An op-ed published in your paper entitled “The Rupee Crunch: Reconciling theory with reality” by one Mr. Norbu has been making its rounds since May. It appeared in the May 19th issue of Kuensel under a pseudonym and again in the Bhutan Observer on May 25, identifying the author as Nyingtob Pema Norbu.
While Mr. Norbu’s piece is highly articulate and a welcome contribution to the discussion on Bhutan’s current Rupee problem, we must take issue with one specific paragraph:
To wit: “A recent study by the BCCI attempted to plot government spending against private credit. Any amateur economist would be able to identify the technical flaws of deriving relationships from such simplistic methods. One of the deficiencies is the issue of omitted variable bias. With private credit being determined by many other variables the simple filtering of government spending as being the major contributing factor amounts to intellectual dishonesty. Even if government spending did genuinely lead to credit expansion, due to the private sector attempting to capitalize on government construction activities, laying the blame on the government is dishonorable. ……..Laying the blame on the government for inducing the private sector to take on credit is like a rapist blaming the victim for being physically appealing. In an attempt to vindicate themselves, even Wall Street bankers used similar shades of arguments.
As the authors behind the BCCI report, we feel that it is important to clarify some points.
First, there was no “recent study” at the time that Mr. Norbu first penned his article. He was referring to a story in the Bhutanese that in turn quoted us as pointing out similar trends in government spending and domestic credit. Though at the time we were insistent that it not present these observations as research findings, the story’s tone may have articulated exactly that, for which we share some of the blame. Then again, it was hardly the most offensive crime to point out that domestic credit mirrors government spending. After all, the government’s spending on infrastructure development and procurement of goods and services is exactly what creates opportunities for private businesses. This was a fact later borne out in our report, which used publicly available data from the Royal Monetary Authority, Ministry of Finance, and National Statistics Bureau.
The BCCI report on Bhutan’s balance-of-payments problem was officially submitted to the government at the Private Sector Deveopment Committee meeting on May 31st, 2012, and has since been made publicly available. It is unfortunate that Mr. Norbu did not read the report since first publishing his piece, as we were hoping that he would reconsider his decision to label our work as intellectually dishonest. The report does not presume to be any kind of final word on the issue. Our findings do not imply that the government is to blame, but rather that it plays a central role in setting the economic agenda for the country, precisely because it is the biggest player in the economy. At the same time, we have highlighted the need for greater communication between the government, the central bank, and the public because we appreciate the importance of consultative planning and clear communication between all stakeholders.
This is an issue of national importance that affects us all. We certainly have no other agenda than to help find a common solution, and we believe that the best ideas emerge from active discussions and debate. Accusations of intellectual dishonesty and equating other people’s opinions to that of rapists and fraudulent Wall Street bankers is counterproductive to that process, to say the least.
QED Consulting Group