Kerala's way forward

By Vinod Thomas

Kerala is currently going through one of the hardest setbacks in economic performance. Most immediately, this economic downturn has been triggered by the price collapse for its agricultural exports. At the same time, lacklustre performance is not new when it comes the State's economic performance. Indeed, the striking fact about Kerala is that all its human resources and natural wealth - cornerstones to economic success elsewhere - have not contributed to an economic take off, if not a miracle, that similar resource-bases have produced in East Asian economies.

What might turn things around in Kerala? It's precisely crises such as the present one that have turned things around in countries from Malaysia to Korea, putting those economies on more sustainable paths. This is Kerala's chance to seriously rethink its development approach. The State has every possibility of succeeding. Yet, given the pace of progress outside the State, this also is the State's last chance.

On the one side, Kerala has achieved what most others find hard to achieve in terms of social progress - widespread literacy, equitable and broad health coverage, gender equality, improved life expectancy, poverty reduction, civil and political liberties, and a vibrant press. In fact, these dimensions already correspond to the International Development Goals for 2015 that the international development community has embraced.

On the other side, economic reforms have lagged to the point that the State is at the lower end of the list in terms of attracting physical investments (only about 1 per cent of India's total, including from the World Bank) and generating growth (even though remittances from abroad remain sizable). Despite its potential in higher education, other locations are considered preferred centres of learning, be it in the sciences or the arts. The climate for enterprise is such that the leadership in the IT area is with Bangalore, Hyderabad and Chennai, and not with Kerala. Despite its excellent potential and good progress in eco- tourism, the State has serious problems in the sustainable use of its natural resources such as forests, biodiversity and coast lines. The tragedy of the destruction of the wildlife park at Parashinikadavu or the killing of the leopard and tiger cubs in Palakkadu in North Kerala and the indiscriminate deforestation and the destruction of the coastal lines are not isolated events, but part of a pattern of destructive development that has not provided dividends elsewhere, be it Egypt or Indonesia.

What might be Kerala's best prospects of development that don't destroy its wealth but rather build on it? To see these possibilities, we must look at the true wealth of the State in its full range - from human resources to financial resources to natural resources. We must also pragmatically see what the prospects are for external collaboration, without undue fear of globalisation. The forces of globalisation are here to stay, and Kerala is not going to be able to change them.

Viewed this way, traditional and large-scale industry is not Kerala's answer, as it was not in several successful economies from Hong Kong and Singapore to Chile and Mauritius. Instead, a combination of IT-based small and medium enterprises, eco-tourism and the export of higher education (as opposed to export of educated people) would seem to hold the key for Kerala.

Going forward, a five-fold strategy would seem to be timely and effective for Kerala. First and most importantly, an attitude that welcomes development - as in Singapore or Korea - is most crucial. Kerala has a wealth of human and natural resources, but we need financial investments as well. This includes local as well as external investments. Rather than shunning them, we need to welcome such investments to kick-start the economy.

Second, we need to capitalise on the strengths in widespread education, which no other State or country can match. This provides a strong support for IT-based development which will have huge payoffs. But for this to become a reality, the State must announce and support an all-out programme of support for IT investments.

Third, we must capitalise on - and not systematically destroy, as is happening currently - the strong natural resource base. Eco- tourism has shown some early success - Kerala was featured as the preferred destination in London's Financial Times of January 13- 14. Environmentally-friendly, eco-tourism would be an obvious channel for Kerala to pursue.

Fourth, with appropriate investments. Kerala could also be a strong exporter of higher education. This requires a much greater focus in selected areas. We could draw lessons from Cuba's experience in reaching the cutting edge of biotechnology, allowing the small country to lead in the transformation of some of its wealth from the seas.

Fifth, while heavy industry would not seem to be neither practical nor essential, the development of a variety of agro and marine-based industries would help reduce the vulnerability to the current dependence on agriculture, in particular adding value to agricultural exports such as coffee, tea, rubber, pepper as well as the development of fisheries.

The issue now being discussed is how economic reform and economic progress can be welcomed and achieved without losing the numerous achievements in social progress - the reverse in the sequence of actions many other economies have been experiencing. While various examples indicate that economic progress and quantity are not sustainable without social and environmental progress and quality, Kerala's experience illustrates that the latter is not possible without the former either. Today, the state faces the challenge of the century to strike the balance in achieving social and environmental progress along with economic growth. It also is Kerala's unprecedented opportunity to succeed.

(The writer is World Bank Vice-President, The World Bank Institute)

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