An alternative route to development

Living standards are lower than in China and India, but the quality of life is higher

China is running out of electric power; Indian businesses have to have their own generators; and the little countries that sit between them, such as Cambodia, from where I am writing this, try to figure out a way of sustaining economic development without running into the environmental problems of these giants.

China is running out of electric power; Indian businesses have to have their own generators; and the little countries that sit between them, such as Cambodia, from where I am writing this, try to figure out a way of sustaining economic development without running into the environmental problems of these giants.

Just this week, in Shanghai, officials are visiting factories to get the least efficient energy users to curb their needs. They are seeding the clouds above the city to try to increase rainfall and cut the temperatures, for air-conditioning is a great gobbler of energy. And they are even thinking of shutting off the illuminated signs that now characterise the city's boom in an effort to save power. China is already the world's second largest user of energy, after the US, yet its GDP per head is less than 10 per cent of America's. It uses twice as much energy per head as India, but its output per head is only about one-third higher.

If this is a problem for China - and indeed India - it is also a problem for the whole developing world. Here in Cambodia, the visitor gets a worm's eye view both of the predicament and of the opportunity. Phnom Penh is not the seething mass of Bombay nor the glittering, if pressured, metropolis of Shanghai. But more remarkable than the difference in scale is the difference in feel. The living standards, as measured by economists in GDP per head, are probably lower. But the quality of life seems much higher. That is partly the layout of the city, for it still has the wide boulevards of the French colonial era. But it is more that Cambodia is further down the development path and does not seem to have the huge inequalities of wealth that now characterise the big cities of China and India.

Cambodia's development progress has been delayed by the most dreadful of histories, including having 20 per cent of its population murdered a generation ago by the Khmer Rouge. But now it is growing rapidly and the question is whether it can avoid the mistakes made by so many of its neighbours. Here are some reasons for hope.

First, it is pricing energy properly. Electricity and petrol are both priced much higher than in neighbouring Thailand, a far richer country. That has kept the spread of the car down - this is a 100cc Honda moped society - but it has also kept the roads relatively clear of jams. At some stage, the new middle class will want its own cars, just like the middle classes of China and India. But that boom will come at a time when fuel efficiency of the world's car fleet is much better than it is now. Next, it has not raced towards ever more intensive agriculture, with the result that there is far less rural pollution. Cambodian rice has a particularly fine reputation for quality. So Cambodia is a net exporter of rice to Thailand and Vietnam.

Third, a lot of resource is going into education, with the growth of private sector universities, a boom in the teaching of English and the spread of internet cafes. One, in a way slightly sad, measure of this progress is the switch from French to English. The legacy foreign language is being dumped for the commercially important one. This is bottom-up, demand-led education, not the top-down imposed sort.

Further, it is majoring on the forms of manufacturing that it is good at. Some 60 per cent of its exports are textiles. You could argue that this is a sign of being at the bottom of the manufacturing ladder, but it also means that it is not in the "me-too" business of making cheap electronic components. China and India will always be able to undercut it on price because their huge populations will tend to hold down wages. It has to push up on quality.

And finally, it has a unique proposition to tourists: the starred alpha site of the temple of Angkor Wat, coupled with a colonial city, an unfrequented sea-coast and the charm of its people. I am told that China plans to send a million visitors a year. It needs to manage its tourism while avoiding the mistakes of so many tourist traps. Can it? Well, at least it can try.

The task facing developing countries is not to reinvent the process of development. It is to learn how to fine-tune it, to nudge it in ways that will avoid the mistakes of China or, indeed, the US and Western Europe.

There is a host of ways in which developing countries could do better than us, but three seem to me to stand out.

One is energy use. There has to be a better way of organising society than the energy-intensive Western way of life. Some technologies will have to be developed by the West, but lifetime costs matter more than up-front costs.

Two is land use. Suburban sprawl is wasteful, not just of land and of time spent commuting, but also of energy. Density can be made to work, as Japan has shown, creating decent lifestyles in much less space than Americans or even Europeans consider they need.

And finally, there is lifestyle itself. There is plenty of evidence that beyond a certain minimum, higher incomes do not make people any happier. The most important single task for the newly developing countries, surely, is to find that middle way: how not just to get richer, but how to create societies comfortable with their own heritage.