Overcoming Market and Government Failures in India and Africa Shanta Devarajan World Bank

GDP growth in South Asia has been strong and accelerating Source: World Development Indicators

Rapid growth is reducing poverty, but inequality is increasing Source: Narayan, Ambar, et. al “The challenge of promoting equality and inclusion in South Asian countries.” mimeo, World Bank: Washington DC.

Big gaps between enrolment and completion in primary education Source: Schweitzer, Julian “Human development in South Asia.” mimeo, World Bank: Washington, DC.

Immunization rates are low and stagnant Source: WDI Indicators Database

For the first time in 20 years, Africa’s growth is high and accelerating

Africa’s progress on poverty and social outcomes is uneven

I. Water in India

24x7 water: A pipe dream? Source: Data collected from the water boards or utilities per capita lpd vs. hours of supply/day Goa Chandigarh Mumbai Delhi Patna Ludhiana Jodhpur Dasuya Dera Bassi Paris Jaipur Ahmedabad Bikaner Bangalore Gurdaspur Bathinda Bharatpur Udaipur Chennai

Service to the Poor is big business

Politics, patronage, & network services

II. Transport in Africa Transport corridors From Teravaninthorn and Raballand, Transport Prices and Costs in Africa: A Review of the Main International Corridors, Directions in Development Series, World Bank, 2008.

SELECTED CORRIDORS OF THE STUDY

Central AfricaEast AfricaWest AfricaSouthern AfricaFrance Variable costs (USD per veh-km) Fixed costs (USD per veh-km) Total transport costs (USD per veh-km) Transport costs are not excessively high in Africa comparing to France for example However, average transport prices in Africa are high in a global comparison

CorridorGateway - Destination Price (USD/ veh-km) Variable cost (USD/veh- km) Fixed cost (USD/veh- km) Average yearly mileage (‘000) Profit margin (%) West Africa Tema/Accra - Ouagadougou % Tema/Accra - Bamako % Central Africa Douala - N’Djaména % Douala - Bangui % Ngaoundéré - N’Djaména % Ngaoundéré - Moundou % East Africa Mombasa - Kampala % Mombasa - Nairobi % Southern Africa Lusaka - Johannesburg % Lusaka - Dar-es-Salaam % An interesting observation: On Central Africa corridor, trucks with lower average yearly mileage have the higher profit margins

West AfricaCentral AfricaEast AfricaSouthern Africa Market entry LicensesNot restrictive Market access Bilateral agreementYes NoYes Quotas/freight allocation Yes No Queuing systemYes No Third country ruleProhibited Allowed in some countries Technical regulation (road user charges, axle- load, vehicle standard, import restriction) Problem of harmonization of axle-load regulation Problem of enforcement of axle-load regulation Problem of harmonization of axle- load regulation, delays at weighbridges Prohibition of second-hand vehicle imports in South Africa Customs regulation Cumbersome transit procedures inducing border- crossing delays Cumbersome transit procedures 1. Prohibition for trailers in transit to pick-up backloads in Kenya 2. Cumbersome transit procedures inducing border-crossing delays Cumbersome transit procedures inducing border-crossing delays

Source: Darbera (1998)

Average transport prices (constant and current) from Mombasa to Kigali

III. Agriculture in India

China Bangladesh India

Subsidies Public Investment Public expenditures in India

IV. Education in India and Uganda

All India Teacher Absence Map (Public Schools) State Teacher Absence (%) Maharashtra14.6 Gujarat17.0 Madhya Pradesh17.6 Kerala21.2 Himachal Pradesh21.2 Tamil Nadu21.3 Haryana21.7 Karnataka21.7 Orissa23.4 Rajasthan23.7 West Bengal24.7 Andhra Pradesh25.3 Uttar Pradesh26.3 Chhatisgarh30.6 Uttaranchal32.8 Assam33.8 Punjab34.4 Bihar37.8 Jharkhand41.9 Delhi- All India Weighted24.8% Source: Kremer, Muralidharan, Chaudhury, Hammer, and Rogers “Teacher Absence in India.”

Public School Teachers are paid a (lot) more Definitions Unadjusted Wage is the average wage of teachers in the public and private sector The adjusted wage is what a 25 year old female with a bachelors degree and a 2-year teacher training course residing locally would earn in the public and private sector

Deviation from Mean Salary in Rs Days Absent per Month Private SchoolsPublic Schools Teacher Absenteeism and Compensation The private sector pays more absent teachers less The public sector pays more absent teachers more Salary results are presented as “deviations from mean”. So the number 200 on the vertical axis means that the person’s salary is Rs.200 more than the average salary for the sector The figure is based on a non-parametric plot of deviations from mean salary against the number of days absent. No incentives to perform…

Primary Education in Uganda (PETS) US$ per Student Intended Grant Amount Received by School (mean) 1999 Grants for Primary Education in Uganda In 1995, survey of 250 primary schools in 19 of 39 districts;

Absence rate among teachers CountryRate (percent) Bangladesh15 Ecuador14 India25 Indonesia19 Papua New Guinea15 Peru11 Zambia17 Uganda27

Uganda: What enumerators found

V. Health in India and Chad

Immunization rates are low and stagnant Source: WDI Indicators Database

Distribution of Health Care Subsidies All India, Source: calculations based on Mahal et. al – referred to in MTA para

India 2003: Doctor absence from PHC’s by state and reason

Quality is low, even when present (Delhi doctors) What they do is in blue, what they know is in red. MBBS doctors are (roughly) the equivalent of MDs in the US. Das and Hammer (2005)

Chad “Although the regional administration is officially allocated 60 percent of the ministry's non-wage recurrent expenditures, the share of the resources that actually reach the regions is estimated to be only 18 percent. The health centers, which are the frontline providers and the entry point for the population, receive less than 1 percent of the ministry's non-wage recurrent expenditures.” -- Bernard Gauthier and Waly Wane, “Leakage of public resources in the health sector : An empirical investigation of Chad,” 2008.

What can be done? Information

Primary Education in Uganda (PETS) US$ per Student Intended Grant Amount Received by School (mean) 1999 Grants for Primary Education in Uganda In 1995, survey of 250 primary schools in 19 of 39 districts;

Primary Education in Uganda (PETS) US$ per Student Intended Grant Amount Received by School (mean) 1999 In 1995, survey of 250 primary schools in 19 of 39 districts; Survey repeated in 1998 and Grants for Primary Education in Uganda

What can be done? Information Separate public financing from provision

Stipends yield big gains for Bangladesh secondary education Source: World Bank Bangladesh: Secondary Education Development Support Credit II. World Bank: Washington, DC.

Rwanda: Results-based Financing Donors National Government Households or Individuals Results Based Aid Results Based Contracting for CCT, RB bonuses Hospitals, Health Centers Sub-National Government District Results Based Planning and Budgeting

National PBF model for Health Centers Learning from 3 pilot experiences (since 2001) Roll-out since May/June 2006 Currently 23 out of 30 districts covered Seven control districts 16 Primary Health Care indicators, e.g. –New Curative Consultation = $0.27 –Delivery at the HC = $3.63 –Completely vaccinated child = $ HIV/AIDS indicators, e.g. –One Pregnant woman tested (PMTCT) = $1.10 –One couple tested voluntarily (PMTCT)= $1.10 –HIV+ women treated with NVP = $1.10 Separation of functions between stakeholders

Increase in Volume of Services (after 27 months) PBF IndicatorJanuary 2006 average/month/ health center ( 258 health centers on average) March 2008 average/month/ health center (286 health centers on average) Percentage increase (linear/log R2) Institutional Deliveries % (log 0.75) New Curative Consultations 9851,48951% (log 0.19) ANC: second dose of TT % (log 0.63) Family Planning new users % (linear 0.88) Family Planning users at the end of the month % (linear 0.98)

Rwanda IndicatorsDHS-2005DHS-2008 Contraception (modern) 10%27% Delivery in Health Centers 39%52% Infant Mortality rate 86 per per 1000 Under-Five Mortality rate 152 per per 1000 Anemia Prevalence : Children 56%48% Vaccination : All 75%80.4% Vaccination : Measles 86%90% Use of Insecticide treated nets among children less than 5 4%67% Fertility 6.1 children 5.5 children

How to end poverty Market failures Efficiency & Equity Government failure

How to end poverty Market failures Efficiency & Equity Government failure