/bringing-water-africa%E2%80%99s-poor

http://thewaterproject.org/water_stats

The catastrophe of bees’ colony collapse globally.

Ad campaign to save bees in the UK - in the London underground
Ad campaign to save bees in the UK – in the London underground

I saw this campaign ad in the London Underground and it raised what I consider to be a very important issue.

Einstein is commonly reported to have predicted that ‘if bees were to disappear from the globe, mankind would only have four years left to live’.

Since the statement above, more than 90% of the world’s bees have disappeared. There is no conclusive evidence to explain why and this is a hugely troubling matter.

One in three mouthfuls of food we eat are crops (fruits, etc) that are dependent entirely on bees.

If the bees are wiped out, our food shortage problems (which are already at crisis levels), will reach catastrophic levels.

Bees’ colony collapse is a problem that will have a huge implication with devastating consequences for people around the world. More urgent effort is needed to better understand the reasons for the decline of bee colonies (this decline will further impact agriculture and crop produce – which in turn will exacerbate the current problem of global food security and supply).

I will strong recommend that we learn more about this very critical issue (which to my mind is almost as important as that of climate change) and act on it.

For further information, please read: http://www.nature.com/scitable/blog/green-science/global_crisis_honeybee_population_on

For those with children, get them to watch Bee Movie!!

Let’s start doing our part, inform and educate and above all act. This is not just for us, but for those who will follow us.

Thank you.