Contentious Development

The pursuit of economic development can often be contentious and tricky, ironically more so in the developing world. This is because the number of stakeholders (or those concerned and willing to make some noise anyway) is greater in developing countries.  

It is due to a dual effect. On the one hand, minority groups with no access to resources or wealth have until now not had any outlet to voice their grievances in the public domain or an effective platform from which to seek their rights, but that has changed dramatically. The proliferation of sensationalist 24-hour news channels has at least played a hand in ensuring that issues confronted by minorities and indigenous groups are now brought into our living rooms and stare us in the face. Prior to this reach of the news media, these were merely abstract concerns.  

On the other hand, increased incomes and increased levels of education have led to increased levels of awareness in the developing countries. This has given shape to a boisterous civil society that is sometimes well-informed informed but never shies away from pinpointing something or someone to criticise. This civil society is loud, animated, laps up any attention it can get and sometimes craves for it.  

This has meant that decision-making in many contentious development issues – especially those that purportedly pit the ‘powerful state’ or the ‘evil multinational’ against the ‘hapless individual’ – is not sole preserve of the government alone. Nor is a bilateral agreement between an investor and the government sufficient. Other interested stakeholders include environmental groups and those petitioning for the rights of local inhabitants who stand to lose their livelihoods and their way of life as a result of the proposed activity or investment.  

Often, a belligerent civil society can be overly critical of any proposed investment by a multinational. Sometimes it can also appear rather foolish in the process. However, all of that notwithstanding, its presence and its actions ensure there is greater awareness of issues, and that prevents governments from acting unilaterally.  

In the week gone by, this was in evidence in India where the Supreme Court disallowed Vedanta Resources from mining for bauxite from the Niyamgiri Hills in eastern India till such time the Dongria Kondh tribe, which lives in those hills, agrees to let it do so. The tribe holds the Niyamgiri hills as sacred and has voiced its opinions against the proposed mining plans, arguing the mines would rob them of their way of life and destroy their religious and cultural traditions.  

The gram sabhas of two of the affected districts have been given three months by the Supreme Court to offer their views on the proposed mining project to the ministry of environment and forests for review, after which a final decision will be made in another two months. The Court made it clear that the tribe’s right to worship its deity has to be “preserved and protected” and that the tribe’s views must be considered.  

In the circumstances, it is a reasonable judgment for it does not place an outright ban on mining activities in the area and brings the tribe into the decision process. Vedanta, if it is to have any chance to access the abundant bauxite in the area, needs to allay the fears of the tribe. The entire process will likely be messy and long-drawn, but it offers all stakeholders with the chance to walk away with something and can lay the basis for a project on more secure foundations.

Taken for a ride

It has been less than a month and once again, the inevitable is just around the corner. Over the last few years, it has almost always been a foregone conclusion that politicians will not be able to deliver what they promise. That common folk such as us can predict government ineptitude with such regularity and precision is very alarming indeed.  

Last week marked the fifth anniversary of the first election to the Constituent Assembly after the Maoists agreed to re-join manifold multiparty politics. In five years – the entire term of a government in most democracies – Nepal hasn’t been able to write a constitution for itself, which was pretty much the main task those elected had to accomplish. They failed. Not once, but multiple times.  

Those in the corridors of power over the last five years have showed very little intent to actually allow Nepal to complete its transition to a republic and Nepal remains an interim state. This time around, it is the same story all over again. The leading parties first decided to outsource administration to Chief Justice Khil Raj Regmi to cover for their own failings and to buy themselves more time before the next election (and obviously shelve all blame onto him if elections do not happen on time). Regmi was, by virtue of his neutrality and high public standing, expected to wave a magic wand and get the parties in line and call for elections by June.  

However, he too seems to have caught the same flu that afflicts our politicians. Less than a month into his new role, there are already pronouncements that elections cannot be held on time and will likely be shifted to November instead as a result of supposed technical complications. Whatever these complications are, nobody thinks it important enough to provide any explanation to the public.  

Regmi has also said that he is in favour of declaring a poll date once he is sure he will not have to change it. That is akin to putting the horse before the cart, as the old adage goes. Rather than setting the agenda himself and pressuring the political parties to fall in line, he has decided to do the reverse – he is allowing what should be his agenda to be dictated by the whims of the political parties. 

The Chief Justice, supposedly a harbinger of hope for Nepal and the man to bring the country out of political limbo, has already set the wrong precedent. Increasingly, his motivations are being questioned, as are his actions. Whether malicious or genuine in intent, his inaction in bringing together the parties to agree upon a date for elections at the soonest is shaping perceptions of him, and thus far, the picture emerging is not flattering at all. There seems to be no desperation whatsoever on his part in getting the country back on track.  

In the meanwhile, ordinary Nepalese, who are supposed to determine the fate of the country, or at least that of its leadership, have been sidelined entirely and are now mere spectators to the political drama that continues to play out in Kathmandu. The politicians of the four big parties have taken the country for a ride. At some level perhaps, they realise that the people have realised this, and hence they fear elections.

 

(This was a column published in The Himalayan Times on 14 April 2013)

Patients over patents

The Supreme Court of India passed a landmark judgement on 1 April, leaving global pharmaceutical majors in the hope that the court’s decision was a hoax in keeping with the spirit of April Fools’ Day. But it was not to be.  

Global drug companies may think the apex court’s decision to deny Novartis a patent in India for a new version of a cancer drug unwelcome, but it is the view of this column that the Supreme Court made the right call.  

Novartis called the refusal to grant a patent a threat to innovation in the country. However, Indian  regulators seem to have a very clear priority – to do what is within their means to ensure drugs are made available to Indians at affordable prices. Indians are relatively poor and if the regulators can ensure that at least drugs are being provided to them at affordable prices, then that must be the case. 

Novartis has been in a long legal battle seeking a patent for a new version of its blockbuster cancer drug Glivec, and the company had its hopes of a favourable outcome quashed as the Supreme Court determined that the new version of Novartis’ drug was not substantially different from the old one to warrant a patent.  

The company has been critical of the Supreme Court’s decision, saying it will encumber medical progress for diseases that do not already have effective treatment options. The argument is that the refusal to grant patent protection in a market as big as India hits profits to the extent that the company cannot spend as much on research and the development of new drugs as it otherwise would.  

The truth is developing countries are seeing a rapidly growing demand for drugs and drug manufacturers need to tap into growing demand in these countries to make up for the scarce growth in the West. India is one such important market with a large and growing demand for drugs, but now Novartis cannot hope to make any money from the sale of its drug in the country due to the availability of locally manufactured generics in the market.  

India may be a huge market for the global pharma companies, but is also the world’s largest manufacturer of generic drugs. As such, the tussle between the drug companies and groups backing patient rights constantly comes to the fore. There is much at stake for large drug companies with the passing of the patent cliff in 2012, which saw an estimated $52 billion of branded drugs losing their patents. It is a potentially difficult time for pharma companies as they seek avenues to boost their revenues or to prolong their patents.  

Big pharma has also been quick to call into question India’s commitment to the sanctity of intellectual property rights. Some others have made pronouncements that this decision of the Supreme Court will deter foreign direct investment inflow into India. Proclamations to this effect have also been made in the past, but money has continued to pour into the country.  

Most importantly, however, it can be argued that the Supreme Court, by refusing to permit a patent for what it thinks is just a tweaked version of an already existing drug, is in fact driving the likes of Novartis towards real innovation, contrary to what the company itself may say.

 

BRICS Bank: A good step forward

At the recently concluded annual BRICS Summit in Durban, the leaders of participating countries Brazil, Russia, India, China and South Africa agreed in principle to establish a new development bank to mobilise resources for infrastructure projects. The infrastructure financing needs of these five countries will amount to about US$4.5 trillion over the next five years, and considering that insufficient long-term financing and foreign direct investment have been constraints in infrastructure development, the decision to set up a self-serving development bank is an exciting one.

This was an idea that first emerged in 2012, when finance ministers of the five countries were asked to study the viability of establishing such a bank that would fund infrastructure and sustainable development projects in the BRICS countries and other developing economies. The BRICS countries are now “satisfied” that the idea is “feasible and viable”, they said in a statement.

It is still early days yet and the BRICS nations have not worked out details pertaining to the bank’s size, location and leadership just yet. Moreover, there are bound to be teething issues with the successful implementation of this idea due to a few factors, the most important of which is the dominance of one country over the rest. China’s economy is significantly larger than that of the other four nations and of the five, it is the country that least suffers from a shortfall in the availability of funds for infrastructure. As such, there is much skepticism around the proposed bank and questions about whether the five countries will be able to arrive at common ground given their differences and given the strong dominance of one over the other.

A few commentators have questioned whether the idea will ever come to fruition, whilst some others have been critical of the proposed bank as they believe it will be redundant, irrelevant or both. The International Monetary Fund (IMF) has been guarded in its reaction to this new development and has merely said it is “following this initiative with great interest”. Coming from the IMF, this is hardly surprising, considering its reluctance to allow any institution to have even a semblance of a say in its own affairs.

While lofty, this aspiration of the BRICS countries is definitely understandable and called for. For much too long now, emerging economies have continued to be treated largely as fringe players in the governance of the global economy. The clout enjoyed by these economies at the multilateral institutions has not kept pace with their growing economic standing. The changing economic realities have not reflected at the international institutions and hence, it is imperative for the key emerging economies to have their own mechanisms in place that could reduce their reliance on dictates from elsewhere and allow them to make decisions in their own best interests.

For instance, institutions such as the IMF and to a lesser extent the World Bank, have always provided economic assistance such as loans and grants with strings attached; and oftentimes, the conditionalities attached to this assistance have been onerous enough to have severe consequences on the development of local industry and economy. A development bank managed by developing economies hence has a nice ring to it. And a lot of potential.

What Durban will lead to is anybody’s guess. But even if the bank only manages to attain a few of its goals, the efforts to set it up will not have been entirely wasteful because these efforts signal to the world the emerging world’s desire to be in control of its own economic future.

(This was a column published in the Himalayan Times on 31 March 2013)