the green devolution

India's population is growing faster than farm output, threatening one of its most prized achievements.


By Jason Overdorf
Newsweek International

Sept. 4, 2006 issue - The Furnace Australia sailed into Chennai last month carrying a load of wheat and, some warned, ill tidings. India's first wheat imports in six years marked a reversal in the march toward "food independence" that the country began in the 1970s. To M. S. Swaminathan, one of the agronomists credited with sparking the so-called Green Revolution, the return of grain imports should be seen as "a wake-up call" for a country that has in recent years taken its ability to feed its people for granted.

Though India's government officially dismissed the return of grain imports as a passing event, Swaminathan and other experts saw it as the latest sign of a long-term decline. The growth rate of grain production has fallen from 1.5 percent before 1995 to 1 percent today, due to a combination of bad management, unpredictable weather and a growing water shortage. Meanwhile, the growth rate for all crops has fallen to 1.25 percent a year, the lowest level since India gained independence in 1947, says Ramesh Chand, acting director of India's National Centre for Agricultural Economics and Policy Research. That's too slow to keep pace with a population now growing, according to United Nations estimates, at a rate of 1.5 percent a year. Chand says the threat to India's food independence is manageable, if the government makes the right moves.

These are sobering indicators for the Green Revolution, which was originally inspired by grave threats to the food supply in India. After back-to-back droughts put the country in danger of massive starvation in 1966, a U.S. presidential-advisory commission called for an "effort unprecedented in human history" to raise farm output around the world. And so it did, as scientists produced new strains of rice and wheat that boosted yields by a factor of five, with the help of heavy irrigation and applications of chemical fertilizers and pesticides. In India, an initially well-executed campaign raised grain output from 82 million metric tons in 1960 to 176 million tons in 1990 and cut imports to zero by 2000. That is, until the trend reversed last month.

Now production gains are slowing as the water supply dwindles, overzealous use of fertilizer and pesticides taints the soil and excessive irrigation waterlogs the land along canals in the showpiece states of India's Green Revolution, like the Punjab and Haryana.

Because irrigated land is two and ahalf times more productive than rain-fed land, many of the gains of the Green Revolution were produced by an increase in the area under irrigation. But as India's population and economy grow, water supplies are shrinking. Already, the World Bankestimates, India meets most of its irrigation and household demand by tapping groundwater—a practice that is "no longer sustainable."

Similar threats haunt China and other developing nations that were big beneficiaries of the Green Revolution. China has responded by relaxing its commitment to being completely self-sufficient in the production of food—encouraging farmers to grow more lucrative fruits and vegetables, while importing wheat and soybeans. To free-trade advocates, this approach makes sense—why obsess over "food independence" in an increasingly global free market, if others grow wheat more efficiently than you do? Focus on the goods, agricultural or not, that you grow most efficiently.

Indeed, when Indian Prime Minister Manmohan Singh called in January for a "second Green Revolution," his concern focused on raising farm incomes, not securing the food supply. He called for a fresh emphasis on fruits, vegetables and new plant varieties that would command higher prices in export markets. He also encouraged measures to harvest rainwater more efficiently, improve the soil and spread the benefits of agricultural technology, including genetically modified seeds.

But the basic position of the Singh government is that India normally produces more grain than it consumes, and soon will again. As for the recent return to imports, officials dismissed it as a procurement snafu: this year, for the first time, India allowed private buyers, including multinationals, to buy wheat directly from farmers. That helped push up prices, and the government responded by refusing to match the prices offered by private buyers. It wound up buying less wheat than usual for the federal program that provides subsidized grain to 150 million poor Indians. When supplies fell short, the government had to turn to imports—temporarily, officials insist.

Critics argue that Singh and his government are missing the big picture. Farm-policy analyst Devinder Sharma complains that "the people who govern this country believe technology is the answer to every problem," and are pushing a second revolution without examining why the first "has collapsed." Chand says the key going forward is to target backward states like Bihar and Madhya Pradesh, which have done little to modernize their farms, and thus have "huge potential" to reverse the slowdown in output.

One reason for these problems is that over the past decade India, as part of its effort to reduce the state role in the economy, has cut back significantly on investment in farms. Public-sector investment fell from just over 2 percent of agricultural output in 1991 to less than 1.5 percent in 2001. That slashed funds for upgrading Green Revolution technologies and for the extension programs that teach farmers how to make it all work.

By the late 1980s, when the early gains made in rice and wheat had slowed, India attempted to extend its success to pulses (peas and beans) and oilseeds. Though it did manage to produce high-yield seeds, the program failed to supply enough of these seeds to farmers, and poor oversight allowed corrupt traders to pass off ordinary seeds as high-yield hybrids, says Delhi University agricultural economist Usha Tuteja. With its vegetarian tradition India is the world's largest consumer of protein-rich pulses, but now ranks near the bottom in the production of these crops.

Swaminathan urges leaders to focus on what he calls an "evergreen revolution." The goal would be to correct the damage wrought by the first Green Revolution: adoptingnew methods like the use of natural predators instead of chemicals to eliminate pests, and switching to organic fertilizers and more efficient drip irrigation. He also says Singh should promote crops that require less water, including native Indian grains such as finger millet (ragi), pearl millet (bajra) and sorghum (jowar).

That's a tough sell for two reasons: these coarse grains, once a staple of regional Indian cuisines, have fallen out of style since the first Green Revolution made wheat cheap and plentiful. So restoring their popularity will take a major marketing push, of the kind governments rarely do well. Second, Singh sees India very differently from the critics, as a nation fighting to attain middle-class comfort, not one at risk of sliding into mass hunger. Watch the future voyages of the Furnace Australia, and whether it is carrying grain to India, for one strong sign of which view is right.
© 2006 Newsweek, Inc.

URL: http://msnbc.msn.com/id/14535864/site/newsweek/
© 2006 MSNBC.com

sexing up science

Western educators and industrialists team up to boost engineering's appeal.

By Mac Margolis and Karla Bruning

Newsweek International

Aug. 21-28, 2006 issue - With his unkempt hair, halogen smile and soft spot for Tamil poetry, A.P.J. Abdul Kalam is not your ordinary national figurehead. The diminutive 74-year-old Indian president seems more like a self-help guru than India's leading technocrat. Though his job in this parliamentary nation is largely ceremonial, Kalam, a newspaper boy turned aeronautical engineer who stewarded India's guided-missile program, has made it his mission to raise his country to glory through scientific scholarship. He travels from school to school, exhorting students to hit the books and excel at science. If they do, he promises, India will be a fully developed nation by 2020. His mantra: "Dream, dream, dream."

By all indications, the budding scientists of India—and elsewhere in the developing world—have taken that advice to heart. Enrollment is soaring at engineering and technical schools throughout Asia. India claims to produce more than 300,000 engineers a year—three times the number in the United States. By some estimates, China turns out twice as many engineers as India, while South Korea produces nearly as many engineers as the United States with one sixth the population. Skeptics say the numbers are exaggerated. But even discounting for official hype and inconsistent academic standards, it's hard to miss the new geography. Legions of engineers from Asia's emerging-market nations are vying for—and winning—contracts, customers and patents in an increasingly competitive global marketplace. According to a recent report by Booz Allen Hamilton and Nasscom, India's IT-industry trade group, the offshore engineering industry is expected to surge from between $10 billion and $15 billion today to between $150 billion and $225 billion in 2020. India alone is poised to grab a quarter of the market.

And that's exactly why educators in the wealthiest countries are losing sleep. True, the United States, the United Kingdom and Germany—the three engineering titans—still lead the way in technological innovation. A recent study by Duke University showed that while developing countries often inflate the numbers of science scholars, the United States still employs nearly a third of the world's science and engineering researchers, publishes 35 percent of science and engineering articles and generates 40 percent of research and development spending. But in middle and high schools, where the spark of scientific curiosity begins, the majority of students can't be bothered to take advanced math or physics. Enrollment in university engineering programs is stagnating; the dropout rate for graduate engineering students is a whopping 45 percent. "We have a choice: do we want Britain to become a theme park or a hub of business activity?" James Dyson, the British inventor cum entrepreneur, wrote recently in The Sunday Times. "We are on course to shuffle into a sort of residential home for retired great powers."

Now Western educators are shifting their focus from what went wrong with engineering to how to fix it. They are most troubled not by the shortfall of new scientists but by their plummeting caliber of scholarship. Even those who make it through engineering school are not always well prepared; the pharmaceutical giant Sanofi-Aventis says it often has to retrain science graduates in the company laboratory.

Some institutions are trying to present students with more real-world challenges early on. In planning its curriculum, Dyson's new School of Design Innovation—scheduled to open in Bath, England, in 2008—has teamed up with companies like Rolls-Royce and Airbus to work practical design and innovation problems into the coursework. Other schools are drafting students into community service. Duke University's Pratt School of Engineering dispatched one group of undergraduates to Indonesia to help shrimp fishermen devastated by the 2004 tsunami by building a manually operated aerator for hatchery ponds. Duke junior Lee Pearson spent a month in Uganda for a clean-water project, using a clothes iron to seal water samples and building an incubator out of cardboard and Styrofoam.

Being in the field "teaches you to be flexible and ruthlessly creative," says Pearson. Indeed, Richard K. Miller, president of Franklin W. Olin College of Engineering in Massachusetts, which graduated its first class in May, says it's crucial to get students to think "outside the box" and work in teams. "Our future doesn't depend on producing more engineers than China. [We] need more innovators," he says. "Engineering is about invention." A number of Olin graduates have parlayed classroom projects into award-winning business plans. One student, in partnership with his grandfather, launched an inter-national company that designs, manufactures and sells supportive seating for meditation.

At younger levels, industries are going out of their way to make engineering—and its components, math and science—more appealing. The Society for Women Engineers recently launched "Wow! That's Engineering?" a high-tech hands-on program that invites middle-school students to play games with gravity, motion and sound. The campaign is aimed especially at young girls, who traditionally have been conditioned to think of math and science as guy stuff—one of the reasons, perhaps, that only 11 percent of working engineers in the United States are women. Another program, "FMA Live! Where Science Rocks," sponsored by Honeywell Hometown Solutions and NASA, sends troupes of hip-hop artists and other professional entertainers into U.S. high schools and colleges across the United States to stage "interactive" skits and demonstrations of basic physics. (FMA stands for Isaac Newton's second law of motion: force equals mass times acceleration.) One routine launches a hapless school administrator across a stage in a futuristic hover chair to collide with a giant cream pie—all in the name of showing the laws of action and reaction. Is it education or show business? "Our culture has changed profoundly," says Tom Buckmaster, president of Honeywell Hometown Solutions. "We have to think of students as you would potential customers, and discover what turns them on."

Behind the hocus-pocus is the conviction that engineering has long had a bad rap. "The misperception of science and engineering jobs as geeky, dirty and dull puts off young people from a bright, exciting and profitable future," says Dyson. That's a stark contrast to the developing world, where science and technology are considered the keys to progress. "When I go to Seoul or Hong Kong, I see signs everywhere for nanotechnology, biotech labs and IT firms," says Florence Hudson, a space engineer and vice president of marketing for IBM. "The developing world's students are hungry for technology. We are not."

Whatever helps break down that resistance, say the experts, is worth trying. "It's an incredibly sexy time to be an engineer," says Kristina Johnson, dean of the Pratt School of Engineering. "Think of the problems science has to solve, like global warming, public transportation, communicable diseases. Yet we still do not have a cadre of professionals prepared to solve them." Engineering's toughest challenge may be to reinvent itself—and the work has just begun.

With William Underhill in London, Jason Overdorf in New Delhi and Corinna Emundts in Berlin

© 2006 Newsweek, Inc.

this rampart is rising

In many nations, class barriers to college are growing.
By Rana Foroohar
Newsweek International

Aug. 21-28, 2006 issue - When students take to the streets, they're usually united against something like war or racism. But when Indian students took to the streets last May they had a different cause. These were children of the wealthy upper castes out to stop a plan to reserve more university places for their peers from poor and lower-caste backgrounds. This was youth versus youth, and they were fighting for the status quo.

Resistance to social-leveling campaigns in higher education isn't limited to India. When a top French Grande Ecole—alma mater of presidents and prime ministers—began giving preferential treatment to poor students, there was an outcry from the upper classes. In Britain, there are fears that efforts by top-tier universities to recruit more students from state secondary schools will dumb down the ivory tower. These controversies say something important about the state of academia: for all the pious attacks on injustice that emanate from universities, the class gap is growing from the United States to Britain, parts of Continental Europe and Asia. The reasons are myriad: state-controlled systems that artificially limit the number of university places, admissions procedures that favor the privately educated, falling financial aid and failing public secondary schools.

The bottom line is that the worldwide boom in higher education is not, in many cases, broadening its reach among the poorest. The proportion of 25- to 34-year-olds who have university degrees is rising across the 30 member states of the Organization for Economic Cooperation and Development, and exceeds 20 percent in 18 of them. But in nations like Japan and the United States, where education costs are skyrocketing, the typical student comes from a much wealthier background than in the past. At Tokyo University, which has traditionally educated an economically diverse population, nearly half the parents of undergraduates now have incomes higher than $82,500 (well above the national average of about $57,500 for men in their 50s). In the United States, the percentage of students with families making more than $150,000 a year has been rising steadily for over a decade, to nearly 17 percent, while the proportion of those with a family income of $49,000 or less has been declining. A 2003 study of the 146 most selective U.S. colleges found that only 3 percent of students came from the poorest quartile of families, while 74 percent came from the richest.

By some accounts, the class divide is perhaps most pronounced in Europe. The slotting of children into vocational or university tracks continues to limit the upward mobility of many poor kids at an early age. Meanwhile, the relative lack of funding, particularly compared with the United States, means fewer new university slots to accommodate growth in demand. Today, only about a third of all secondary-school grads in the European Union go on to university, and working-class kids are highly underrepresented, especially at elite institutions. In the U.K., where Tony Blair's New Labour Party has made socioeconomic diversity in top schools a key priority, a recent survey found that the share of spots at Oxford that go to state schoolkids (in other words, not rich private-school grads) has fallen 5 percent since 2001.

Politicians and educators everywhere are looking for ways to fix the imbalance. But there's a lingering fear that easing the way for poor kids will bring down the quality of education and, thus, national competitiveness. "My honest opinion is that it is going to be a disaster," says P. V. Indiresan, former director of the prestigious Indian Institute of Technology (Madras), about the proposed quota system. "No. 1, it introduces a new social tension which we never had in the IIT system before. No. 2, you need certain institutions in a country where you are able to stream the very best talent available. Once you get students of a lower caliber, there will be enormous pressure to reduce to the standard of instruction."

Business leaders second this sentiment, and not only in India. Almost everywhere outside the United States, where affirmative action has long been the status quo, there is resistance to changing admissions to favor the less advantaged. When Richard Descoings, the head of France's prestigious Sciences Po Paris, began aggressively recruiting kids from lower-class backgrounds in 2001, critics lamented the end of blind égalité and privileged students worried that the degree would be devalued. "There were eternal debates on whether this program fit in with the principles of the French Republic," says Descoings, "but nobody asked whether or not it was effective."

In fact, it was; this past summer, the first class of 15 pioneers from poorer suburbs graduated from Sciences Po with respectable results, some near the top of the class. Elsewhere, there's also plenty of evidence that, given a chance, kids from lower-income backgrounds can do just as well or better than others. In the U.K., for example, Sir Peter Lampl, head of the Sutton Trust, an education nonprofit, says that if admissions were based purely on A-level test results, two thirds of students at Oxbridge would come from state rather than private secondary schools. In reality, only about half of them do. "Many poor kids don't have the confidence" to apply to top schools, particularly since graduating secondary school students must apply before they see their test results, says Lampl. And while private secondary academies advise students on how to maximize their chances of admission, even how to target specific departments at certain schools, state-school pupils are left to their own devices. The result, says Lampl, is that top-tier universities in Britain are excluding some 3,000 qualified state-school students every year.

That has major economic implications, given that the wage premium on a top-tier degree has never been higher. According to a number of studies, if going to college increases your earning power, then going to a top university increases it exponentially. Harvard economist Caroline Hoxby has shown that graduates of top schools in the United States typically earn hundreds of thousands of dollars more during their lives than similarly accomplished graduates of state universities. Depending on the country, a person with a university degree can command anywhere from 25 to 120 percent more than one without.

Finances are a further burden for the nonrich. As numbers of college applicants rise, costly prep classes, which can run $50 or more per hour, are becoming de rigueur. In the United States, while the absolute amount of aid to university students is up, financial aid is being replaced by merit aid, which favors the middle and upper classes. In Europe, where universities are still tax-supported and practically tuition-free for everyone, the poor get no leg up on the rich, who already have every advantage.

That something must be done is obvious to most nations. Basically, the combination of aging societies and rising demand for tech-savvy workers mean that most rich nations face an emerging shortage of educated labor, one that can't possibly be filled by the wealthy alone. Some solutions are, of course, country-specific. Europeans need to modernize and, to some extent, privatize their university systems so they can better respond to the needs of the market. More flexibility is key; while the United States and Scandinavia offer all kinds of two-year or associate's degree programs, in many parts of Europe and Asia four-year degree courses are the only option. But in Norway, for example, a modular system allows students to balance school with work or family commitments. They can finish courses in their own time, acquiring certificates for specific skills over a period of months, or a year, which can eventually be combined into a degree.

Perhaps the best way to equalize university education is to improve secondary schools in poor regions. In India, the rate of absenteeism in state schools is 25 percent—and that's for teachers. "Poor but talented kids tend to go to impoverished high schools, where parents, teachers and other students are just less interested in learning," says Richard Kahlenberg, a fellow at the Washington-based Century Foundation. "What they need is to be around peers who have big dreams—that will allow them to work up to their potential."

In Britain, educators are trying to cultivate those dreams with a new program in which top universities would help identify talented students as young as 11, and help them stay on track to reach elite colleges. The ethos is reflected in Oxford's new recruiting slogan: "It's not where you're from—it's where you want to go." As the need for knowledge workers grows, it will clearly be more and more important for poor kids, as well as rich ones, to go all the way to the top.

With Jason Overdorf in New Delhi, Tracy Mcnicoll in Paris and Akiko Kashiwagi in Tokyo
© 2006 Newsweek, Inc.

URL: http://msnbc.msn.com/id/14320419/
© 2006 MSNBC.com

tutors get outsourced

(Business 2.0) August 1, 2006 -- IDEA NO. 6 Services that once required face time can be profitably handled online.

America's education crisis, along with the rise of online video, is turning into another big opportunity for India. Companies like New Delhi-based Educomp are tutoring U.S. high school students in math and science one-on-one via the Internet. Anyone with a PC and a webcam can use the service, and the Indian companies' combined annual revenue is an estimated $10 million. That's a small slice of the $2.3 billion tutoring business, but India's share is growing fast.

Indian companies charge as little as $100 a month for unlimited, real-time, interactive video tutoring. A private face-to-face session in the United States runs as much as $100 an hour. Plus, most of the Indian companies guarantee that their tutors have at least an undergraduate degree in the subject they teach. In the United States, nearly 30 percent of high school math teachers lack a major or minor in the field.

TutorVista, based in Bangalore, recently tapped $2 million from Sequoia Capital and anticipates $10 million more for acquisitions by next year. Chairman K. Ganesh compares the sector to mobile communications: When the right price point is reached, he says, "the market size will increase 10-fold."

But the real opportunity could lie in using online tutoring to leverage other educational services. New Delhi-based Career Launcher has already acquired a U.S. company and begun to roll out bricks-and-mortar tutoring centers just like the ones it operates in Dubai. Seems they have a thing or two to teach American educators.

ring of change

The Ten Most Dynamic Cities

In this list of cities from key economic regions of the world, even the big names will surprise you.

Newsweek International

July 3-10, 2006 issue

....

A factory suburb of Delhi, now surrounded by posh high rises.

In old Ghaziabad—20 kilometers outside New Delhi in the north Indian state of Uttar Pradesh—ancient green-and-white three-wheeled Tempos that double as buses career alongside a tangle of bicycle rickshaws, buffalo-drawn wagons and pushcarts. Tiny, no-name manufacturers advertise rubber gaskets, gears, machine tools. You'd never guess Ghaziabad is India's hottest city.

But thanks to skyrocketing real-estate prices in the capital, Ghaziabad is emerging as the next popular address for Delhi-bound commuters. In residential pockets on the outskirts like Indirapuram, posh new developments are sold out. The largest developer, Shipra Estate Ltd., has built 7,000 two-, three- and four-bedroom flats, all of which are already occupied, says Vijay Sundar Raj, manager of sales and marketing. Many of the residents commute to IT jobs in neighboring Noida and Delhi.

Strategically located on the old Grand Trunk Road from Bangladesh to Afghanistan, Ghaziabad was targeted by the state for industrial development in the 1980s. Today the city is home to more than 14,000 small-scale industrial units and larger plants run by giants like Coca-Cola and the International Tobacco Co., which still provide most of the jobs in Ghaziabad proper. For all the new luxury high rises, Ghaziabad today is one of the most heavily industrialized cities in Uttar Pradesh.

The forecasts of rapid population growth, however, have more to do with New Delhi. Despite attempts to bar new industry within the capital, Delhi still creates more new jobs per year than the southern Indian IT centers of Bangalore and Hyderabad. "Delhi is a very big magnet," says S. K. Zaman, a top planner for Uttar Pradesh state, ruefully reflecting on the government's failure to contain the capital's population, which has grown by 50 percent every 10 years for the last half century, and now stands at around 14 million.

Authorities are having more success shifting at least some new growth to the outskirts. New roads, concessionary land prices and other schemes are drawing companies like Samsung, Honda and Siemens to satellite cities like Gurgaon and Noida. With its excellent highway connections to Noida and Delhi, Ghaziabad is starting to reap the benefits. Though it still doesn't have the cachet of Noida, it boasts cheaper land, and the completion this summer of the controversial Tehri Dam should help prevent frequent water and electricity shortages. None too soon. The city is already building a village to host the 2010 Commonwealth Games. And plans for both a new expressway and a second Delhi international airport on the east side of the capital should help put the entire region, Ghaziabad included, on the global map.

—Jason Overdorf

unlikely boomtowns

The last half-century was the age of the megacity. The next will belong to their smaller, humbler urban relations.

By Rana Foroohar

Newsweek International

July 3-10, 2006 issue - Great cities like London, New York and Tokyo loom large in our imaginations. They are the places people still associate with fortune, fame and the future. They can dominate national economies, and politics. The last half century has been their era, as the number of cities with more than 10 million people grew from two to 20, as now famous names like Rio, Mexico City and Mumbai joined the list. But with all respect to the many science-fiction novelists who have envisioned a future of increasingly dominant urban giants, their day is over. The typical growth rate of the population within a megacity has slowed from more than 8 percent in the '80s to less than half that over the last five years, and their number is expected to stagnate in the next quarter century. Instead, the coming years will belong to a smaller, far humbler relation—the Second City.

Within a year or so, more people will live in cities than in the countryside for the first time in human history: the 21st century will be an urban one. But increasingly, the urban core itself is downsizing. Already, half the city dwellers in the world live in metropolises with

less than half-a-million residents. Second Cities—from exurbs to regional hubs, resort towns to provincial capitals—are booming. Between 2000 and 2015, the world's smallest cities (with under 500,000 people) will grow by 23 percent, while the next smallest (1 million to 5 million people) will grow by 27 percent. This trend is the result of seismic shifts, including the global real-estate bubble; increasing international migration; cheaper transport; new technologies, and the fact that the baby-boom generation is reaching retirement age.

This rise of Second Cities is dramatically illustrated by our top-10 list, which encompasses the fastest-growing cities in each of the world's 10 most important economies (following stories). Based on an advance copy of the latest U.N. forecasts for all cities with populations greater than 750,000, the list includes only two major capitals—Moscow and London, which continue to outpace smaller rivals for unique national reasons. All the rest are aspiring middleweights like Toulouse, Munich and Las Vegas, or former unknowns like Florianópolis (Brazil), Ghaziabad (India), Goyang (South Korea) and Fukuoka (Japan), which may not remain unknown for much longer. Boomtowns breed ambitious city fathers, so it's hardly surprising that Toulouse is competing with Paris to host the 2016 Summer Olympics, or that Fukuoka is challenging Tokyo for the same honor.

There are several megatrends that get lost on a top-10 list, however. One is the concentration of fast-growing cities in emerging economies: of the top 150 fastest-growing cities in this size class, the most by far, 55, are in China, followed by an intense boomlet of 12 in Indonesia, and 10 in India. In the developed world, while none make the top 150, metropolises in the United States are growing much faster than those of Europe and Japan. This is due in part to the fact that overall population is declining in those places, but it drives home the relative dynamism of the Asian and American superpowers. The growth cities of the United States and China are growing faster than 2 percent, leading a pack of small cities, while those in Europe are growing at maybe half a percent, and are typically the rare exceptions in nations where most cities are shrinking.

In a way, the emergence of Second Cities has flowed naturally (if unexpectedly) from the earlier success of the megacities. In the 1990s, megalopolises boomed as global markets did. This was particularly true in metropolitan areas with high-tech or "knowledge based" industries like finance—witness the renaissance of New York and London, and the explosion of growth in Shanghai or Hong Kong. Bonuses got bigger, bankers got richer and real-estate prices in the world's most-sought-after cities soared. The result has been the creation of what demographer William Frey of the Washington-based Brookings Institution calls "gated regions"—places like New York, London, Tokyo—in which both the city and many of the surrounding suburbs have become unaffordable for all but the very wealthy.

One reaction to this phenomenon is further sprawl—high prices in the urban core and traditional suburbs drive people to distant exurbs with extreme commutes into big cities. As Frey notes, in the major U.S. metropolitan areas, average commuting times have doubled to about 90 minutes over the last 15 years, making once rural places like Pike County, Pennsylvania, viable dormitories for workers employed in New York. "It's hard to believe, but a place like Las Vegas is now actually a kind of suburb of Los Angeles," says Frey, noting that there are plenty of people who make the six-hour one-way drive a few times a week. And while the extreme commute is a longstanding tradition in Japan, it is spreading to Europe. Brighton, a once seedy beach resort about an hour by train from the capital, is now "London by the Sea," populated by arts and media types. House prices have boomed lately, and the city is now on its way to getting the requisite Frank Gehry landmark building (a futuristic residential tower and sports complex) to herald its success.

Why does one town become a booming Second City while another fails? The answer hinges on whether a community has the wherewithal to exploit the forces pushing people and businesses out of the megacities. One key is excellent transport links, especially to the biggest commercial hubs. Though barely a decade old, Goyang is South Korea's fastest-growing city in part because it is 30 minutes by subway from Seoul. Burgeoning IT hubs outside Delhi like Gurgaon and Noida, for which Ghaziabad serves as a new bedroom community, all sit on good roads into the capital.

Europe's cheap airlines have given new life to any number of provincial capitals, from Glasgow to Bologna. Estate agents estimate that a new Ryanair or easyJet link to a given city can immediately raise property prices in the area by 30 percent or more. In Asia, the number of cheap, short flights between cities is also growing.

Another growth driver for Second Cities is the decentralization of work, driven in large part by new technologies. While more financial deals are done now in big capitals like New York and London than ever before, it's also clear that plenty of jobs in booming service industries like banking, entertainment and high tech are flowing to places like Dubai, Las Vegas, Tallinn, Dalian and Cape Town, all of which international real-estate services firm Jones Lang LaSalle names as "Rising Urban Stars." These places have not only improved their Internet backbones, but often have tech parks and universities that turn out the kinds of talent that populates growth industries.

Consider Montpellier, France, a case study in urban decentralization. Until the 1980s, it was a big Mediterranean village, but one with a strong university, many lovely villas and an IBM manufacturing base. Once the high-speed trains were built, Parisians began pouring in for weekend breaks. Some bought houses, creating a critical mass of middle-class professionals who began taking advantage of flexible working arrangements to do three days in Paris, and two down south. Soon, big companies began looking at the area; a number of medical-technology and electronics firms came to town, and IBM put more investment into service businesses there. To cater to the incoming professionals, the city began building amenities: an opera, a tram line to discourage cars in the city center. The result, says French urban-planning expert Nacima Baron, is that "the city is now full of cosmopolitan businessmen. It's an entirely new town, a new society."

Today it's easier for Second Cities to build self-sustaining economies, independent of megacities, as firms and workers look to avoid the problems of major urban centers. "Economically, after a city reaches a certain size, its productivity starts to fall," notes Mario Pezzini, head of the regional-competitiveness division of the OECD in Paris. He puts the tipping point at about 6 million people, after which real estate costs, travel times, and the occasional chaos (witness the recent Paris riots) "create a situation in which the center of the city may be a great place, but only for the rich, and the outlying areas become harder to live and work in."

Meanwhile, the democratization of the good life—even small towns now have good sourdough bread, international newspapers—means that people no longer have to choose between the culture and chaos of the big city, or the ease and boredom of everything else. Pseudo-European-style café culture is cropping up in American towns like West Palm Beach, and European minicities like Groningen, in the Netherlands, draw millions of tourists with Philippe Starck-designed museums and renovated downtowns. Retiring baby boomers are giving new life (and money) to a host of sun-belt cities in the United States, as well as many Provençal and Tuscan towns.

Immigrants play a big role, too. In places like Las Vegas, they're morphing from cheap labor to a new middle class reshaping the character of the city. In the U.K., hundreds of thousands of Eastern European immigrants have helped galvanize the capital and smaller northern and coastal cities, where workers in agriculture, construction and lower-level service jobs are sorely needed. Ultimately, they are expected to take their earnings home, where they are likely to seek property not in Prague or Warsaw, but in less-expensive Brno or Cracow. That's a big reason Jones Lang LaSalle expects the 60 Central and Eastern European cities with 500,000 or more people to be among the hottest places for corporate relocation in the next few years.

All this means, of course, that second cities won't stay small. Indeed, some countries are actively promoting their growth. China's Go West campaign encourages investment in smaller inland cities. Italy is trying to create tourist hubs of towns close to each other with different yet complementary cultural activities. "The worst-case scenario is that we end up with some national version of New Jersey—an inefficient sprawl with no center," says Frey of Brookings. Already, one has to wonder if all the marketing pressure for Second Cities to pay for iconic buildings or to re-create mock versions of New York's SoHo is a productive use of capital. If one of the biggest drawing cards for Second Cities is unique local flavor, why ape the best-known megacities? Devolution of policymaking power is leaving many lesser cities more free than ever to shape their destinies. To Vegas, Toulouse and company: this is your era. Don't blow it.

With Jason Overdorf in New Delhi

© 2006 Newsweek, Inc.

india's maoists step up rebellion

By JASON OVERDORF
Thursday, June 8, 2006 Page A16
Special to The Globe and Mail

DORNAPAL, INDIA -- Madkam Devi, a pretty 19-year-old in a sari printed with pink flowers, shifted the thin-limbed infant on her hip and gazed into space as she described how she narrowly escaped being hacked to death by Maoist revolutionaries a month ago.

She and 51 other villagers of Manikonta, a village in the central Indian state of Chhattisgarh, had returned to their homes from a government relief camp on April 25 to collect cooking pots, plastic buckets and other household items they had left behind when they made their hurried departure for police protection from the guerrillas. Finding the village deserted, they quickly gathered their belongings and started back to the relief camp. They didn't get far before the Maoists ambushed them.

"Some people panicked and tried to run, but some of the Maoists were wearing uniforms and shouted to us that they were the police, and we shouldn't be afraid," Ms. Devi said.

The Maoists, including about 50 gunmen in uniforms and another 150 irregulars armed with axes and wooden staves, killed two villagers and captured the others, Ms. Devi said. Some were badly beaten, a taste of the treatment the prisoners would receive over the next four days. But the worst was to come. As an example of the fate that awaits villagers who participate in a government-aided people's movement against their rebellion, the Maoists executed 13 of the villagers.

The Maoists -- sometimes called Naxalites, in reference to an armed uprising in the village of Naxalbari in West Bengal, from which the movement began in 1967 -- have maintained a low-level insurrection in India for nearly 40 years, organizing uprisings among landless workers, hijacking trains, mounting frequent attacks on police posts and industrial facilities, and murdering their political opponents. Their rebellion is gaining ground, expanding across 14 eastern and central Indian states, running all the way from the Nepal border in the north to the southern coast, and becoming a major Communist force intent on winning control of the Indian state through military means.

And the war is growing ever more deadly. More than 700 people, 500 of them civilians, were killed in raids, land-mine blasts and other incidents in 2005. Provisional data from the past four months suggest the death toll will be higher in 2006.

The rapid increase in violence has prompted some experts, such as Ajai Sahni of the New Delhi-based Institute for Conflict Management, to warn that the Naxalite insurrection has surpassed separatist terrorists in Kashmir as the largest internal threat to India's ability to govern its vast territory.

India's national and state governments have long refused to acknowledge the seriousness of the problem, because of what it says about their administrations, Mr. Sahni said. "Unlike the Kashmir issue, which we could blame on somebody else, this was entirely indigenous. It pointed to state failures."

The Maoist movement is rooted in the deep impoverishment of rural India. Although India's economy is growing at close to 8 per cent a year, nearly three-quarters of its people live in rural areas that continue to lag far behind the cities, especially in the problem states of north and central India. Just 20 per cent of rural people have access to basic amenities such as running water, compared with 70 per cent in urban areas. And poor nutrition and lack of health care mean that the infant-mortality rate for rural India is nearly 40 per cent higher than in urban areas.

In Chhattisgarh, the lack of local economic progress is obvious despite a huge influx of investment to develop the state's mineral resources. "Mining has been going on for three decades, but the only industry to flourish in the area is prostitution," a spokesman for the Maoists recently told local reporters.

In recent months, the rebel attacks have become more daring. In November, hundreds of Maoists stormed a jail in Bihar, freeing a captured Maoist leader and about half of the facility's 650 inmates. In February, the rebels raided a state-owned mining company in Chhattisgarh, stealing tonnes of explosives for the manufacture of crude bombs.

The violent attack on the villagers of Manikonta signalled a shift in strategy by the guerrillas, who previously had focused attacks on organs of the state. By brutalizing ordinary villagers, the Maoists are taking a dangerous gamble. Historically, they have embraced local causes and won respect, and sometimes support, through hard work and a dogged battle against social injustice and government corruption.

In Chhattisgarh, local observers say that years ago the Maoists forced contractors to pay tribal labourers the wages mandated by the state, rather than skimming from the payroll. They thrashed corrupt officials of the forest department, and forced truant government teachers to show up for their classes in the deep jungle, instead of merely drawing their salaries.

However, Chhattisgarh officials now say that the Maoists more often work to stop projects that would benefit the local poor.

"Contrary to what they [the Maoists] say, Naxalism is not growing, because there is no development in the state," said Chhattisgarh Home Secretary B. K. S. Ray. "Basically, this is a terrorist movement to gain political power through violence. Initially, they may have wanted land reform and equality, but now it's a gang of extortionists, gangsters and killers."

The tribal people of rural India need roads, schools and jobs. But the Maoists are committed to a full-scale Communist upheaval and radical redistribution of wealth, and believe that these incremental gains will never erase the gross inequalities of what they term India's "bourgeois comprador democracy."

"There is no dilution in the ideology," said Mr. Sahni of the Institute of Conflict Management. "There is absolutely no set of economic initiatives on the horizon that can give prosperity, dignity et cetera to 810 million people in rural India."

shrinking flocks of vultures spoil ancient culture's funeral rituals

By Jason Overdorf
Special to The Globe and Mail

MUMBAI -- Smack in the middle of the thicket of ultramodern high-rises that make up Malabar Hill, one of Mumbai's most exclusive neighbourhoods, followers of an ancient religion are fighting to preserve funeral rites that go back thousands of years.

The Parsis -- so called because their ancestors immigrated from Fars, or Persepolis, in Iran -- are Zoroastrians, who believe that earth, water, air and fire are sacred elements. For that reason, their religion forbids them from burying or cremating their dead.

Instead, in a ceremony that no outsider is allowed to witness, pallbearers followed by a procession of mourners in flowing white robes carry the body to one of five tremendous stone structures, evocatively named the Towers of Silence, where the corpse is laid out on a marble slab to be dried up by the sun and devoured by carrion birds.

A great flock of white-backed vultures used to strip the bodies of the dead in less than an hour. But today, India's vultures are nearly extinct due to accidental poisoning, and the flock that once served the Towers of Silence is no more.

"When I was young, there were so many birds that they used to swoop down at you," says Minoo Shroff, the white-haired chairman of the city's Parsi Punchayet, the charitable trust charged with maintaining the funeral grounds, or doongerwadi. "There used to be 50 to 70 vultures on a well. Now, other birds like kites and crows are there, but seeing a vulture is very, very rare."

According to the United Kingdom's Royal Society for the Protection of Birds, the near extinction of South Asia's vultures happened faster than any other on record. Between 1988 and 1999, the region's eight vulture species declined by as much as 95 per cent -- the birds dying out so rapidly that millions were reduced to a few thousand in little more than a decade.

"The speed and scale of the vulture declines across South Asia has been totally unprecedented," says Chris Bowden, director of the RSPB's vulture program, who visited India recently. "For such formerly abundant birds in the space of just 10 years to be facing the real possibility of extinction is almost unbelievable."

For many years, the reason for the vultures' disappearance was a scientific mystery, with researchers blindly looking for an unknown contagious disease. But in 2004, scientists of the U.S.-based Peregrine Fund discovered that the vultures were being poisoned by an anti-inflammatory drug called diclofenac, which local farmers use to treat sick cattle. One feeding from a tainted cattle carcass is enough to cause fatal renal failure in the birds.

The culprit identified, Indian Prime Minister Manmohan Singh called for a universal ban of diclofenac in 2005. But so far the Ministry of Agriculture has been dragging its feet even though scientists have identified a harmless substitute, conservationists say. "For well over a year, the Ministry of Agriculture has done nothing," says Rishad Naoroji, a Parsi naturalist.

A handful of state governments have banned diclofenac, but only a national effort will be effective, according to Asad Rahmani, director of the Bombay Natural History Society.

That leaves the Parsi community in a dire situation. Without the aid of the vultures, the sun alone can take months to reduce the bodies laid out in the Towers of Silence to desiccated skeletons, a worrying problem as the mushrooming city encroaches on the funeral grounds. Already, the Punchayet has been compelled to stop using one of the towers, located in proximity to the high-rise Paradise Apartments, when residents complained about the sight and smell of the decaying corpses.

More crucially, many Parsis themselves have begun to doubt whether months of putrefaction amount to a death with dignity.

The search for a solution has opened a rift between the traditionalists and pragmatists of the community, which was already divided over the issue of intermarriage. The Parsis played a vital role in the development of Mumbai, formerly Bombay, and spawned three of India's largest business houses -- the Tata, Godrej and Wadia groups. But in recent years they have seen their population plunge some 40 per cent to about 40,000 people, as younger members of the community delay marriage, marry outside the community and have fewer children in favour of successful careers.

Its ties already weakened, the last thing the community needs is more people moving away from tradition, conservatives believe.

To stop that from happening, some conservative Parsis back a proposal to build a giant aviary and breed a captive population of vultures to serve the towers. But reservations about the cost of the project -- which would have run to several million dollars -- as well as doubts about whether it would work, have put the plan on hold.

Instead, the Punchayet has adopted a pragmatic solution developed by Homi Dhalla, president of the World Zarathushti Cultural Foundation, a group that sponsors various efforts to preserve Parsi traditions.

Dr. Dhalla, 60, developed a plan to focus powerful solar concentrators at the working area of three of the five towers, amplifying the heat of the sun and thus speeding the desiccation of the bodies. With these devices, the sun can reduce a corpse to a dry husk within three to five days.

Because they harness the power of the sun, Dr. Dhalla believes the solar concentrators, though an innovation, suit the tenets of the Zoroastrian religion. "It was quite difficult for me to find a solution within our theological limitations," he says.

But many conservatives don't believe he has. Khojeste Mistree, a conservative leader with a sizable following, argues that Dr. Dhalla's solution is little more than a solar-powered crematorium.

Parsi theologians like Dr. Firoze M. Kotwal, a former high priest, agree. "From a religious point of view," he says, "this method is not very proper."

the perfect score

Student cheating is reaching new levels, forcing an overhaul of standardized tests.

By Emily Flynn Vencat

Newsweek International

March 27, 2006 issue - Chris doesn't consider himself a cheater. Yet for the past four years, the 21-year-old senior at one of California's most prestigious universities (which he doesn't want identified) has used an arsenal of tricks to pass his classes. He's plagiarized, taken illegal prescription drugs to improve his focus, obtained exam questions in advance and text-messaged his friends via cell phone to find quick answers to tough questions. Still, he doesn't see any of that as out of the ordinary. "Sure, I've used test banks, study drugs, text buddies, cyberessays and picture messaging," he says. "But so does everyone."

That may be an exaggeration—but not as big of one as you might think. From Beijing to Bristol, the rates of academic cheating have skyrocketed during the past decade. In a huge study of 50,000 college and 18,000 high-school

students in the United States by Duke University's Center for Academic Integrity, more than 70 percent admitted to having cheated. That's up from about 56 percent in 1993 and just 26 percent in 1963. Internet plagiarism has quadrupled in the past six years, according to the same study. In Britain, a recent government-sponsored report found such rampant cheating in the state-run GCSE and A-level exams that Secretary of Education Ruth Kelly called for a total revamp of the coursework system before 2008. Hundreds of Asian universities' Web-based bulletin boards are dumping grounds for the memorized answers to Test of English as a Foreign Language questions—the basis of most U.S. colleges' admittance of foreign students.

Nearly all of India's ultracompetitive entrance exams have been stolen and sold to students at least once during the past five years. In 2004 students paid up to $15,000 apiece for access to answers to India's Pre-Medical Test—and the perpetrators pocketed $1 million. In China, where the number of university students has almost tripled since 1998 to 16 million, police last year cracked one of the biggest qiangshou (hired gun) gangs—Web-based agencies where students can hire expert look-alikes to take any of a host of national exams for them. The gang had already taken in $212,000 from nearly 1,000 students in 19 provinces across the country. Also in 2005, South Korea faced the biggest exam-cheating scandal in its history when officials realized that the previous fall's national college-entrance exam, the CSAT, had been infiltrated by more than 20 cheating rings across the country; they had text-messaged exam answers to paying students taking the test. "We've passed the tipping point, where cheating is so common that it's an accepted social norm," says David Callahan, author of "The Cheating Culture."

What's turning students into crooks? First and foremost, technological advances have made cheating easier than ever. From purchasing "original" essays from Web sites like Gradesaver.com to "outsourcing" computer-programming homework to experts in India via sites like Rentacoder.com, students can now buy A's for the price of a school lunch. At the same time, mobile phones and MP3 players have given test takers new tools: picture messaging lets them contact friends outside the classroom with photographed copies of whole exams. SparkMobile, a new service from SparkNotes (Barnes & Noble's take on Cliffs Notes), will text students themes to use for surprise in-class essays or beam them iPod-friendly audio summaries of classic novels.

Competition, though, is the real culprit. As the work force becomes ever more crowded and the number of college grads skyrockets, top educational credentials are increasingly seen as the only sure vehicle to success. Thirty-five years ago, just 11 percent of Americans had a college degree; now nearly a third do. In the European Union, the number of university graduates has shot up by 30 percent in the past five years alone. In hypercompetitive Asia, where most academic achievement is measured by standardized tests, that can lead to excruciating pressure. "Your exams are so closely connected to your admission to college that a 0.1 percent difference can determine whether you get admitted or not," says Sudha Ravi, vice principal at a prestigious New Delhi secondary school.

Sociologists argue that the upsurge in school dishonesty also reflects attitudes in the culture at large, where cheating has become acceptable and even admired. International tycoons make enviable fortunes through market manipulation and fraud: think Enron, WorldCom and Martha Stewart. Scientists like South Korea's once revered stem-cell research pioneer, Hwang Woo Suk, fake lab results. In a recent poll of 25,000 high-schoolers by the California-based Josephson Institute of Ethics, nearly half agreed with the statement "A person has to lie or cheat sometimes in order to succeed." In Australia, a new study from Griffith University of students at four major campuses revealed that 40 percent believe faking research results is a "minor" offense. "Students feel like it's just no longer a big deal to cheat," says Don McCabe, the founder of Duke University's Center for Academic Integrity.

The problem is so pervasive that it's reshaping the face of academic admissions. In the future, exams from the SAT to the MCAT to the A-levels will be administered in secure rooms equipped with metal detectors, radio-frequency locators to check if students are receiving text-messaged answers on their mobile phones and, in China and South Korea at least, the threat of up to seven-year prison sentences for cheats. This year the world's most respected graduate entrance test, the GRE, which is taken by half a million students annually, is undergoing the biggest face-lift in its 55-year history. Starting this October, exam questions will be changed from test to test. Start times will be staggered across the globe so students in Los Angeles can't post memorized or photographed test sheets on the Web for students in Hong Kong. "We've basically revolutionized the way we're administering our high-stakes tests," says Ray Nicosia, director of security for the world's largest test administrator, the Princeton, New Jersey-based Educational Testing Service, which runs 25,000 test centers in 192 countries. "We're changing to combat this problem."

America's med-school en-trance exam, the MCAT, is stepping up security measures using biometrics. As of next year, would-be doctors will have to give electronic fingerprints and submit to digital photographs, making it easier for exam boards to catch cheaters who pay others to take the tests for them. The SAT last year added a writing section which, says Nicosia, provides a "substantive handwriting exemplar" to authenticate test takers. South Korea's Ministry of Education has introduced metal detectors for bathroom visits. In India, testing bodies have limited the number of administrators with early access to the exams.

European exams like Britain's GCSE and A-levels and France's baccalaureate are arming themselves with plagiarism-spotting software, like TurnItIn.com and MyDropBox.com, which compare student papers with everything available on the Internet and highlight copied sections in bright red. Some top institutions in the United States and Europe have even "legalized cheating." They now allow students to surf the Web on PDAs and laptops during "open Internet" exams. Proponents argue that this helps students learn research skills more applicable to real-life work situations, where information is freely available.

At the same time, a growing number of top universities are reducing their emphasis on standardized tests. Many are even beginning to throw them out altogether in favor of interviews and recommendations—markers of aptitude that can't be faked. The rising incidence of scoring errors has only heightened their concerns; just two weeks ago the U.S. College Board revealed that some 4,000 scores from last October's SAT had been miscalculated—some by as much as 400 points. "I do see a rise in alternative ways to augment the scores," says Gary Natriello, an education professor at Columbia University's Teachers College. "People are looking for those other signs that a student has a lot of potential."

Will standardized tests ever become obsolete? According to the Massachusetts-based National Center for Fair & Open Testing, some 730 American colleges no longer require undergrad applicants to take either the SAT or the ACT. In Britain, Oxford and Cambridge used to interview top candidates once; now final decisions are made after two interviews. Marlyn McGrath Lewis, the director of admissions for Harvard College, says more and more universities are adopting a "holistic approach to admissions"—and that's essential. "The quality of [the class] depends on it." Not to mention the quality of the education.

With Jason Overdorf in Delhi and Jonathan Adams in Taipei

© 2006 Newsweek, Inc.

real estate: remaking mumbai

(This article appeared in Newsweek International on March 27, 2006)

The latest quiet reform undertaken by India's government deals with one of its oldest problems—land reform. Across the country, thousands of acres of land are tied up in disputes over decrepit edifices. But last week, a landmark Supreme Court judgment removed restrictions on the sale of land owned by Mumbai's defunct textile mills, freeing up hundreds of acres in the city center for development. Is this a turning point? On the surface, certainly. Six hundred acres of valuable land in the heart of the city are now slated for massive projects including office buildings, high-rise apartments and shopping malls. However, environmentalists and representatives of Mumbai's millions of slum dwellers argue that unfettered development of the mill lands will do nothing to solve the housing crisis facing the city's poor, as well as exacerbate water and power shortages. An equally pressing question is whether the ruling will speed the conversion of agricultural land on the edge of India's cities into much-needed residential and industrial developments—a transition to modernity that until now has been hopelessly slowed by red tape.

—Jason Overdorf

money shortage

Financial Services: More capital is needed, but reform is slow.

Newsweek International

Nov. 25, 2005 issue - American Treasury Secretary John Snow was in New Delhi two weeks ago, calling for India to speed up the liberalization of its financial-services sector. He argued that looser rules for foreign investment in banks, insurance companies and pension funds would hasten India's economic rise, "add capital to the banking sys-tem, spread credit availability, bring in additional managerial expertise and [enhance] technology."

According to a report by McKinsey & Co., India's financial system is an often-overlooked reason the nation's economic growth hasn't matched China's. India has $1.1 trillion in financial assets—one fifth of China's. The country's financial depth, a measure that compares the total financial stock in the economy to GDP, is 175 percent, compared with China's 311 percent. Although India's banks have fewer nonperforming loans and have achieved a higher return on their assets than their Chinese counterparts, the report notes, "The bottom line is that India has a lot less money circulating in the financial system than one would expect, given the size of its economy." Unless the country loosens up, it will never be able to match its Asian rival as an FDI destination.

Prime Minister Manmohan Singh understands the stakes. He's been trying to eliminate a 10 percent cap on foreign shareholders' voting rights in private banks. He has also been seeking to raise the limit on FDI in the insurance industry from 26 percent to 49 percent—but as with other reforms, Singh's leftist political allies have stymied efforts to get new investment rules implemented.

Right now, foreign banks can open branches and wholly-owned subsidiaries, and can also acquire up to 74 percent of a domestic bank. But because their voting rights on domestic acquisitions are limited, they have little management control. Still, Citibank, Standard Chartered and HSBC are opening branches and selling credit cards. On the insurance side, global players like U.S.-based MetLife, Prudential and AIG and Germany's Allianz are selling policies and pension plans. Company officials say that pension funds can be an important source of financing for the infrastructure that India desperately needs.

In both sectors, foreign players are counting on rising demand to chip away at resistance in New Delhi. As Subir Gokarn, chief economist for the ratings agency Crisil, notes, India needs new insurance and pension products "to make it easier for people to save and give them security in old age." And the government stands to gain, too, because a liberalized financial sector will push money into investments that will broaden India's growth. True reforms may be just a matter of time.

—Jason Overdorf

© 2005 Newsweek, Inc.

spend less, get more

One thing India does better than China is high-tech research and development.

By Jason Overdorf and Sudip Mazumdar
Newsweek International

Nov. 28, 2005 issue - The office of Dr. D. Yogeswara Rao, head of business development at India's Council of Scientific and Industrial Research, doesn't exactly look like a nerve center of cutting-edge research and development. Cluttered with stacks of documents and crammed with the tattered furniture common to New Delhi's government offices, Rao's domain looks like part of the landscape of old India.

But the humble surroundings can be deceptive. Despite a lack of funding and facilities—the government's entire R&D budget is a fraction of the annual research expenditure by a single multi-national company like Pfizer—India's researchers have shown the world they can innovate without breaking the bank. And that's attracting a great deal of interest. "Not a week goes by without some foreign delegation visiting us to discuss research collaborations," Rao says. Over the past six months, Rao's visitors have included representatives of Procter Gamble, Colgate, Johnson & Johnson and Alcoa, to name a few. The reason is simple. "Per dollar, the output of innovations is significant, so overall you may spend less, but you get more," says Rao.

Over the last five years more than 100 companies, including General Motors, Boeing and Mobil, have chosen India as an R&D hub, some of them citing local scientists' facility in English, as well as the country's superior track record in intellectual-property protection, as advantages over China. Prominent among them is General Electric, which has its largest research-and-development center outside the United States in Bangalore, India. Though GE also has an R&D center in China, its state-of-the-art John F. Welch Technology Center in Bangalore employs about 2,300 scientists, researchers and engineers, double the number in Shanghai.

GE's $80 million Bangalore center does groundbreaking work in areas such as aerospace engineering, electronic systems, ceramics, metallurgy, advanced chemistry, chemicals, polymers and new synthetic materials. The center uses the latest technology and e-engineering tools to facilitate real-time global interaction with the company's affiliates, tech centers, customers and suppliers. "I have immense faith in the intellectual capital of India and the amount it can contribute to GE's success," says Scott R. Bayman, president and chief executive officer of GE India. "India is rich with bright, young talent."

GE's Indian researchers have applied for 260 U.S. patents on products such as synthetic materials and ceramics, with 37 approved by the U.S. Patent and Trademark Office, according to the company's spokeswoman in India. Motorola, which employs more than 1,700 Indian engineers and researchers, says Indian programmers develop about 40 percent of the software in its mobile handsets. The Internet browser and multimedia messaging system for the company's 3G and GSM phones were conceived, engineered and delivered by its India operations.

India's software industry was first out of the gate in R&D, and increasingly important tasks were outsourced as India's so-called cybercoolies demonstrated their prowess. But today, a host of industries—including the automotive, chip-design, pharmaceutical and aerospace sectors—are taking advantage of India's giant pool of scientists and engineers, and not only to write program code. According to a recent study by PricewaterhouseCoopers, India is rapidly moving up from relatively routine tasks like converting schematics from one computer-aided design system to another, to sophisticated and critical functions like plant engineering and redesigning products for a better cost-performance ratio. Global automakers, in particular, which spend 3 to 5 percent of their annual revenue on R&D activities, are turning increasingly to India, the consultancy says.

The main reason for the shift is manpower—the oft-cited 300,000 engineers and 150,000 computer experts who graduate from India's many universities and technical institutes each year. But that's not where the country has the biggest advantage over China, which produces 400,000 engineers of its own annually. According to Indian business experts, local graduates have greater cultural affinity with Westerners (not to mention English-language skills) than their Chinese counterparts. Like that of the United States, India's growth has been driven by entrepreneurs and market forces rather than the government, so foreign business leaders perceive India managers as more market-savvy.

That affinity has also helped India gain an edge in intellectual-property protection. In a sector like chip de-sign, for instance, large companies will outsource R&D activities only if they believe they can protect the intellectual property they are letting out the door. "The way you grow is by having contracts with bigger companies," says S. R. Dinesh, program manager of Frost & Sullivan's Asia Pacific electronics and semiconductors practice. "Intellectual-property law is a big issue. Even if multinationals outsource [to China], it will be at the lower end of the value chain."

The intellectual-property issue is also crucial to the global pharmaceutical sector, which spends about $40 billion a year on drug development. Drug companies rise and fall on the strength of their patents for new blockbuster medicines. India's move to implement international patent laws earlier this year—despite the pain caused to domestic pharmaceutical giants like Ranbaxy, Cipla and Dr. Reddy's Laboratories, which had built their businesses by making generic copies of drugs protected by patents in the West—was roundly criticized by aid agencies worried about providing affordable retrovirals for HIV sufferers in Africa. But the decision sent a message that India was committed to playing by global rules, whatever the political cost.

India already has a well-developed pharmaceutical industry. With turnover of about $7 billion—$2.5 billion from export sales—the Indian pharma sector ranks fourth in the world in terms of sales volume and 13th by value. The Chinese pharmaceutical industry, at $8 billion in 2004 and growing fast, is about the same size. But the new commitment to patent protection may help India beat China in the race up the value-chain ladder in pharmaceutical research, says Vivek Mehra, executive director for PricewaterhouseCoopers in Delhi. Multinationals like AstraZeneca, Novartis, GlaxoSmithKline, Bayer, Pfizer and Roche set up modest research centers in India in the mid-1990s, and they've since grown substantially.

The fastest-growing pharmaceutical segment in India is so-called contract research, or the outsourcing of research-and-development activities. More than a dozen foreign contract-research companies—including Quintiles, ClinTec and PharmaNet—have set up operations in India, not only because it's inexpensive but also because India offers a large patient pool, trained doctors, good clinical diagnosis and a genetically diverse population for clinical research. Indian pharma giant Biocon, which set up a unit called Clinigene to conduct clinical trials for multinationals in 2000, has seen its contract-research revenue grow 45 percent over the past six months.

In spite of the gains, Chinese firms still apply for more patents annually than Indian firms, and some experts say India is weak in the area of fundamental research. The ties between academia and industry—needed to commercialize breakthroughs—must be strengthened if India is ever going to produce its own version of Silicon Valley. In the meantime, investment continues to roll in, and the demand for top graduates in technical fields is high. "The world has realized that if you don't have an India address [in R&D], you are in trouble," says R. A. Mashelkar, head of the government's Council of Scientific and Industrial Research. That's a boast, but one that's hard to argue with.
© 2005 Newsweek, Inc.

© 2005 MSNBC.com

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'a great shift'

India has leveraged its engineering and design skills to become a hot spot for auto parts.

By Jason Overdorf
Newsweek International

Nov. 28, 2005 issue - With a wandlike wave of his mouse, 27-year-old Saurabh Rawat displays a 3-D model of a new precision gearbox for Porsche's Boxster on his computer screen. Rawat works in the quiet 14th-floor office of Hi-Tech Gears in Gurgaon, Haryana, on the outskirts of New Delhi. On the street below, flashy new Hyun-dais vie for space with battered scooters, overloaded bicycle rickshaws and rawboned cattle. All around them a satellite town mushrooms out of the desert, growing on the strength of the IT-services outsourcing boom.

Rawat—and hundreds of thousands of workers like him—is part of another kind of revolution. Once considered incapable of making quality products and meeting shipment deadlines, India is leveraging its skill in engineering and design to emerge as a hot spot for auto-parts manufacturing. The sector has grown more than 20 percent a year over the past three years, while export growth has topped 40 percent. A host of local entrepreneurs are reaping the benefits. Hi-Tech Gears, for example, has become a global supplier for the German firm Robert Bosch International, while other Indian firms like Bharat Forge—now the second largest forging company in the world—have begun acquiring companies in the United States and Europe.

As some big global players begin to rethink their exposure to China, India is starting to attract some of the foreign investment once directed toward the dragon to the east. A recent study by McKinsey Co. suggests India's auto-components market could grow from roughly $9 billion in sales now to as much as $40 billion by 2015—including $20 billion to $25 billion in exports—as the parts business shifts from the West to low-cost nations like China, India, Thailand and Turkey. Struggling carmakers are under great pressure to chop their production costs, and parts suppliers in these big, developing markets are increasingly reliable.

To reach its goals, India's auto-parts industry will require lots of investment—as much as $20 billion over the next decade—and the capital inflow has already started. Last year, for example, the Bosch Group announced plans to invest about $225 million to build manufacturing capacity in India. Goetze India, in which U.S.-based Federal Mogul holds a 30 percent stake, says it plans $45 million in capital expenditures. And Sona Koyo Steering Systems, a joint venture with Japan's Koyo Seiko Co., has said it will invest about $30 million."There's a great shift underway," says Hi-Tech Gears chairman and managing director Deep Kapuria, a two-term president of the Automotive Component Manufacturers Association of India.

Kapuria says that some U.S., Japanese and European automakers and their first-tier parts suppliers have admitted to him that they're now overexposed in China. Volkswagen entered China aggressively in 1985, and quickly grabbed 60 percent of the embryonic auto market. But since then, even as China's car sales have exploded, the German automaker's market share has dwindled steadily, reaching just 18 percent in the first half of this year. The falloff prompted the company to announce last month that it will stop investing to expand production capacity in China, and will scale back its 2003- 2006 investment plans in the country by 40 percent. VW and other global car companies have suggested to Kapuria that Indian parts companies would be getting more business.

India's auto market is attractive for two reasons. First, though still only about a third the size of China's, it's growing faster than its eastern neighbor. Car sales in India last year grew by 24 percent, compared with 14 percent in China. Beyond that, unlike China, India has demonstrated its willingness to comply with intellectual-property rules and the global patent regime. That commitment is essential, because it's allowed India to build on its strength in engineering and to achieve a competitive advantage making advanced components such as exhaust manifolds and machined gears.

There are potential potholes for the industry, to be sure. The Chinese have a huge advantage when it comes to making products that depend on economies of scale. And the infrastructure problems and bureaucratic impediments for which India is notorious continue to discourage foreign investors. "India has a three- to five-year window to get its act [together]," says Kapuria. Carmakers are betting that it will.
© 2005 Newsweek, Inc.

© 2005 MSNBC.com

URL: http://msnbc.msn.com/id/10114266/site/newsweek/

‘lion of the chambal’ does last deadly dance

India’s police traced notorious bandit via cell phone signals, then shot him.

By Jason Overdorf/NEW DELHI

(This article appeared in the Globe and Mail on November 10, 2005).

For 25 years, he terrorized the villagers of central Indian and outsmarted police. In the end, though, notorious bandit Nirbhay Singh Gujjar was brought down by his penchant for publicity, as police were able to use cell phones through which he boasted to reporters to trace him to his forest hideout. They killed him this week in a shootout.

“It was an embarrassment for the police, because he was talking to the media,” said Yashpal Singh, director-general of the police force in the north Indian state of Uttar Pradesh. “So we were under pressure from people who were asking why journalists could locate him and the police could not.”

After determining Mr. Gujjar’s location by tracing the signals from the two phones he used, authorities crawled through thick scrub to creep up on a ravine where the bandit was drinking with half a dozen members of his gang.

Alerted by a sentry, Mr. Gujjar’s band opened fire, but police scattered the gang, trapping the bandit and a lieutenant in a canyon.

When police called for him to surrender, Mr. Gujjar tried to fool them into thinking he had been killed, but opened fire again when officers advanced to investigate, said Deputy Superintendent Rajesh Dwivedi of the Uttar Pradesh Special Task Force. In the ensuing shootout, Mr. Gujjar was shot in the head.

“This sends a clear signal that we are going after them,” Mr. Singh said. “It will certainly send a frightening message [to other bandits].”

Mr. Gujjar, whose name means “fearless,” was known as “the last lion of the Chambal,” an unmappable labyrinth of ravines in the border area between the modern states of Madhya Pradesh and Uttar Pradesh. The area is famous for marauding outlaws, called dacoits, and is portrayed in hundreds of Bollywood films.

Married three times and cuckolded as many times by rival bandits, Mr. Gujjar went berserk when his third wife ran away with a man he had kidnapped as a boy and raised as his foster son. Vowing to track the lovers down and exact his revenge, he announced a hefty reward for information about the couple.

He then told reporters he wanted to lay down his arms. All he asked was that a political party from one of the states he terrorized grant him a role in government as a member of the legislative assembly.

But even though politicians with long charge sheets are common in central India, Mr. Gujjar misread the way the political wind was blowing, according to police.

“He didn’t have any connections,” Supt. Dwivedi said.

Copyright 2005 by the Globe and Mail

red-hot market

Growing wealth at home fuels an Indian art boom.

By Jason Overdorf

Newsweek International

Oct. 17, 2005 issue - Looking for a good investment? Try contemporary Indian art. In back-to-back auctions held by Christie's and Sotheby's in New York last month, four different works topped the previous auction-price record of $317,500, set by Tyeb Mehta's "Celebration" in 2002. And, according to experts, that's just the beginning. "Because of the strength of the market and the strength of the Indian economy, we're seeing that many of the paintings exceeded estimates, some tripling or quadrupling our expectations," says Yamini Mehta, who oversees modern and contemporary Indian art at Christie's. At separate auctions at both houses on Sept. 20 and 21, 16 works by contemporary Indian artists sold for more than $200,000 apiece; even more impressive, Christie's brought the hammer down on Mehta's painting "Mahisasura" for a whopping $1.6 million—five times the previous auction record. "It [was] an amazing week," says Robin Dean, director of the Indian and Southeast Asian department at Sotheby's.

Not coincidentally, nearly all the artworks that broke $200,000 were by artists belonging to the Progressive Group. Founded around India's struggle for independence in the late 1940s, the group includes artists like Mehta, Ram Kumar, Maqbool Fida Husain, Syed Haider Raza and Francis Newton Souza, who rejected the colonial British academic style and began the modernist movement in India. "Today we paint with absolute freedom for content and technique," reads the group's 1948 manifesto.

The market for their works took off in 1995, when Sotheby's auctioned off paintings from the extensive private collection of the Chester and Davida Herwitz Charitable Trust. At that time, according to Neville Tuli, who started India's first domestic auction house, Osian's, the entire Indian art market amounted to about $1 million. Today the same market is valued at close to $180 million.

At first the Indian diaspora drove demand, but now growing wealth in India itself is fueling the market. In the mid-1990s, most buyers were scions of India's industrial dynasties, who favored the realistic, conservative artists of the Bengal school. In the late 1990s, nonresident Indians, or NRIs, who preferred the bolder, more colorful and less traditional work of the Progressives, began dominating the market. Today, domestic buyers—buoyed by India's skyrocketing stock and real-estate markets and fast-growing economy—are helping drive prices higher. While an overseas Indian bought Mehta's "Mahisasura," private collectors living in India accounted for four of Christie's biggest sales last month, paying $486,400 for Husain's "Trial," $385,600 and $262,400 for two untitled paintings by Kumar and $284,800 for Souza's "Girl With Hairpin and Girdle." "The biggest change is the increase in activity from India itself," says Dean. And there's more to come: "For every work that sells, there are two or three new very wealthy people that come into the market."

Meanwhile, the big players in India's domestic art market—Osian's, Dinesh Vazirani's Saffronart.com and Geetha Mehra and Pravin Gandhi's Sakshi Art Gallery, among others—are aggressively pushing the field in new directions. Osian's Tuli has published art books, built the world's largest archive of Indian art and developed a historical record of prices. Saffronart.com pioneered online auctions, introducing a new level of transparency to a market long characterized by backroom, cash-only deals that left would-be buyers uncertain of the real market value of the works up for sale.

Now Tuli, Mehra and Gandhi are developing new ventures for the domestic art market: competing art-investment funds. In August, Mehra and Gandhi, backed by Edelweiss Capital, launched the Yatra fund. So far they have raised at least $2.3 million from high-net-worth investors—each of whom committed a minimum of $45,000 for four years—interested in tapping the art market. Osian's has a similar fund slated for launch in November; Tuli—never less than bold—expects to bankroll his fund with $25 million. In this market, he says, raising that amount is "a two-day job." Indeed, he has a good pitch: starting with about $3.5 million in 2000, Osian's is now worth more than 10 times that amount. You just can't beat that kind of a return.

© 2005 Newsweek, Inc.

conflicted commies

The force that could determine India's capitalist future is one of the world's strongest communist parties.

By Jason Overdorf

Newsweek International

Oct. 10, 2005 issue - As its name implies, the Communist Party of India-Marxist still employs the dated rhetoric of the left, down to calling its ruling body the Politburo, in old Soviet style. So it came as a surprise this summer when the national leadership endorsed "all the actions" of its maverick chief minister for West Bengal, a state of 100 million people and long a bastion of communist power. That came shortly after Buddhadeb Bhattacharjee wooed foreign investors in Singapore by saying Indian communists had to "reform or perish," and invited these capitalists to help build new infrastructure in West Bengal. The moment cemented Bhattacharjee's reputation as the Deng Xiaoping of India: a pragmatic communist reformer.

That doesn't mean, however, that India's communists have gone the way of comrades from Russia and China, tilting toward robber-baron capitalism. Just last Thursday the party's traditional allies in India's left-wing trade unions brought the country to a standstill with a daylong national strike that shut down railroads, airports and banks. In New Delhi, where the communists are critical partners in the coalition government, they have diluted free-market reforms and are hotly debating their proper role in a capitalist economy. The outcome of that debate is crucial: it could help determine whether India accelerates to China-style growth rates or stumbles yet again.

The Indian communists have more influence than all but one kindred party in a capitalist democracy, behind President Hugo Chavez's Movement for a Fifth Republic in Venezuela. (Third on the list: Portugal, where communists hold 12 of 230 seats in Parliament.) The CPM and two much smaller communist parties together control 60 of India's 545 parliamentary seats. Since the United Progressive Alliance led by Prime Minister Manmohan Singh's Congress party is 51 seats short of a majority, it depends on communists to stay in power. The CPM has used that clout to block or temper policies from the sale of state-owned companies to the liberalization of labor laws in special economic zones.

In Western Europe, the leading communists for much of the cold-war period were found in Italy, where their focus was internal: their big idea was worker ownership of factories in an otherwise capitalist market. Given the vast expansion in international trade since then, the Indian communists' focus is more global. Indeed, the country's population and growing economy make the party one of the world's most influential opponents of excessive globalization. Experts debate whether India's communists are emulating Chinese reformers or European social democrats. Bhattacharjee says neither: "We are debating among ourselves. What is reform? Reform means what? For whom?" Sitaram Yechury, a member of the CPM Politburo, says the party's overriding ambition is to shift the goal of market reform from promoting corporate profit to people's welfare.

The differences with China are stark. The Indians still cling to socialist ideals like worker protection and land reform, while China's leveling impulses seem to have been spent during the land reforms of the Mao era, when the rural bourgeoisie was all but destroyed. India, meanwhile, never made good on post-independence promises to wipe out a feudal caste system. That said, the Indian communists' ideas about economic sovereignty take a page from China's book, and mirror the Congress Party view of the early 1990s.

The CPM sets three rules for foreign investors: they must increase India's production capacity—build factories, rather than simply buying assets—help upgrade Indian technology, and create jobs. While Congress is now inclined to open doors further, the communists are more wary. Where Congress leaders praise a domestic automaker like Tata for rising to the challenge of foreign competition, the communists decry how Japanese giant Suzuki ultimately gained control of its Indian joint venture, Maruti Udyog. "It would be wrong for anybody to characterize us and say we have been opponents of capital flows into India," says Yechury. "We qualify those flows, rather than opposing them."

On battles over how India should comply with its obligations to the World Trade Organization, the CPM has prevented the government from giving away too much on issues like drug patents, which could have harmed consumers. And in some market reforms, the left has taken the lead. Bhattacharjee's Finance minister in West Bengal spearheaded the introduction of a value-added tax, as a way of eliminating tax evasion and replenishing government coffers, which some experts call the single most important economic advance in India in the last five years. "You can't just paint the left as anti-reform," says Ramesh Venkataraman, a partner with McKinsey & Co. in Mumbai. "The left is selective."

The CPM has been criticized in the Indian media as hypocritical for resisting a Congress plan to increase national limits on foreign investment in the telecommunications sector, while aggressively pursuing foreign investment for West Bengal. Once scorned for its obstructive policies and constant strikes, the state has been attracting investment from companies like IBM and Microsoft since Bhattacharjee took office in 1990, and now draws more investment from Japan than any other Indian state, including Karnataka, home to Bangalore's massive outsourcing industry. But the communists say the devil is in the details: the party opposed Congress's telecom plan because it would have allowed foreigners to provide phone service—making big profits but providing no new technology or manufacturing capacity in return. Yechury says the party has done nothing in West Bengal that it has rejected on the national level.

Still, the party remains conflicted about its most progressive members. When Bhattacharjee recently signed a deal with the Salim Group of Indonesia to build a 2,000-hectare commercial and housing development, party members accused him of favoring a company close to the former Suharto regime, which took power in an anti-communist coup. Soft-spoken and white-haired, he wears the large-framed spectacles typical of Bengali intellectuals, and embraces the word "capitalism" only with protections for workers and the poor. Yet he is pushing labor market reform to attract more outsourcing companies to West Bengal. He says workers must "share a concern" for productivity with management.

The CPM, in fact, reacted quietly to last week's union-led strikes, citing them as a warning to Singh not to push too hard on reform. Tellingly, the strikes hit hardest in West Bengal, where workers took complete control of the capital, Kolkata. They defied measures Bhattacharjee took to allow IT workers to get to work through blockaded streets. Only when Bhattacharjee personally confronted them did they meekly step aside. It remains to be seen whether his detractors in a party that still values its labor roots will ultimately do the same.

© 2005 Newsweek, Inc.