Safety First!

We are in the midst of rainy season and very heavy at that, this year. There are reports and photos showing road formations and bridges damaged, villages destroyed, Sarpang market washed-out, traffic interrupted, people stranded and supply of essential items disrupted.  It is a natural calamity. People are panicking, worried and some even depressed. This is no time to put our heads down. Let us all keep our heads on our shoulders, keep spirit high and move on using our mind, belief, dedication and commitment.

In times like this I have seen in many places, time becomes very critical factor. Everyone will have their own account of losses because of disruption created by the natural calamity. Pressures to connect roads, rebuild bridges, resettle villagers, and relocate markets quickly build up. The authorities like to display their efficiency in handling emergency situation. This is no time to panic and make mistakes. The decisions should not be made making only time as the critical factor. We should prioritize safety above time. Let us not put lives at high risk to get things back on track haphazardly. So I say, SAFETY FIRST.

The critical areas where safety measures need to be implemented from beginning are roads and bridges. On roads and highways safety has to be ensured in two ways: (i) through technical measures; and (ii) traffic management & control.

(i)         Technical Measures

(a)  Ensure all structures are technically safe before opening the road to traffic.

(b)  Stability of bridge abutments is critical if temporary bridges are being launched.

(c)  Fresh cut areas need adequate formation widths and set back slopes;

(d)  Ensure water is drained out from the area as quickly as possible.

(e)  No unstable hanging rocks should be kept above the road.

(f)  After opening the road to traffic, constantly monitor the area by competent technical person for unusual soil and structural movements/behaviours.

(g)  The installation/construction  of road/bridge structures should be planned in such a way that (i) construction of permanent roads/bridges could continue without hindrances; and (ii) road workers are not put to high safety risk.

 (ii)  Traffic Management and Control (more critical where traffic volume is high)

(a)  To avoid traffic bottlenecks, traffic management & control plan should be prepared for controlling traffic from two points on both sides. The first point should be about 5 km before reaching the critical area, and second at the entry point of critical area.

(b)  Two way traffic should not be allowed on fresh cuts or on temporary bridges.

(c)  Bridge should take one vehicle at a time. Two or more vehicles should not be permitted on the bridge.

(d)  The traffic management & control plan should be widely circulated to public.

(e)  Vehicles should not be allowed to ply on critical areas during heavy rain.

Let us move ahead in one direction with much sense, not in multi-direction on panic-mode!

(These are not my off-the-cuff remarks and suggestions, but have come out of my experiences of handling disaster of national proportion in other countries as staff of the Asian Development Bank.)

Why do you think Jaigaon is booming?

The Bhutanese border town of Phuentsholing, our main commercial hub, and adjacent Indian town, Jaigaon, are separated by the main gate, few pedestrian entry/exit points, and the fenced partition. In 1980s when I looked down from Kharbandi hill-top, Phuntsholing was a vibrant town and Jaigaon just a strip at the tip of connecting Hasimara-Phuntsholing road. Since then Phuntsholing has now turned into Phuentsholing, and Jaigaon is a booming town, more like no. 3 city in West Bengal after Kolkata and Siliguri. Except for an additional ‘e’ and some Jaigaon-influenced growth, Phuentsholing has failed to serve effectively the rest of the nation. Jaigaon supports us with most goods and services, at heavy costs obviously. Why? Everyone’s perception is because it is so near to us that’s why. Wrong. Nearness is a factor but a lame reasoning why Jaigaon has become so important to us.

There are other important aspects along with proximity that puts Jaigaon at higher business echelon for its commercial boom. Proximity is a phenomenon, not an event or process, that happens due to strategic and other advantages (and our weaknesses?), not otherwise. The bad news is we may never be able to catch-up with Jaigaon (who says compete?). India is on its way to carry out structural reforms including introduction of new tax regimes such as goods & services tax (GST), bad bank loans clean-up and lure credible investors including FDIs, and also train its young population (65% of population is in less than 35 years age group) with an aim to supply to the world the productive Indian workforce, whereas we have nothing of the sort in plan, and not even looking forward to be on an economic dance floor. The contemporary examples below will give you some idea why sluggish Bhutanese private sector is dormant, and therefore Bhutanese entrepreneurs (will) find so very hard to catch-up with Jaigaon.

The reality is we have to import goods and services from India. Have we focused on framing smart policies, regulations and procedures centered around this reality to help make Bhutanese private sector vibrant for developing our economy? I believe, no, not at all. Without policy reforms focused on strengthening our own workforce and systems for economic development, parroting private sector as engine of growth is going to get us nowhere. And, we should not be big fan of miracles.

Broadly Jaigaon does business with Bhutanese in four ways, as: (i) an end-use seller, (ii) business to business (B2B) supplier, (iii) government proxy supplier through Bhutanese business to government (B2G) linkages, and (iii) service provider. They buy from other parts of India and sell direct to end-users and/or Bhutanese business enterprises in B2B set-up or through B2G links, and also provide services to both Bhutanese individuals and businesses.

Jaigaon is attractive to end-users as well as to businesses. The Bhutanese consumers find it beneficial for purchase from Jaigaon. The fact is consumer nondurable goods, motor parts, construction materials, electrical and electronic items and others are easily available and much cheaper in Jaigaon than in Phuentsholing. The Bhutanese are very price sensitive (not quality conscious as much) consumers. Therefore why shouldn’t one go there and buy? Let us take a look why it is advantageous through the angle of  the so called “ease of doing business” there and here.

Jaigaon has strong traditional-type supply chain: local, regional, national and even international (if rumours are to be believed). I have heard neither Bhutanese business houses nor the Government ever making solid efforts towards improving/strengthening Indian supply chain to benefit Bhutanese consumers. Naturally the Bhutanese business supply chains revolve around Jaigaon and its networks. They need Jaigaon help rather than being able to contend with it. So even B2B operations cannot bypass Jaigaon, except for some direct dealership of manufacturers.

For any import of goods from India, we need 7 invoices, yes seven. First, we need Proforma Invoice, based on which money is sent to supplier through Real Time Gross Settlement (RTGS) or bank draft. Upon receipt of the amount, goods are supplied that require 6 invoices: 1 for Indian customs, 1 Bhutan customs, 1 buyer, 1 for bank through which RTGS was sent, 1 more for Bhutan customs to process exemption certificate, and 1 copy goes back to supplier with buyer’s acknowledgment of goods. How many invoices will Jaigaon buyers require when they buy goods from other parts of India? Just two, one each for seller and buyer.

The payment to supplier through Real Time Gross Settlement or RTGS involves filling 2 forms, submitting an undertaking with a copy of citizenship ID and issuing a cheque. The “real time” transfer of fund from any Bhutanese bank to seller account in India takes 2 to 6 days depending on interest and efficiency of bank staff here and there. Sometimes it takes weeks. The Jaigaon trader can walk to the bank and deposit cash in supplier’s account real time.

The cost is the other important factor where two issues come into play: taxation and quality. Indian suppliers sell to Bhutanese on maximum retail price (MRP), with/without discounts (seller’s discretion). MRP includes Indian taxes, including value added taxes (VATs). Bhutanese import goods at MRP (minus small discount if any) and pay Bhutan sales tax (BST). Upon payment of BST, Bhutanese buyers apply for Indian tax Exemption Certificates that enable return to the Bhutanese buyers normally an amount of 14.5% of invoice value. Most of the Jaigaon suppliers do not accept Exemption Certificates issued by Department of Revenue & Customs (see below for the reason). Therefore Bhutanese consumers bear both Indian VAT (to the tune of 14.5%) plus BST.

The Bhutanese government bureaucracy is rusted and relaxed. It cannot make effort to see beyond imposing numerous (some outdated) rules and regulations. The Indian entrepreneurs are becoming innovative and globalized. They get goods manufactured all over the world and sell in India, after payment of applicable Indian import duty, as an Indian item with Indian rupee MRP but with label “ Made in (country of manufacture)”, e.g. “Made in Korea” for Hyundai spare parts. The Bhutanese have to pay import duty because of the label, even if it is imported from India. The fact that Bhutanese consumers have to pay double, Indian and Bhutanese, import duties and/or bear double taxation (Indian VAT+BST) are of no concern to our bureaucracy, because these are “as per the rules”. And, Bhutanese consumers do not come in the picture as far as government to government excise refund is concerned.

On quality, Jaigaon finds itself in a heavenly abode to supply spurious goods to Bhutanese. Jindal is an ISO 2001-2008 certified Indian company. Jindal corrugated galvanized iron (CGI) sheets (with its trade mark and ISI stamp) bought from Jaigaon corrodes in less than two years. Jaigaon suppliers know that Bhutanese cannot go back to take them to task for poor quality supply. They sell Jindal imitation at Jindal genuine MRP with discount (Jaigaon is expert in discount psychology), and do not accept Exemption Certificates because goods traded under shadow economy are not reflected in their books of account. Jindal is an example but you name it and they may have it. The GST (fingers crossed) may make such parallel economy disappear (hopefully).

The only area that has slight edge over Jaigaon is direct dealership of goods, the manufacturers/suppliers of which accept Indian tax Exemption Certificates issued by Bhutanese customs authorities, because of small tax advantage (14.5% in India against 5-10% in Bhutan), but not in any other terms. If the dealership is of product associated with after-sales-service, the advantage gets neutralized because of hi-fi sales with poor after-sales-services here.

How can any Bhutanese private sector possibly be price and quality competitive, play positive role and pass benefits onto Bhutanese consumers? And on top of all banks charge 14% interest (may be offsetting bad loans) on business loans compared with about 13% (which may come down significantly after bad loans clean-up) in India on working capital & term loans of Rs 25 lacs or less. Then...

There is no system of BST for services. Anyone can go to Jaigaon, and avail the services. I do not know anyone can or just doing it. The fact is Jaigaon fully encashes on poor quality of Bhutanese workforce and their low productivity, and our regressive imported labour policy. I believe there is no difference of opinion on workforce. The imported labour policy requires that all border towns employ non-nationals as day workers only, meaning they stay across the border and commute everyday to Bhutan for work. Let the institutional commitment, work ownership, organizational discipline, team work, labour control and management of Bhutanese enterprises be thrown out of the window. The workers commute everyday from Jaigaon for few years and then open their own businesses there that obviously has helped expand Jaigaon market. Jaigaon started with such people and Dadgiri (opposite Gelephu) is fast moving towards the capitalization (while we play around with our notion of one-half km land strip as national security buffer) which, for all you know, may accelerate after 19 May 2016. People go for services where good worker is, not where there is just a service. 

The rules do not apply when low calibre non-national skill-workers come into Bhutan under  work-permits and work as “thikedars” (proxy contractors). Jaigaon and its associates supply those “thikedars”. They need neither licences nor to pay taxes because they do not sign contracts. The immigration rule restricting the person to work in specific project for which the person has been recruited is mostly bypassed for the reasons known to regulators. The “thikedars” carryout multiple electrical, plumbing, painting, aluminium window or marble work contracts dictating their costs and terms to Bhutanese. They undertake such contract works under everyone’s nose. Can we not regularise award of such contracts to non-nationals making them follow country's rules and regulations and pay taxes if Bhutanese are not available or capable? I do not need to tell you which rule regulators apply -- "We have hundreds of electricians, plumbers and other skilled workers passed out from TTIs, and should get the works carried out by Bhutanese. Also award of contract to non-nationals are not permitted as per the rule.” The same illusionary lines that are repeated for years while the construction sector is exploited by unscrupulous elements. Everyone knows what the ground reality is! Why would anyone make an effort to regularize/systematize such award of electrical/plumbing contracts to non-nationals when people benefit from not doing it? As easy and simple as this!

The system is too loose and leakages far too many. The conservative imported labour policy refuses to trust Bhutanese entrepreneurs/investors on any account as far as non-national workforce is concerned. I still do not understand why the employers cannot be allowed to recruit non-national workforce as required and be made fully accountable with regard to their management, service utilization, and safe and secure habitation following the rules and regulations. The fact that it is the optimized blend of national and non-national workforce that stimulate economic activities and generate jobs, and also upgrades local skills is beyond comprehension of pseudo-regulators, and therefore not permitted "as per the policies/rules". What good is a policy/regulation/rule that revolves around comfort and convenience of regulators but is regressive to our own development, and therefore fails to serve Tsa-Wa-Sum (King, Country & People).

As long as standard of living is better on our side, the Jaigaon growth is imperceptible (is it also camuflaged?) or even if noticed it is not so much of an issue for most on this side. I wonder what would be the situation when the balance tilts on that side (may happen sooner than later). We may perhaps look back and say we knew North Korea, Laos, Cambodia, Myanmar, and New Guinea were east Asia's failed states, but not anymore because they now trade and interact with the world. It may, by then, be too late to ratify the Bangladesh, Bhutan, India and Nepal (BBIN) Motor Vehicle Agreement (MVA) and participate in BBIN economic zone, or to do anything of substance except watch Jaigaon pass by the window. The entrepreneurial spirit need solid support and encouragement. As of now I do not see any policy support forthcoming may be because as Upton Sinclair rightly said, ”it is difficult to get a man to understand something when his job depends on not understanding it.”

What I told young TVET participants

 Good afternoon young friends:

It is so nice to be here this afternoon in this beautiful campus of Technical Training Institute (TTI), Dekiling, talking to you, the young Technical and Vocational Education and Training (TVET) participants. Let us be very informal and exchange views: feel free to ask me any questions, relating to my presentation or otherwise, any time during the deliberations.

Let me briefly introduce myself. My name is Sangpa Tamang and I run my private business in Gelephu. I finished my college education in civil engineering from Indian Institute of Technology (IIT), Kharagpur, the prestigious institution now popularly referred as college from where Sunder Pichai (Chief Executive Officer of Google) graduated. After graduation I worked in Public Works Department (PWD) for 17 years. In 1990 I got a job offer from the Asian Development Bank (ADB) and worked there 20 years. I have worked in most of the Asian countries including 5 years in China.

I thank the organizers for inviting me to guest lecture TVET participants today. All of you are young and you have your beautiful life in front of you. I will try to be as simple as possible so that you can understand whatever I am trying to tell you today. I am not used to lecturing school students. I want you to carry with you THREE simple thoughts that may help you succeed in life. If you did not understand ask me follow-on questions.

FIRST, purse your dreams in the areas of your interest. Think hard,  make your brain work and find what interest you the most. I am not talking here about casual interest. I am talking about field or area which you are very passionate and day-dream about. It can be anything but your thoughts should mostly revolve around it all the time and you can keep your focus on it no matter what externalities you face in life.

By now I have interviewed around 40 young candidates.  The first question I ask is, “what is your aim in life or what do you want to become in life.” I have yet to receive very captivating answer. Most of the answers were ”it is up to you, sir.” I feel sad to hear such answer. The mind is blurred, and probably the brain has never been put to hard work.  What else can I say?

And, What can I say when I see young people sitting on road culvert at 5:30 in cold winter morning without even realizing where they are and what they are doing there? I can only say they are ruining their lives even before taking some shape. You tell me what kind of an impression I should carry with me about today’s youth when I see these in front my eyes. I am not trying to project unnecessary bad image of your seniors. You may go and ask any private business person what they think of today’s youth in terms of their mental agility, intellectual sharpness, and work interest and productivity.

I am sorry to say that the private sector impression about the youths is not positive. You have a big responsibility to change that impression. You have to come out with the razor-sharp brain and put us, the private entrepreneurs, on the edge. We will love that. We will be proud of you.  And for this you have to be the best in your field. We want the best, not average, not mediocre. To be the best you must work hard in the area that interest you the most. There is no shortcut to hard work.

When we are born everyone has same brain. If you make it work, your brain becomes sharp and if not it becomes dull. You make it work and think hard about your field of interest. There is no small or big job. Success largely depends on the level of your interest, passion and commitment to the profession. Even best of the colleges in the world cannot go against your passion and interest. So pursue your dream in the area that interests you most.

SECOND, having made yourself sure about the area of your interest value add to your knowledge and capability. You may not understand what value addition is at this stage. I want to explain you with an example. You must have open and fertile brain to add value.

Let us take an example of a manual worker who works day and night carrying bricks, stones, sand and doing other physical works. An open minded worker while carrying bricks, cement, sand will see how the mason is working. In few months he starts to lay bricks and make a simple wall, and in a year or so he will learn how to plaster the walls. With his enthusiasm and interest in the work the person will learn in few years more delicate works of laying tiles and marbles on floor. In 10 years or so he may become a civil works contractor with his thorough knowledge on the job. This is how you go on adding value to your profession.

For you, the participants, attending this TVET program is also an opportunity for adding value to your knowledge base. You will have so many opportunities to add value but you cannot go on a haphazard fashion in the name of value addition. You must add value in the area of your interest so that you become the best person in the field. You are then confident to compete in open market of not only Bhutan but outside as well.

THIRD, respect and value knowledge because those who do not have respect for the knowledge will have no basis for gaining knowledge. There is no harm in saying you do not know, no matter how simple an issue may be. How can a person know everything? If the other person knows more than you, respect the person’s knowledge. This will keep your mind in positive frame and you become receptive to more knowledge inputs.

I want to tell you a story about valuing knowledge. There was a huge industrial enterprise having machineries worth millions of dollars. An old technician was in-charge of running and maintenance of the machineries.  Old man retired. New technician was recruited. After a while one of their machineries broke down. The new technician could not repair it. Even after hiring mechanical engineers, the problem could not be rectified.

So they called retired technician to come and take a look if he could repair it. He came and inspected and marked “X” on particular part of machinery with a chalk. A component of the machinery where he had marked “X” was replaced and it started running. The old man was asked about his fee for his service. He said it was $50,000. People were shocked. Just for marking “X” with the chalk he was charging $50,000. He was asked to give detail breakdown. He put his billing as: (i) Chalk = $1 and (ii) Knowing where to put “X” = $49,999. And at the bottom of the bill was a note in small script: "Most valuable knowledge is gained through experience. Learn to value and pay for it." This is knowledge and its value. Without the chalk mark, the multimillion dollar machinery would have been lying idle.

So, remember the THREE points I told you today. These will help you succeed in life. Do not waste your time and life. These are too precious to be wasted casually. The skills gap right now between skills required by private sector and those that graduates have acquired is huge. I sincerely hope that the program like TVET will bring awareness in closing the skills gap. And you, all the TVET participants, will try your best in closing that gap. The jobs are there but only for those who can do the jobs!

At the end I want to leave you  with following question that was asked in one of the job interviews. You think it over and over and try to find correct answer to it. If you cannot, do not worry about it. It is a simple but tough one.

There are three boxes, one contains only apples, one contains only oranges, and one contains both apples and oranges. The boxes have been incorrectly labeled such that no label identifies the actual contents of the box it labels. Opening just one box, and without looking in the box, you take out one piece of fruit. By looking at the fruit, how can you immediately label all of the boxes correctly?

Now I am ready to answer your questions if you have any.

Q: Why did you decide to invest in workshop?

Ans: It is an auto center providing more comprehensive auto services. Our objective is to provide quality products and services and also show an example for other private sector investors to invest in service sector.

Q: How do you manage your work and family well?

Ans: My children are grown-up and independent. Our grandchildren are looked after by their parents on day-to-day basis. We only see that our grandchildren do not cross certain boundaries. My wife is mostly involved in religious affairs. So my family management is fairly simple. And, I do not consider my business as work. It is my interest.

Q: What kind of problem you face in your business?

Our problem mainly is relating to quality of manpower. We are not able to optimize our national vis-a-vis imported manpower mix for better productivity mainly because of the conservative non-national labour policy.

Q: How do you overcome labour dispute in your business?

Ans: In any organization if you make a conducive work environment then labour disputes are minimized. We try to see the interest of our workers and are working on our internal service rules in a fair manner. We are small with 26/27 workers and do not see any major labour disputes arising in future having made the working environment more conducive and secure.

Q: Tell us about the difference in your experiences of working in government, international organization and private.

Ans: In the government, there are responsibilities, powers and accountabilities. In my time we constructed Tsirang-Dagana road and also fixed alignment of Wandi-Tsirang road. We used to sleep in jungles for months to connect the road to Dagana on time so that first National Day in Dagana could be held. In international organization, you have to be above the rest in knowledge otherwise you cannot advise the governments on the subject matter. It is a very prestigious job. Everyone looks up to you for knowledge. You cannot let them down. In private I am down on ground. People call me jinda/ malik/uncle/achho/daju/sir. I have no problem whatsoever. Our customers range from taxi drivers to contractors to government organizations. We treat them all equal, as our valued customers that matter us most.

What power Hydropower

Bhutanese generally do not save, they spend more than they earn. They even borrow to spend. So national-debt-is-not-my-concern attitude of politicians, bureaucrats, private individuals alike is not really shocking. Is there any other way, other than hydropower, to service mounting Nu 120 billion credit that is on upward spiral? Which sectors have potential to service $2.0 billion equivalent loan: agriculture, manufacturing/industry and/or tourism? Credit, by itself, is not so much of a concern, if the country has capacity to make the most of the loan and service it. For us, it’s a huge “if”!

As per the Financial Times, Japan is the most indebted nation in the world with gross debt to GDP ratio of 245%. The figure is mind-boggling but the public still maintain calm. The Japanese government holds large amount of assets, therefore the net debt to GDP ratio goes down to 132%. And then Bank of Japan holds a large amount of Japanese government bonds which, in principle, can be held forever without having to worry about how it is going to repay. Then the net debt relative to GDP ratio goes even further down to 80%. Some have calculated as low as 41%.

Looking at our current standing on assets that can be beneficially traded/harnessed, we have no choice except to harness our hydropower. It is already almost like staking the futures of our children/grandchildren on hydropower. The arguments on “eggs in a basket” are redundant. We can only talk about our ability to smartly harness hydropower and move ahead securely. Yes, securely! Let us not make hydropower an issue for political gamble. Please, people of Bhutan and the region deserve better and we have to have high ability because the hydropower, in my view, is a high risk investment. I do not buy “cost plus” paradigm with the Government of India as risk covers, certainly not on account of the following.

First, can anyone (including experts from both countries intensely involved in power sector) tell us capacity factors of the Bhutanese run-of-the-river mega power plants down the line, say in 10, 15, 20 years from now, considering water-flow variations, seasonal as well as year to year, technological shortfall then and other human factors? The way we import power at the moment from India in winter gives us impression that the capacity factors of our power plants are low even now. The capacity factor risks can be mitigated to an extent by optimizing the sizes and types of hydropower plants. Why are we going ahead with mega run-of-the-river power projects with high capacity factor risks? Isn’t smaller run-of-the-river and reservoir power projects combination with high capacity factors the better option? In terms of energy storage, power plant efficiency and energy security, this combination is by far the better option. Shouldn’t capacity factor be one of the major considerations along with geotechnical, hydrological and environmental factors? What is the assurance that the run-of-the-river mega power plants will not be redundant in say 10, 15, 20 years when we consider snow and glacier melt runoff by then?

Second, we need to think ourselves as an open energy market player considering the regional (even global) power grid development. Then will our power be competitive in an open energy market considering that the energy profile of the world, including that of renewable energy in India, changes at a rapid pace? We better be aware of the open market forces in energy sector and prepare for the challenges. For instance, hydraulic fracturing (“fracking”) and horizontal drilling seem to be breaking the power of the OPEC to keep the oil price high. The brent crude is trading at $50/barrel from the high of $145/barrel in August 2008. Goldman Sachs says $20/barrel in future is a possibility.

Third, there are huge efforts for paradigm shift in urban energy systems with  distributed energy generators, also called energy servers, producing clean reliable, affordable electricity at site. Some even talk about grid electricity as fading trend in the new energy world. Will our power plants feeding the grids remain relevant through their economic life? Many power systems claim they generate electricity cheaper than the power companies for two main reasons. Firstly, their unmatched efficiency in converting fuel (e.g. fuel cell) to electricity, meaning systems producing significantly more electricity for the same fuel costs. Secondly, the ability to generate fuel at site eliminates the need for costly transmission and distribution infrastructure both physical and organizational. So much so that the savings typically are calculated to provide a 3-5 year payback on the initial capital investment on energy servers.

Fourth, we have to be absolutely sure about our hydropower policy and strategy, and transform the economic development pattern to resource, more specifically water-resource, based model. This may involve massive reforms including redirecting investments and entrepreneurs, and reforming, streamlining and cutting the civil service to size.  The civil service needs to be free from cronyism and corruption, and has to have strength to face, not hide, the reality on ground. Are we prepared to transform,  cut and clean? The pseudo-fanaticism piggy-backed on “cost plus” principle is bound to fall flat.

Fifth, key to above lies on the abilities of our current and future workforce that need to be highly educated and dynamic to take up the challenges posed by the massive economic shift. There is no denying that the quality of our workforce is the weakest link in the development process. The IQ level of our school children are low (anyone can verify this). Are we ready to reform education sector based on meritocracy as fundamental ideology and principle in the education system? The education system has to aim to identify and groom bright young students for positions of leadership. Leadership in energy is not an easy option. Children need to be taught manners, honesty, respect and responsibility. We may need to go beyond to teach softer skills such as collaboration, critical thinking and creativity. Critical factors for developing creativity in school include: (i) creating in the classroom an environment that support creative thinking and work; and (ii) teaching creativity skills and strategies explicitly and assessing in the context of academic learning. Misplaced priorities in education do not produce leaders of international level. Nationalism has its own place and should evolve through deeper sense of respect, knowledge and substance, not through parroting of catchphrases. The practices incubate superficiality, obliterates creativity, and let go public interest.

We either tighten our belts and work hard to take the hydropower issues head on or float on “cost plus” paradigm and bask on self-liquidation delight letting the open market forces squeeze in future the best out of us. The choice is with us!

The Growth Model

Our economic growth model seems an import-driven internal consumption-based pattern characterized by high credit growth and internal and external imbalances, and presumably heading towards resource based economy with assumption that manufacturing, as well as services, will no longer provide engine of growth. It is an easy-go model that requires no major effort to ensue. Basically beseech, borrow and spend (not even invest) brand that takes practically no account of  accountabilities for the financial recklessness, be it millions spent on domestic airports, education city, IT park, massive buildings and/or feeder roads of negligible benefits to the nation.

The economic growth model has to be supported by comprehensive plans. It should evolve fully responding to various challenges emerged as a result of detailed analysis of country’s  situation, strengths and weaknesses including people-sourced details. In formulating the model, it may even involve transforming the economic development pattern completely. Late Lee Kuan Yew said, "Well, we are pragmatists.  If in order to survive, we have to open up a sector, we open it up. Because the best test - the yardstick is, is this necessary for survival and progress? If it is, let's do it. We are ideology-free. What would make the place work, let's do it." 

Let us take the case of Bangladesh. With about $21 billion in exports in 2013 (80% of total exports) Bangladesh has become hot spot of ready-made garments (RMGs) producing mainly 5 items: T-shirts, sweaters, trousers, men’s and women’s shirts. There are more than 5,000 factories employing almost 4 million workers. Some experts forecast export-value growth of 7-9% annually and Bangladesh RMG market to touch $45 billion (about Nu 2.9 trillion, yes trillion) by 2020. Mind-blowing figure!

The main factors, among others, for Bangladesh RMG boom are: (i) strong and expanding backward linkage particularly for cotton items; (ii) domestic supply meeting 90% of fabric and 75% of yarn requirements; (iii) low labour and production costs (in time when increasing labour costs in China started to become an issue); (iv) easy and abundant access to skilled labour force; (v) flexible labour market laws and regulations; (vi) price competitiveness;  (vii) product diversification and upgrading; (viii) world standard and social compliances; (ix) courageous and bright entrepreneurs; (x) export friendly government policies; (xi) flexible financial market; and (xii) major push for image building and market promotion.

The Bangladeshis are working on improving transport infrastructure and energy supply, and reducing political unrest and strikes. The three main stakeholders — the government, suppliers, and buyers — work together. The government's top three priorities for investment are infrastructure, education, and trade support. It is clear, Bangladesh is on export-led development model and directs investment and entrepreneurs towards manufacturing exports. This is how they have been able to carve a $45 billion niche in the world market that involves even shifting RMG manufacturing base from China to Bangladesh. I envy them in an affirmative way!

A model is a conceptual framework devised to be used as a guide in making a diagnosis, understanding a developmental process, and forming a prognosis for continued future development direction of the country. It has normally five components: (i) the identifiable state describes the stage, level, phase, or period of the condition or process; (ii) the shift in state identifies qualities of change as progressive, sudden, abrupt, or recurrent; (iii) the form of progression describes patterns of development as linear, spiral, or oscillating, (iii) the  force that triggers the change or the step in development may be self-actualization or any form of stress, and (v) development is ultimately constrained by the fifth component, potentiality, the genetic and environmental possibility of growth.

It is not possible to have a dynamic economic growth model if the economy is mostly government-centric and does not enjoy the confidence of private  and non-profit sectors. That is what it is, and therefore step-by-step transformation of economy to the new growth model is prerogative. Plans drawn off the cuff and casual commitments with foot in the mouth by politicians do not work. The haphazard action plans/activities formulated on the back of an envelope not only distort  development resources and efforts streamlining,  but also stifles innovation, enterprise, and enquiry into cause and effect relationships. Without due attention to these it is impossible to interact with fiercely competitive world. Many with vacuum of ideology, principles, purpose and integrity may say why do we need to interact with the world? Many experts consider North Korea, Laos, Cambodia, Myanmar, and New Guinea as east Asia's failed states. Their one common characteristic: failure to trade and interact with the world.

As per Economic Development Policy (EDP), Bhutan’s economic development policy, guided by the overarching philosophy of Gross National Happiness (GNH), is based on the four pillars: (i) sustainable economic development; (ii) preservation and promotion of culture and tradition; (iii) conservation of environment; and (iv) good governance.

On sustainable economic growth alone, major challenges identified in EDP are:

(i)           Economy largely financed by external aid

(ii)          High fiscal deficit

(iii)         Weak balance of payment

(iv)         Mounting public debt

(v)          Difficult to sustain foreign exchange reserves as it is not built through exports

(vi)         Small domestic market

(vii)        Inadequate infrastructure

(viii)       High transportation cost

(ix)         Difficult access to finance

(x)          Inconsistent policies

(xi)         Lack of management skills

(xii)        Shortage of professionals

(xiii)       Low productivity of labour

(xiv)       Absence of R&D capability

(xv)        Access to land

The EDP recognizes that unless these constraints are systematically removed, the capacity of the private sector as the engine of growth cannot be enhanced. Heavy sentence!

Our competitive advantages identified in EDP are:

(i)          Political stability

(ii)         Peace and security

(iii)        A vibrant and living culture

(iv)        Natural and pristine environment

(v)         Geo-economic location and open access to the emerging Indian market

(vi)         Reliable and competitively priced energy

(vii)        Nation of GNH

(viii)       Wide use of English language

I suggest you to put the above pros and cons on an economic growth balance and see for yourself if these so called advantages can be classified as the country’s Unique Selling Proposition (USP), one that is expected to build on and to become Brand Bhutan. I will not go into geographical location that lacks credible reasoning to term as competitive advantage. The questions are, “Are we really up for export-led development model? Do we really want to lure credible FDIs to achieve our goal the way Bangladesh is doing?” The optimism displayed by our pseudo-idealists lack understanding how tough the mainstream FDI customers are! Credible FDIs do not do emotional investment. They look for opportunities and markets favourable to their businesses in the terms they dictate, if possible.

I am not disparaging EDP. We are in mid-2015 and the government statement of achieving minimum growth rate of 9% annually and striving to be a middle income nation by 2020 in EDP sounds hollow. It is not difficult to assess how much of efforts have gone so far into the Areas of Economic Opportunities identified in EDP to help generating wealth, employment and sustainable growth within the framework of GNH easing above 15 challenges. Surely, we cannot be taking things so casually once we put credibility of the nation in the forefront. Can we?

We are in high-voltage cloud computing age enabling to put-up apps in cloud storage, and do business or launch start-up. Those who do not realize value of internet, they can watch the world go by outside their window because you cannot eat pixels. The internet enables the use of the knowledge and power of community. Those who are not aware of this will eventually reach the point where they become a cubicle Jonestown devoid of anything resembling real-world logic.

Internet is the double-edged killer technology. The digitization not only benefit business in terms of product development and supply-chain management to sales and/or marketing, but also in providing straightforward information enabling people to interact among themselves facilitating benefits. It is possible to harness digitization benefits and the digitization process.

On the other hand it can ruin the foundational underpinning  with superficial use of information available in the net through application of shallow ideas and concept that are no longer relevant to the ground realities. We tend to be heading towards this syndrome. If you disagree with me, try talking to senior teachers how many shallow concepts and borrowed ideas have messed up the education system. Education is not alone. All most all sectors have applied policies and regulations that float because those are mostly square-pegs-in-round-holes. There are numerous ideas in the net that look good and can be downloaded free. These only help in framing superficial solutions sweeping under the carpet the real development dilemma and parroting frivolous nationalism. The problem is we suffer from doing things easy-way without analytical details to help structure development direction. Our inability or refusal to grasp in-depth knowledge of the structural problems, because we find conflicts of interest, will drive us to intellectual backlog deficit that will be of much bigger agony than any current account deficits. While the world's money is moving into the pockets of 25-year-olds with sexy ideas, our dated start-up engine does not fire because neither it has been retrofitted/modernized nor there is fuel.

In 1960, the American Economic Historian, W.W. Rostow, suggested that countries passed through five stages of economic development. According to Rostow development requires substantial investment in capital. For the economies of least developed countries to grow the right conditions for such investment have to be created. If aid is given or foreign direct investment occurs at Stage 3 the economy needs to have reached Stage 2. If Stage 2 has been reached then injections of investment may lead to rapid growth.

   

Rostow's Model - Stages of Economic Development

				Stage 5: High Mass Consumption   consumer oriented, durable goods flourish, service sector becomes dominant
			Stage 4: Drive to Maturity  diversification, innovation, less reliance on imports, investment
		Stage 3:Take Off               industrialization, growing investment, regional growth, political change
	Stage 2:Transitional Stage  specialization, surpluses, infrastructure
Stage 1: Traditional Society  subsistence, barter, agriculture

It is good to know the five stages of Rostow’s Economic Development model. I do not believe development ladder-steps are so structured and neat in reality. So we do not need to place ourselves on one of the Rostow treads. But there is no denying of the fact that one way or the other we need to climb the staircase for which a conducive environment for substantial investment in capital, both internal and external, is a prerequisite.

As of now I see two choices. Either continue status quo and head in the direction of east Asian nations mentioned above, or eliminate conflicts of interest in the areas of pursuing inclusive governance (such as, but not limited to, creating leveled playing field, exercising financial transparency, granting merit-based - rather than obeisance-rooted - reward and recognition, maintaining proper accountability, overhauling sectoral policies, regulations and procedures) and applying rule of law; and redirect the nation to proper economic growth model (even if it is resource based growth model). Unfortunately it is either/or. We need good alchemy!

Nepal Earthquakes

I could not walk pass some of the narrow gullies of Kathmandu,  without a thought about earthquake and feel of chill through my spine, looking how attached and fragile the houses were. I know the earthquake happens due to tectonic activity. But the earthquake disaster is a function of  tectonic activity, population size and quality of construction. Why were the authorities so indifferent that you almost feel like you are in three different countries while travelling around Kathmandu, Pokhra and remote villages of Nepal. That was my observation during our holiday there in January this year.  Sitting on top of major geological fault with one of highest urban population densities in the world (with population growth rate of about 6.5%) and dilapidated and fragile buildings all over, Kathmandu valley was clearly facing high earthquake risk. This, for smartphone era people with internet at their finger tips, is a general knowledge.

The Nepali villagers may say some things are beyond control. It was their karma. The tectonic activity is beyond anyone’s control but population density and construction qualities are man-made. The 1934 and 1988 earthquakes severely damaged Kathmandu with around 10,600 and 1,500 fatalities respectively. Life of human being is, at some point, touched by tragedy of some kind. I believe only those who accept this fact are more prepared to face it, for tragedy does not come with warning. How could the authorities not accept the facts of tragedies of such dimensions and get caught so unprepared? It is, in my view, the recklessness of ruling generations with neither a sense of responsibility nor accountability.

The devastation wrought by 7.8 magnitude on 25 April 2015 is hard to grasp. The official counts of dead are at least 8,046 people and injured more than 17,800 and adding. As per New York Times more than a quarter of the Nepal’s 28 million people have been affected. Entire villages remain buried under avalanches or landslides. About 75 percent of the buildings in Kathmandu are destroyed or are unsafe. We are close neighbour. Looking at these figures and images, our hearts ache. We prayed and did whatever we possibly could, and are still doing.

Looking around Kathmandu valley, people who survived may have just started to come out of the shock and feel little lucky. Lucky that it did not hit them hard. Lucky that the earthquake was during the daylight, during the night people would have been sleeping and who knows what would have happened. And that it was Saturday, when the children were not in schools. Also lucky that it did not happen during mid-monsoon or mid-winter.

As if not to let the Nepalese escape the trauma, another earthquake of 7.3 magnitude strikes Nepal again on 12 May 2015 followed by several aftershocks.  The government reported more than 100 deaths and 2,500 injuries.  Many would have said perseverance has limit. After the limit is crossed, what else can you do when the world is turned upside down? Thank God, Nepalese are more bold than one could imagine. If one Nepali rises in organizational hierarchy, pulling the person down is typical  Nepalese characteristic. But if in emergency, they fight and reach out to one another like no one else. They do not desert, as if to bear witness to the fact that true qualities of a being is tested during emergency. That probably shows bold Gurkha  chi with high resilience. The reason why PM Narendra Modi believes in the saying that “if a soldier says he is not afraid of death, he is either lying or he is a Gurkha.”

While the spirit may be strong, Nepal needs to fight the big battle, the battle to prevent cholera and other disease, speed-up relief operation to beat monsoon season which begins in about five weeks to provide tents and food to as many as 800,000 Nepalis whose homes are uninhabitable, and also quash  unscrupulous elements from becoming active in stealing properties, child trafficking, corruption  and other malpractices.

The big question now is, when will the Indian plate stop pushing Eurasia plate north-east causing unprecedented devastation in Nepal?  Will the Nepalese get over the search and rescue phase and move onto relief operation or they will be thrown back to digging survivors again? Some speculate that the thrust between the subducting Indian plate and the overriding Eurasia plate is moving eastwards, meaning towards Bhutan. The speculation may have been based on the fact that the epicentre has moved from west to east of Kathmandu valley. No one can predict earthquake. It does not come with warning. The fact is the Himalayan range sits on geological fault. The preparation now to face future earthquake will improve resilience and save many lives. 

And then moving on to rehabilitation and reconstruction phase, the longer-term challenge for Nepal is to rebuild shattered infrastructure and economy that may have been pushed back by a decade. Nepal is at a critical cross-road. It may look as an opportunity to rebuild better and do well, and rebound with Gurkha life-force. Or it may continue to remain a country bogged down by the caste-dominant power base ridden with corruption depriving other castes the benefits of sound governance and inclusive development. In Nepal they do not caste their votes, they vote their castes. If the Nepalese do not see opportunities to do well even after earth-shattering disaster, they may not see the light of the day for decades to come. Before that, situation may arise when the country may not be able to fulfill some of the basic conditions and responsibilities of a sovereign state (period). 

The Service Economy

         A service is owned, delivered, or sold but cannot be turned over by the service provider to the customer like the goods. It is an intangible commodity. Practically every product is associated with some type of service to it. The service delivery is commissioned by service provider to render service to the customer. The old dichotomy of product and service of the understanding that service provider referred to as only specific third party organizational sub-units and/or outsourced suppliers is being replaced with the new business model known as servitization of products. The servitization refers to the innovation of organisation’s capabilities and processes to better create value through a shift from selling products to selling product-service combination.

            Let us take an example of truck tyres. Instead of buying tyres, truck owners pay for the use of tyres (owned by tyre dealer) by kilometer tracked using GPS tracking units. Since the tyre is still owned by the tyre dealer, the truck owner returns the tyre to the dealer once the productive life of tyre is over. The truck owner need not worry about investment in, retreading and disposal of tyres. The business model aligns closely the interests of truck owners and tyre dealers. So it is servitization of tyres: the truck owner is paying for service not for the product. More classic example is the Rolls-Royce, the manufacturer of aero engines, selling by hour the power generated by their engine providing all support services including maintenance. The Rolls-Royce treats its business as service business, not seller of the aero engines. The service innovation moves on. Is our service sector moving forward or backward?

            In developed nations, services represent 70, 75, 80 percent of GDP. The service economy in developing countries is mostly concentrated in human services, hospitality, retail, health, education, telecommunication, information technology and financial services. Even in China, which we mostly think about manufacturing, infrastructure, mining and construction, services represent about 50 percent of the economy. In a low income country we can safely say it would be at least 50 percent of GDP. As the economies continue to develop, the importance of services grow because of the exponential increased demand for faster, more and better services.

            Even though service sector’s contribution to the overall economy is heavy, it is neglected and abused, and given low priority in most countries. And, when we talk about innovation, people typically think about product innovation, not innovation in providing services. Here, I can safely say that services have not changed at all over several decades. For instance, brick & mortar banks still provide services that are about 10 years behind time. The auto service sector is in dilapidated condition. The construction sector seems in back-gear. I see no change in retail experience in 1994 versus 2014. But twenty years ago, we were perfectly fine with “I’ll deliver it to you in a month, plus or minus a week.” Today, the clients expect you to deliver it in few days, plus or minus few hours. The quality and delivery of services count, and it will matter more as the economy develops further.

            We have to have business models that are effective and smart for efficient delivery of services. While we may be far behind the level that is required for servitization, the straightforward service efficiency has to come from not only business operation and management but also from business model that scales up or down: the service level has to adjust to the highly flexible demands. In a small country service market fluctuates at unprecedented level and is highly unpredictable. So service efficiency has to take account of high as well as low demands adjusting quickly and efficiently. Thus, when we start thinking about innovation, there is an instinctive reaction to consider adjusting the business model that changes with market, in other words it scales up or down quickly adjusting with the changing market demands. In the case of products the concept of scaling up/down through production levelling by volume through longer-term average demand works, but not in services.

            Unfortunately the government is too far behind to take cognizance of the need for rational support to the service economy enabling efficient private sector service delivery. Their mind is attuned to the idiotic pre-conceived notion that service sector makes money through unfair means. So its approach and attitude is limited to the practice of refuse-and-abuse as means for pursuing mainly their lead on what-is-there-for-me (and other category civil servants is busy fishing training abroad as almost a full-time job). Petty bureaucrats becoming tyrants (generally lead by immigration, revenue & customs, construction and other sectors) are not uncommon. It looks as if those bureaucrats know the weaknesses of their supervisors and therefore they treat themselves out of the supervisors' control which beget more greed for 'rewards' through corrupt practices. For those service providers who carve this-is-for-you slices for officeholders, the quality and delivery of services are non-issues because they are too preoccupied looking for mean means to make, without investing, money -- in coalition with corrupt individuals -- as quick as possible. It is a very counterproductive rogue private-public coalition that is almost impossible to apprehend.

            For instance, government invites tender for the product/service rates that should remain valid for one full financial year and does not mention the quantities of goods/services to be procured to suit themselves well. The government pool vehicle may go for repair with a work-order to a workshop whose arbitrary rates have been accepted for a year by the government tender committee. The vehicle may remain overnight in workshop and return next day with the repair bill. The workshop does nothing (neither mechanic nor spares are needed) but the repair bill is prepared, paid and shared. The workshop does not need to keep its book of accounts because it is covered by the exception (but generalized for the convenience of self-serving individuals, another major misplaced calling) under Rule No. 4.2 of General Provisions of Rules on Income Tax Act of the Kingdom of Bhutan (where lies, in my view, the root cause of corruption). No audit/anti-corruption unit can catch it. So why would you need time limits and quantities for submitting arbitrary product/service rates in the government tender?

            On works, the procedure for awarding contracts to lowest priced bid, treating technical and financial bid capacities at same footing once certain threshold is crossed, has failed. It has helped dubious contractors with questionable integrity to interface with shady bureaucrats for favours. As a result technical standards and specifications are sacrificed, technically qualified persons became redundant, institutions are weakened and sound investments in construction sector are eluded.

            So the service economy is a hotchpotch of policy muddle, capacity cocktail of national and non-national workers, operational imposture (aka fronting), corruption plinth, decayed milieu and/or shambolic bazaar. The service sector has to have credible capability to provide the customers best value for their money. It is devoid of new initiative, ideas, knowledge, innovation, sound policy/regulatory support and investment ingenuity for heading in the right direction. “If we are in the right direction, all we have to do is keep on walking,” says Zen Proverb. Nurturing service economy into the right direction is the issue, the BIG issue!

            The doctors, engineers, lawyers, accountants, managers, sales representatives, teachers, and other skilled professionals together serve as the engine of the service economy. If the service economy is disorganized from the core and the system undermines their value and technical knowledge, the professionals do not find enough functional space to perform with dedication and integrity. So where would the transformational driver of workforce change, away from present “casual culture”, come from? I wonder. I am not under foolish illusion that a chain is as strong as its strongest link. No sir, a chain is only as strong as its weakest link!