Case for Knowledge Economy Services in Kashmir

“The economy, stupid” is one of the ideas from Bill Clinton’s campaign strategist James Carville, that sank elder Bush’s boat in the 1992 US presidential election. I had just landed as a student in America a year earlier, when I followed with utter amazement how Bush’s 90% approval ratings were pummeled into dust with the power of a few simple ideas like the one about economy. A new fairy tale president was elected, making economy a central policy plank for the Clinton administration. Eight years later, the country had a budget surplus and one of the best periods of economic recovery in recent times. While the context of this article is not even remotely political and certainly without parallels, the phrase applies to Kashmir’s revival as aptly now, as it did to United States 25 years ago.

Kashmiris, including the diaspora, must put a concerted and strategic focus on building new fundamentals for our economy. While we have predominantly been an agrarian economy, the focus must shift to economic activities that are sustainable, do not disturb our fragile environment, fit with our cultural ethos, utilize available human resources, and help us become a relevant global contributor for decades to come. We have a strong case for building a vibrant knowledge economy in Kashmir and we should not be doing "more of the same" any more. Departing from the usual pronouncements of “government should have this policy or that policy,” I propose that this knowledge economy be citizen driven, with the realization that the government is not going to be of any help. Successive governments have been driven by their political agendas and controlled by their masters in New Delhi. They have not had any strategic focus for social and economic development in Kashmir. Let us stop pretending that the government will help or take ownership and accountability for our economic progress. We must be practical and stand on our own feet.

The Kashmir Valley is not suited for heavy industry for a variety of historical, environmental, and geographical reasons. Our environment is fragile and is rapidly deteriorating, partly resulting from rampant deforestation, use of pesticides, and soil erosion. We must break free from a 19th century “industrial” mindset. We are land-locked and do not have reliable and affordable transport links to a port. Our potential for productivity and innovation is strangled, as we are dependent on only a couple of choked transport links for raw material imports or exports of physical goods outside of Kashmir. The high cost and low volume carrying capacity of existing transport links suggests that they should only be used for high value and low volume goods like saffron, walnuts, high grade apples, shawls, papier mâché, rugs, etc. In addition, sustainable farming methods should be adopted for a “locally grown, locally consumed” lifestyle that overcomes external dependence and frees up the capacity of strained transport links to carry high value exports outside of Kashmir. While traditional horticulture and handicraft industries should be sustained, they cannot become a focus for economic revival and we must not invest new money to scale these industries up.

Tourism-related trade, hotels and restaurants account for only about 7% of the total economy. While it has been touted as a panacea for our economic ills by some, “more of the same” investments on it are like putting lipstick on a pig. Tourism cannot create a substantial number of meaningful and well-paying jobs in Kashmir and is not the industry where local money and energy should be spent for long term sustainability. The social and physical infrastructure needed to massively scale tourism is not compatible with our cultural values or available physical resources. Frankly, the kind of tourism that has prevailed recently puts more latent costs on Kashmir than it creates in economic value. There are no more than 1.5 million visitors that have ever visited Kashmir in a given year. Of those about 90% are domestic visitors. A significantly large number (80% based on anecdotal data) of those domestic visitors are what are known as Pepsi-chips tourists. They come to Kashmir for a few days - many for the Amarnath Yatra. These tourists generate little economic value as they bring much of their own food with them, buy a few Pepsi bottles, eat a few potato chips bags, throw plastic wherever they go, and exert damaging costs on the environment through their visit. Building a robust tourist industry that offers well paying jobs requires concerted focus from a local trade group with a disciplined campaign to attract the right type of tourists from developed countries. The current run-amok tourism model will kill the hen that lays the golden egg.

So, what should we do, then?

Nobel laureate Paul Krugman’s ‘economic geography’ model proposes that concentrating resources in a geographical area and focusing them on a key production activity can become a source of competitive advantage and wealth for communities. In simple terms, what happens is that an ecosystem gets built where some people with special skills and knowledge come together and a larger pool of resources and ancillary services needed for success of the product or service gets developed in the geographical area. Two examples to illustrate the point: 1) More than 90% of the functional carpet produced in the world today is made within a 65 mile radius of the city of Dalton in Georgia, USA 2) An estimated 80% of all rough diamonds in the world are handled in Antwerp, Belgium. That is not how these industries started in their respective locations but that is what they became. The examples are many, but they point to the same economic idea that it is advantageous to focus and develop capability in a specific industry. For Kashmir, an area that can be exploited is developing deep capabilities to support a global knowledge economy. A simple definition of a knowledge economy by Powell and Snellman is: “We define the knowledge economy as production and services based on knowledge-intensive activities... The key component of a knowledge economy is a greater reliance on intellectual capabilities than on physical inputs or natural resources.”

A key question is do we have the infrastructure, resources, and capabilities? A short answer is that yes we do. Some pieces need significant improvement to become useful but some capabilities are reasonably developed. Kashmir has sufficient human resources and intellectual capital. There are no huge infrastructure development projects needed to get us started. Given our unique circumstances and capabilities, we must focus on two major areas: 1) Educational Services, whereby Kashmir becomes a destination of choice for students wanting to learn skills needed in a knowledge economy and 2) Information Technology, where we become a serious contender to develop software and offer back-office support for major corporations of the world. The two are intertwined and feed off of each other. The Educational Services industry will not only offer services to local Kashmiri students but also to other students from the rest of the world. And the local IT industry will not only offer services to global corporations but also fund research projects and provide employment opportunities to students from local universities. This may sound like a lofty goal to some. The barrier is a self-imposed one. There is nothing that stops the Kashmiri community, with rock solid support from the diaspora, to start this journey of a thousand miles with small steps in the right direction.

Here is one example of why I believe it can be done. Dr. Siddiq Wahid took over the role of Vice Chancellor of Islamic University of Science and Technology in 2005 with less than 12 lac rupees. He negotiated a revolving door loan of one crore rupees with J&K Bank to get started. The Wakf Board, which established the University, eventually came up a year or so later with about 1.7 crore rupees as grant. With a starting batch of 200 students, the University today has about 3,000 students, a net worth of 125 crore rupees, and self-generates about 60% of its profits, more than any other university in the region! This astounding success took Dr. Wahid’s leadership and dedication, but is a shining example of what is possible. Another example is a software company by the name of BQE, which was established about 20 years ago. With offices in Srinagar, Kashmir and California, USA, the company employs about 50 people in Kashmir and has become a multi-million dollar business with hundreds of thousands of users of its software throughout the world. There are other examples that illustrate that despite curfews, shut-downs, a stifling bureaucracy, unhelpful government, and dilapidated infrastructure, progress can be made and economic value can be created.

In future articles, we can certainly describe the business case in detail. A back-of-the-envelope calculation tells me that Kashmir can easily easily stand up about 800 small 10-member teams delivering services for the knowledge economy. Each member of the team will need to personally invest 50,000 rupees one time and 15,000 rupees per month until the business generates revenue. With proper grooming and guidance, in about 18 months, the business can generate enough revenue to cover its operating costs. After that, a good business should start generating profits that can be invested back in marketing and growth activities. Starting with 50 such units generates a revenue of 30 crores and in a few years with 800 units, can generate 480 crore rupees - a significant boost to the economy and about 8,000 new jobs. None of this will happen unless people take ownership of their destiny and start moving in tandem.

Lack of sustainable economic progress has its political roots and our unfortunate position in the Indo-Pak geo-political theater. Those are historical cards we have been dealt. However, our societal inclinations and beliefs have to fundamentally change. As a community, we have to allow our youth to think critically from a young age, teach them how to solve problems instead of giving them solutions, allow them to take financial risks, allow them to pursue education and careers that they are passionate about, support and encourage jobs in private enterprises, change our work ethic, and most importantly encourage truthfulness and honesty as a society. We must transform from an “ideas” society to an “execution” society. Economic progress is three things: People, Capital, and Technology or Know-how. We have the people, but a vast majority needs to build new skills and a stronger work ethic. We have the capital, but it has to transfer from palatial houses and wazwan to investments in small businesses focused on Educational and IT Services. We can learn technology but the attitude has to change from getting a certificate or diploma to gaining knowledge. A belief that it can all be done is the basic difference between success and failure. And that belief starts with only a few, who chip away at it, one chip at a time. This can all be done in spite of political turmoil and lack of support from the government. Let us start with one new unit next month and soon enough, we will be on our way to hundreds more.

Playing on Jim Carville’s words, here are three things to consider:

Change vs. More of the Same

The Knowledge Economy, Stupid

Don’t Forget…

With quality Educational and IT services, we can begin pivot to economic activities that are sustainable, environmentally friendly, culturally compatible, utilize our human resources, and help us become relevant globally. Join us in the effort to take our economy forward.

By Tahir Qazi

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