One-stop shop to make India 20 times richer

Category: Economics

The need for (almost entirely) private ownership of infrastructure

Someone asked me about SBP’s manifesto: It’s not clear to me how creation and maintenance of infrastructure would be achieved in building/maintenance of roads or airports?

MY RESPONSE

First, read the whole section carefully:

Government to facilitate/regulate, and only rarely directly build infrastructure

It is sometimes taken for granted that infrastructure should be created and maintained only by the government. But even infrastructure should be subject to the laws of market and private initiative. Inefficiency and waste resulting from unnecessary government involvement has resulted in severely stunted infrastructure in India. Our railways, roads and energy deficits are a serious bottleneck to economic activity.

Wherever possible, we will hand over the creation and maintenance of infrastructure to private initiative and subject it to the normal laws of markets. Except in the rarest of cases, the direct construction and maintenance of infrastructure by government departments will be brought to an end. Even in areas of potential monopoly such as water, sanitation and laying internet cables, we will advance significant private sector involvement under regulatory oversight. We will also support high speed rail networks where these are economically self-sustaining and without taxpayer subsidy.

Where competitive ownership and/or management of infrastructure by the private sector is not feasible, we will procure work from private vendors through competitive bids, with accountability of relevant public sector managers to deliver results at more competitive rates.

Some local infrastructure will continue to be built through work created as part of emergency relief, although such emergency situations are likely to be fewer in the future, given our social insurance scheme which will kick in for those impoverished through natural calamities.

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Well, the first question: should always be: why should government be involved in this (or that) activity in the first place.

Almost all infrastructure in the world was ALWAYS built by the private sector in the first instance. Study some economic history. Almost all railways, all buses, all airports, all airlines, all power stations, even water supplies. It is only later that governments decided to step in and meddle. In some cases they improved things, in most cases they harmed the entire society.

Vast swathes of roads across the world (generally toll roads) are built and managed by the private sector. Japan’s famed train system is privately owned. Electricity generation, distribution and retail is entirely privatised in Victoria, where I work (in the USA the idea that government would produce electricity never even came into question. ALL power plants in the USA (including nuclear plants) are privately owned. Water is privately owned in the UK. Vast dams and irrigation facilities are privately owned in Tasmania. All major airports are privatised in Australia (and I’m sure in most parts of the world).

ANYWHERE, where it is possible for a private operator to put a barrier around a service (e.g. train/ airlines/ water/ electricity) and charge for specific use, it is possible to fully privatise – in some cases under regulatory oversight to minimise the effect of monopoly ownership.

Where there is some difficult (e.g. most roads), the government probably needs to play some role (but not all: merely a facilitator).

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Jayant Bhandari’s prediction for the mining sector in India – the pits

I quote from here. This is consistent with my many writings on this subject. It is GROSSLY inconsistent with bootlicker Gina Rinehart’s assessment of Modi (see my FB post).

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Recent reports on India’s courting of private investment to raise $15 billion over five years “to double mining output and cut mineral imports” as it strives to boost domestic manufacturing under Modi’s landmark ‘Make in India’ drive, have been accompanied by India mines minister Piyush Goyal’s push to increase mineral exploration spending. The government wanted to boost exploration spend, “partly through taking upfront payments for discovered deposits when the mines are auctioned”, Bloomberg reported.

Global consulting group McKinsey has observed that without “accelerated growth in mining” India will rely heavily on imported raw materials to supplement local supply into its manufacturing sector, with increased forex spending on thermal coal, coking coal and iron ore alone reaching an estimated $58 billion, “a staggering 180% of today’s current account deficit”. Domestically, McKinsey says, “the Indian mining sector has been a success story in waiting for decades”.

“The mining industry could contribute an additional US$125 billion to India’s output and $47 billion to India’s GDP by 2025,” it says.

Bhandari is typically blunt in his assessment of recent public statements from Indian government leaders.

“In a very Orwellian sense this is good news for the international commodity prices. India … is incapable of ramping up its mining output. In fact, over the last 15 years when the world was rapidly ramping up its commodity production and increasing its exports to China, India was turning it down.

“There are simply no institutional capacities in India that make the ramping up of production of commodities possible. It is for this reason that despite having among the largest coal reserves, India imports from Indonesia and Australia, and these imports are growing.

“There is always hope for India. And they always stay hopes. Indians loves talking but avoids walking.

“Doing business in India is impossible enough, mining is much more difficult.

“The [mines] minister and Bloomberg should have at least used their calculators before writing and talking about [the investment required to double domestic mining output]. The US$3 billion per year [over five years] is about 0.0017% of the Indian GDP. US$3 billion is equivalent to just over US$2 per Indian, small change even for a poor country like India.

“If this amount could really double Indian mining output, it could be found from many places internally. A mid-sized mining company could single-handedly supply such an investment.”

And on the hoped-for recovery of advance payments for mineral exploration tenements, Bhandari was quizzical: “Corruption, planning and confused thinking is part and parcel of public servants in India. Would you give advance payment to India for minerals?

“I can think of no sane company that will do so.”

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Some details about the government-owned Singaporean education system which produces superlative results

We saw key points regarding Singaporean education system here:

in Singapore meritocracy reigns all the way down the system. Teachers, for instance, need to have finished in the top third of their class (as they do in Finland and South Korea, which also shine in the education rankings). Headmasters are often appointed in their 30s and rewarded with merit pay if they do well but moved on quickly if their schools underperform. Tests are endemic.  [source]

Here’s some more detail – from an OECD report. The question I’m trying to resolve is how PRECISELY does Singapore manage incentives in a manner to get stupendously high quality outcomes in many fields, despite government ownership. They have clearly mastered Chanakya’s Arthashastra.

EXTRACT FROM OECD REPORT

Singapore has developed a comprehensive system for selecting, training, compensating and developing teachers and principals, thereby creating tremendous capacity at the point of education delivery. Key elements of that system are described below:

  • Recruitment: Prospective teachers are carefully selected from the top one-third of the secondary school graduating class, by panels that include current principals. Strong academic ability is essential, as is commitment to the profession and to serving diverse student bodies. Prospective teachers receive a monthly stipend that is competitive with the monthly salary for fresh graduates in other fields. They must commit to teaching for at least three years. interest in teaching is seeded early through teaching internships for high school students; there is also a system for mid-career entry, which is a way of bringing real-world experience to students.
  • Training: All teachers receive training in the Singapore curriculum at the National institute of Education (NiE) at Nanyang Technological university. They take either a diploma or a degree course depending on their level of education at entry. There is a close working relationship between NiE and the schools, where all new teachers are mentored for the first few years. As NiE’s primary purpose is training all Singapore teachers, there are no divisions between arts and sciences and education faculties. Thus, according to Lee Sing Kong, the conflicting priorities that plague many Western teacher education programmes are less significant and there is a stronger focus on pedagogical content. NiE has put in place a matrix organisational structure whereby programme offices (g. office for Teacher Education) liaise with individual academic groups in drawing up initial teacher training programmes. This means that these programmes are designed with the teacher in mind, rather than to suit the interests of the various academic departments. As such, there is a stronger focus on pedagogical content and greater synergies among modules within each programme.
  • Compensation: The ministry of Education keeps a close watch on occupational starting salaries and adjusts the salaries for new teachers to ensure that teaching as seen as equally attractive as other occupations for new graduates. Teacher salaries do not increase as much over time as those in private sector jobs, but there are many other career opportunities within education for teachers. Teaching is also regarded as a 12-month position. There are retention bonuses and high-performing teachers can also earn significant amounts in performance bonuses.
  • Professional development: in recognising the need for teachers to keep up with the rapid changes occurring in the world and to be able to constantly improve their practice, they are entitled to 100 hours of professional development per year. This may be undertaken in several ways. courses at the National institute of Education focus on subject matter and pedagogical knowledge and lead towards higher degrees or advanced diplomas. Much professional development is school-based, led by staff developers. Their job is to identify teaching-based problems in a school, for example, with a group’s mathematics performance; or to introduce new practices such as project-based learning or new uses of icT. Each school also has a fund through which it can support teacher growth, including developing fresh perspectives by going abroad to learn about aspects of education in other countries. Teacher networks and professional learning communities encourage peer-to-peer learning and the Academy of Singapore Teachers, was opened in September 2010 to further encourage teachers to continuously share best practices.
  • Performance appraisal: Like every other profession in Singapore, teachers’ performance is appraised annually by a number of people and against 16 different competencies. included in this Enhanced Performance Management System is teachers’ contribution to the academic and character development of the students in their charge, their collaboration with parents and community groups, and their contribution to their colleagues and the school as a whole. Teachers who do outstanding work receive a bonus from the school’s bonus pool. This individual appraisal system sits within the context of great attention to the school’s overall plan for educational excellence, since all students in Singapore have multiple teachers, even in primary school.
  • Career development: Throughout Singapore, talent is identified and nurtured rather than being left to chance. After three years of teaching, teachers are assessed annually to see which of three career paths would best suit them – master teacher, specialist in curriculum or research or school leader. Each path has salary increments. Teachers with potential as school leaders are moved to middle management teams and receive training to prepare them for their new roles. Middle managers’ performance is assessed for their potential to become vice principals, and later, principals. Each stage involves a range of experience and training to prepare candidates for school leadership and innovation.
  • Leadership selection and training: Singapore has a clear understanding that high-quality teaching and strong school performance require effective leaders. Poor quality leadership is a key factor in teacher attrition in many countries (Ng, 2008). Singapore’s approach to leadership is modelled on that found in large corporations. The key is not just the training programme, but the whole approach to identifying and developing talent. This differs from the US or UK approach, for example, in which a teacher can apply to train as a principal or school head, and then apply for a position in a school. in Singapore, young teachers are continuously assessed for their leadership potential and given opportunities to demonstrate and learn, for example, by serving on committees, then being promoted to head of department at a relatively young age. Some are transferred to the ministry for a period. After these experiences are monitored, potential principals are selected for interviews and go through leadership situational exercises. if they pass these, then they go to NiE for six months of executive leadership training, with their salaries paid. The process is comprehensive and intensive and includes an international study trip and a project on school innovation. Only 35 people per year are selected for the executive leadership training. Asked why Singapore uses the “select then train” rather than the “train then select” model, Professor Lee Sing Kong said that while the US/UK approach is feasible, it carries a higher risk. Singapore is very confident that they consistently have the best possible leaders for their schools and that there is a wide range of inputs into their selection. Principals are transferred between schools periodically as part of Singapore’s continuous improvement strategy.

By putting its energy in the front end of recruiting high-quality people and giving them good training and continuing support, Singapore does not have the massive problems of attrition and persistently ineffective teachers and principals that plague many systems around the world. Teaching has developed into a competitive and well-regarded occupation. it is also now considered to be an honour to be a teacher in Singapore.

 

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The key features of the Singapore bureaucratic model in a three paras – from The Economist

Continuing from here.

One thing that stands out in Singapore is the quality of its civil service. Unlike the egalitarian Western public sector, Singapore follows an elitist model, paying those at the top $2m a year or more. It spots talented youngsters early, lures them with scholarships and keeps investing in them. People who don’t make the grade are pushed out quickly.

Sitting around a table with its 30-something mandarins is more like meeting junior partners at Goldman Sachs or McKinsey than the cast of “Yes, Minister”. The person on your left is on secondment at a big oil company; on your right sits a woman who between spells at the finance and defence ministries has picked up degrees from the London School of Economics, Cambridge and Stanford. High-fliers pop in and out of the Civil Service College for more training; the prime minister has written case studies for them. But it is not a closed shop. Talent from the private sector is recruited into both the civil service and politics. The current education minister used to be a surgeon.

Western civil services often have pretty good people at the top, but in Singapore meritocracy reigns all the way down the system. Teachers, for instance, need to have finished in the top third of their class (as they do in Finland and South Korea, which also shine in the education rankings). Headmasters are often appointed in their 30s and rewarded with merit pay if they do well but moved on quickly if their schools underperform. Tests are endemic. [Source]

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A not-so-useful additional piece of information regarding Singapore’s governance system

Continuing from here, this is an extract from: Governance and Bureaucracy in Singapore: Contemporary Reforms and Implications – M. Shamsul Haque, International Political Science Review, Vol. 25, No. 2 (Apr., 2004), pp. 227-240

Unfortunately, the article is pretty superficial and doesn’t get to the bottom of the governance system details. Nevertheless, it may be helpful as part of a broader analysis I hope to undertake in the coming weeks/ months (time permitting).

Btw, the incapability of “economists” in analysing the governance machine is what I mean when I say that most “economists” are very superficial.

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First, although Singapore inherited the same British model of governance as other Commonwealth states, its governing system has become widely known for efficiency and competence, especially in terms of its role in generating an “economic miracle.

the Singapore government has adopted some major components of business-oriented public administration (sometimes called the “new public management”) which evolved in the advanced capitalist nations during the 1980s and 1990s (Haque, 2001). In general, the two main components of this business-oriented public management are the disaggregation of various ministries, departments, and agencies into autonomous executive agencies with greater autonomy and the delegation to these autonomous agencies of financial and managerial authority for formulating and implementing programs based on final results or outcomes, rather than inputs and processes (Haque, 2003).

 

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