Weekend reading links

1. On top of opaque lending practices which have led to debt crises in many countries, it now emerges that poor quality of construction may be another problem with at least some of the Belt and Road Initiative (BRI) projects. Some samples,

Thousands of cracks have emerged in the $2.7 billion Coca Codo Sinclair hydroelectric plant, government engineers said, raising concerns that Ecuador’s biggest source of power could break down. At the same time, the Coca River’s mountainous slopes are eroding, threatening to damage the dam... In Pakistan, officials shut down the Neelum-Jhelum hydroelectric plant last year after detecting cracks in a tunnel that transports water through a mountain to drive a turbine... The head of the country’s electricity regulator, Tauseef Farooqui, told Pakistan’s senate in November that he was concerned the tunnel could collapse just four years after the 969-megawatt plant became operational...

Uganda’s power generation company said it has identified more than 500 construction defects in a Chinese-built 183-megawatt hydropower plant on the Nile river that has suffered frequent breakdowns since it went into operation in 2019. China International Water & Electric Corp., which led construction of the Isimba Hydro Power Plant, failed to build a floating boom to protect the dam from water weeds and other debris, which has led to clogged turbines and power outages, according to the Uganda Electricity Generation Co., or UEGC. There have also been leaks in the roof of the plant’s power house, where the generators and turbines are located, UEGC said. The plant cost $567.7 million to build and was financed mostly through a $480 million loan from the Export-Import Bank of China... In Angola, 10 years after the first tenants moved into Kilamba Kiaxi, a vast social housing project outside the capital of Luanda, many locals are complaining about cracked walls, moldy ceilings and poor construction. The project, built by China’s CITIC Group, was initially funded through a $2.5 billion, oil-backed credit line from the Industrial and Commercial Bank of China that was later refinanced by the China Development Bank.

2. Gillian Tett writes that 4% may be the new inflation norm for central banks.  

3. Business Standard writes about the demand-supply gap for dialysis in India,

Dialysis in India costs $25 a session compared with $300 a session in the US. India, however, with its high hypertension- and diabetes-prone population, remains a growing market for dialysis service providers. Every year, the country adds 600,000 to 700,000 patients in need of dialysis. Given that some 40 per cent die, the net patient addition is 350,000 to 400,000, which translates into an incremental requirement of 55 million dialysis sessions every year, more than double the current number of 21-22 million. The country has 50,000 dialysis machines, 5,000 centres for dialysis and about 3,000 practising nephrologists.

Clearly the demand-supply gap is large enough to keep the supply growing at high double digits for several years. Sample this

Vikram Vuppala, founder and CEO, NephroPlus, said the market will continue to grow at 20-25 per cent over the next three or four decades and predicts that the share of organised private sector players in the dialysis market — there are several mom-and-pop centres run by doctors — will increase from 21-22 to 40 per cent in the next five years.

I'm inclined to argue that such growth rates will not persist beyond a few years and what prevents that from happening are two-fold - affordability (demand-side) and entrepreneurship and capital (supply-side). 

4. NYT article on the tuition industry at Kota

“There are two types of students in Kota — rankers and bankers,” Amit Gupta, a coaching-center biology instructor, told me. “One ranker will attract thousands of bankers. This is our modus operandi. We are in the business of selling dreams.” By Gupta’s definition, rankers are students with the potential to get into elite colleges, while bankers, who are in the majority, are students whose ambitions outrank their capacities. “A ranker was always going to get selected,” Gupta told me. “If he gets good teachers, his rank may improve, but he was already capable of selection. The business model of the coaching industry relies on the banker. We show him a dream — ‘You can also become an I.I.T.-ian or a doctor’ — even though we know all along that he would never be selected because there are just not enough seats.”

5. Noah Smith makes a very interesting observation about the link between depreciating real estate prices in Japan and the country's practice of constant tearing down and rebuilding of property once every 30 years or so.

Japan’s fervor for constant scrap-and-build construction is a major reason why rent there is so affordable, and why local politics haven’t halted dense development as they have in the West... Because Japanese people don’t use their houses as their nest eggs, as they do in much of the West, there is not nearly as much NIMBYism in Japan — people don’t fight tooth and nail to prevent any local development that they worry might reduce their property values, because their property values are going to zero anyway. As a result, Japanese cities like Tokyo have managed to build enough housing to make housing costs fall, even as people continued to stream from the countryside into the city... Even more amazingly, Japan managed all of this while increasing the size of the average person’s home...

When property tends to depreciate, it means that houses don’t cost as much to buy in the first place; that lower price frees up household cash that can be put into stocks and bonds. Basing wealth on productive assets instead of unproductive land is good for the economy — housing scarcity might pump up prices and build individual wealth for homeowners, but at the national level it simply holds back economic growth. And as it turns out, it’s good for middle-class wealth as well — in 2022, Japan’s median wealth per adult was about $120,000, compared to around $93,000 in the U.S. (And this is despite the fact that Japan’s once-legendary household savings rate has collapsed!) So Japan’s somewhat unusual choice not to tie middle-class wealth to housing prices seems like a smart one. Over the past two decades, the country has done better in terms of housing policy, construction, landscaping and urbanism than just about any country in the West. And it did this by embracing constant change rather than the physical stagnation that has prevailed in Western cities.

Noah's post is a brilliant takedown of a goodbye article by BBC's long-time Tokyo correspondent Rupert Wingfield Hayes who characterised Japan as a society resistant to change. 

6. The Big Mac Index appears to show that the Rupee is among the most undervalued currency.

7. The Economist profiles "scripted one-size-fits-all instruction" offered by NewGlobe in public schools in Nigeria's Edo state,

The government has provided tablets and training to more than 15,000 teachers. They in turn have given the new lessons to more than 300,000 children, most of them in primary schools. On any given day pupils throughout the state receive identical lessons, as dictated by the tablet... The scripts enforce instructional practices that are routine in many rich-country classrooms but often neglected in poor ones. These include techniques such as pausing frequently to pose questions to the class, instead of delivering long lectures at the blackboard, or encouraging pupils to try to solve a problem by chatting to the child sitting next to them. 

Detailed, prescriptive lesson plans are also supposed to relieve teachers of the burden of having to write their own... In Edo, tablets register when teachers arrive. They can tell if a teacher has scrolled through a lesson faster than appropriate, or if they have abandoned one halfway through. Beneath lies a low-tech foundation: a team of officials—about one for every ten schools—that observe lessons and coach teachers, helped by data from the tablets... In the past few years the approach has been applied in Gambia, Ghana, Nepal and Senegal. One programme in Kenyan government schools helped push up the number of children reaching the national standard in English by 30 percentage points... teachers sometimes bristle at the constraints that scripts impose... 

Sceptics often come round, she says, when they see kids making swift progress... other expensively trained professionals, such as pilots and surgeons, also have procedures that they must follow to the letter. After some initial complaints (similar to those expressed by dubious teachers) such regimented approaches have become widespread in those fields. They help reduce mistakes, and spread better ways of doing things.

For school systems stuck at very poor baseline instructional quality and low learning levels, scripted pedagogy of the kind that the likes of Bridge International Academies did offers promise. 

8. Livemint has a fascinating set of infographics comparing budgets over the years on a host of variables.

9. Vivek Kaul has an excellent set of graphics on the changing nature of India's banking sector. Three graphics stood out for me. The first is the stagnation in banking sector credit.

The lending of banks has remained around 50-53% of the GDP since March 2009 (with 2020-21 being an exception due to covid-19), and deposits have remained between 67-70%.

Second, in a reversal of their lending targets, banks now lend out more to individuals than businesses.

Finally, the variation across states in credit to deposit ratios - the ratio of total loans given out in the state to the deposits mobilised from the state.

The interesting story in the list is that of Bihar. The credit-deposit ratio of the state has increased from 0.32 to 0.45. Further, the credit-deposit ratio of India’s most populated state, Uttar Pradesh, has barely moved up from 0.44 to 0.45. Andhra Pradesh, Tamil Nadu and Telangana have a ratio of greater than 1, implying that banks need to import deposits from other states in order to meet their lending requirements in these states.