Monday, January 30, 2012
Links for January 30, 2012
Jagdish Bhagwati on the African Brain-drain panic
Inflation target tyranny
How do states act after they get nuclear weapons?
Paul Romer's Charter Cities concept is getting notices
This fear is misplaced. At the outset, we have to distinguish between “need” and “demand.” Yes, many African countries need skills. But they are unable to absorb them, owing to several factors associated with economic backwardness.
[...]Moreover, keeping people at home is easier said than done. In many poor countries, except those like India and South Korea, which have now developed superb educational institutions, the brightest citizens receive their education abroad. The challenge, then, is to prevent them from staying there and settling down.[...]
The proper response to the outflow of skilled manpower from poor countries, especially those in Africa, is to be found in a different direction.....This means adopting a “diaspora” model, which implies four policy proposals....First, stop crying over the fact that the diaspora is not returning home. Instead, nurture the loyalty of professionals settling abroad, so that they assist their home countries in a variety of ways....Second, while the diaspora should be integrated through more rights, its members also ought to accept obligations that put them on an equal footing with those who remain behind....Third, because skills are necessary for nearly all activities in most of Africa, here and now, we need to organize ways to supply such skills to these countries......Finally, foreign aid should be used to expand training massively for Africans in all the essential fields in rich countries like the US, the United Kingdom, France, and the Netherlands.Does the Chinese Yuan matter?
Inflation target tyranny
[...] The central banks of the leading developed countries failed spectacularly in the lead-up to GFC. Their failure was centred on what most central bankers still regard as the great achievement of the 1990s, the shift to a system of ‘inflation targeting’, in which the sole objective of monetary policy was to keep the rate of inflation in a target range, typically close to 2 per cent.[...]
[...] in the post-crisis environment, achievement of inflation targets has no longer promoted stable economic growth. Rather, low inflation has been a drag on growth. But with inflation clearly under control, central bankers like former European Central Bank President Jean-Claude Trichet have been able to describe their own performance as ‘impeccable’, even as the economies and currencies they manage appear headed for collapse....This system is clearly unsustainable. But what is the alternative?[...]
The most popular idea begins with a change of target, from the rate of inflation, to the level of nominal GDP (the most commonly used measure of national output, valued at current prices).... The idea would be to combine a target rate of inflation (say 2-3 per cent) with an estimate of the medium-term rate of real economic growth required to maintain full employment (again 2-3 per cent is a plausible estimate). The aim would then be to keep the value of GDP, expressed in current dollars, on a growth path consistent with these targets (that is, at an average annual rate somewhere between 4 and 6 per cent).
...First, it would restore the balance that used to prevail in monetary policy before the 1990s, when central banks were explicitly required to pursue full employment as well as price stability...Second, because the target would apply to the level of nominal GDP, its adoption would require central banks to catch up the ground lost over the last few years of depressed growth and generally low inflation...Third, the adoption of a nominal GDP target, by committing central banks to an expansionary policy would have self-fulfilling effects on expectations....Last but not least, a nominal GDP target would create room for fiscal policy as well as monetary policy.
How do states act after they get nuclear weapons?
Paul Romer's Charter Cities concept is getting notices
Corruption in Nepal: A symptom, not a disease
The following opinion piece was published in Republica today with the title "Wrong Diagnosis". The direct Republica link is here.
Corruption in Nepal: A
symptom, not a disease
When the Corruption Perception Index was published by Transparency
International recently, it reported that 33 percent of South Asians were made
to pay bribes. Sixty two percent of South Asians believed that the corruption
situation had gotten worse in the last three years. Unlike Bangladesh, where
bribes are paid to “get” things done, people in Nepal, India, Pakistan and Sri
Lanka pay bribes to “speed up” the process of getting things done.
The report highlighted the fact that political parties are the most
distrusted institutions in Nepal. Around 54 percent of those surveyed mentioned
the political parties as the most corrupt, followed by the legislature and the
police. Many in Nepal took the report as a further proof of rampant corruption
in Nepal. Many Nepali opinion pieces decried the phenomenon, and labeled
‘corruption’ as the disease plaguing Nepali developmental processes. And,
therein, lays our biggest problem. We don’t seem to realize that corruption is
not a disease, but merely a symptom.
Corruption is never ‘the’ problem or even the ‘root’ of the problem. We
have to realize that rampant corruption is a symptom of dysfunctional state
mechanisms, overregulation, uncontrollably large public service sector, and, in
the case of Nepal, absence of strictly enforced rule of law. And, then, there’s
our ever incorrect understanding of corruption being an absence of ethics. We need
to realize that corruption is not so much an absence or lack of ethics but an
absence of freedom, mostly economic freedom.
This lack of economic freedom is visible in all aspects of our Nepali
lives. Corporations do not have the freedom to pursue their capitalistic
pursuits in the best of possible ways because of intermittent disturbances from
political or trade unions. Case in point is the recent closure of Surya Nepal’s
garment unit in Biratnagar. Travel agencies do not have the freedom to operate
their vehicles in popular tourist destinations due to threats from local
syndicates. Case in point is the Pokhara—Jomsom route where red-plated and
green-plated vehicles are barred from making trips. These are, but, only two examples.
Both the above mentioned instances (examples) have aspects of
corruption in them. The first one has political leaders becoming corrupt, and
mismanaging their respective party-affiliated unions. Some people go one step
further and accuse that the parties even fund and foster these unions for the
very purpose. The second one has, again, political parties and their unions,
favoring one group of travel entrepreneurs over another, with a healthy aid of
corruption money.
However, we have to realize that corruption is only the symptom in both
these examples. The underlying disease is the lack of enforcement of rule of law in punishing those involved in
restricting the freedom of others for their own pursuit of wealth. Presence of
weak rule of law in Nepal has meant that corruption is increasing, and informal
market i.e. shadow economy is growing. A recent report by Nepal Economic Forum estimates
that the informal economy of Nepal is worth anywhere from 40 to 50 percent of
the GDP.
An additional disease that plagues us is the weak property rights law. Many of us lack the knowledge about processes
of practicing our freedom over property rights. Even when we have had enough
knowledge, the bureaucratic hurdle we have to go through to register our
properties is, sometimes, a nightmare. On the other hand, there are people that
engage in corrupt behavior to get more than they deserve. Case in point are the
thousands of homeowners in Kathmandu valley that captured and profitably used
public land for years, if not for decades, until they started getting taken
down by the municipality in recent weeks.
Weak rule of law and weak property rights have meant that we do not
have a very conducive environment for pursuing business opportunities. The World Bank’s Doing Business report from this year reports that it takes, on
average, 7 different procedures, 29 days, and around $241 to register a new
business in Nepal. Even after ignoring the amount of money needed, the fact
that it takes 7 different procedures and 29 days, on average, to register a
business suggests that there are plenty of opportunities for our officials to
engage in corrupt activities, from plain-old under-the-table money taking to
rent-seeking.
One possible way to reduce such type of corruption is to reduce the
number of steps and days needed to register a business. Until we achieve that,
we will always have people shying away from opening a new business. How many
entrepreneurs, each year, are we discouraging from opening a new business due
to our poor Doing Business records? How
many jobs could such entrepreneurs have created if we had a system that
encouraged them to open businesses with relative ease? Our government, and our
bureaucracy, needs to ponder over this issue while they discuss poor business
environment in Nepal.
Perhaps we should try a solution that Indian economist Kaushik Basu has
proposed. Let us make paying bribe legal but receiving bribe illegal. In
addition, if a bribe-payer can provide evidence of paying a bribe, not only
would the amount paid in bribes be reimbursed, but the bribe-payer (now
considered a ‘whistle-blower’) would be rewarded with prize-money for exposing
the corrupt official. Then, every potential bribe-taker would refrain from
taking a bribe because it would be difficult to determine if the bribe-payer is
a ‘normal’ bribe-payer or a whistle-blower. Kaushik Basu’s proposed idea might
have some flaws of its own, but it’s worth a try in a region that Transparency
International calls the ‘most corrupt’ in the world.
Monday, January 23, 2012
Links for January 23, 2012
How the U.S. Lost Out on iPhone Work
Inefficient and Unfair
Inefficient and Unfair
......there are (at least) four problems with capitalism, which the current crisis has revealed rather than caused:
1. The rise of low-wage competition from Asia, the slowdown in the rate of innovation, and the difficulty of monetizing some innovations has lead to a long-standing dearth of profitable investment opportunities and thus to slow real growth. One effect of this has been that money has flowed into malinvestments instead, creating a tendency towards speculative bubbles and slumps.
2. Top-down control of companies is inefficient, both for Hayekian reasons (bosses haven’t the knowledge or rationality to control big organizations) and because of perverse incentives and selection effects.
3. Capitalism concentrates ownership of (some) risky assets into a few hands, and thus creates greater fragility and vulnerability to crises than is technically necessary.
Will emerging markets fall in 2012?4. There’s a division between ownership and control. The problem of collective action, allied to the fact that the key asset in many firms is human rather than physical capital, means that shareholders are unwilling and unable to control firms. The result is that they become mechanisms whereby bosses and key workers can tunnel assets away from formal owners to those with real power.
As 2012 begins, however, investors are wondering if emerging markets may be due for a correction, triggered by a new wave of “risk off” behavior........few believe that the rapid economic growth and high trade deficits that Turkey has experienced in recent years can be sustained. Likewise, high GDP growth rates in Brazil and Argentina over the same period could soon reverse, particularly if global commodity prices fall – not a remote prospect if the Chinese economy begins to falter or global real interest rates rise this year. China, in turn, could land hard as its real-estate bubble deflates and the country’s banks are forced to work off the bad loans.
.....The empirical argument is simply historically based numerology: emerging-market crises seem to come in a 15-year cycle. The international debt crisis that erupted in mid-1982 began in Mexico, and then spread to the rest of Latin America and beyond. The East Asian crisis came 15 years later, hitting Thailand in mid-1997, and spreading from there to the rest of the region and beyond. We are now another 15 years down the road. So is 2012 the year for another emerging-markets crisis?Four keys to a better tax system
- Broaden the base and lower the rates
- Tax consumption, and not income
- Tax bads and not goods
- Keep it simple
Labels: brazil, capitalism, china, emerging markets, iPhone, taxation, thailand, turkey, US
Friday, January 20, 2012
Guantanamo Bay: In Numbers
If you are getting this in email and cannot see the attached picture, please visit my blog (khanalm.blogspot.com) to see it.
Labels: gitmo, guantanamo, united states, war on terror
Thursday, January 19, 2012
Articles in Republica and Kathmandu Post
First, Republica has my article on how we can learn from China and grow. The title is "Model Watch". The first two paragraphs:
Chinese Prime Minister Wen Jiabao’s Nepal visit on Saturday made quite a lot of headlines in the Nepali national dailies. The constant newspaper reporting and the “curfews” imposed in various roads in Kathmandu were reminders of how important and heavyweight the Chinese premier, and ergo China, is considered in this part of the world. This rise in China’s importance, not just in South Asia but also in the global arena, is because of its unprecedented economic growth: China is the second largest economy in the world and is expected to overtake the United States by 2020.
What has pushed China from poverty to the second largest economy in a span of few decades? The question merits some explanations if we are to learn any lessons from China’s rise. Most importantly, we need to learn to adopt and implement the economic policies and programs that like that of China for our own economic growth.
Second, The Kathmandu Post has my article on the state-society relationship in Nepal. The title is "Relaxing the noose". The first paragraph:
There is this notion amongst intellectuals in Nepal debating the state-society relationship that a stronger state negatively affects the strength of civic society. The notion comes out of years of experience in the form of oppression from the hands of strong states. This is especially true in Nepal since oppression and repression were commonplace during the Rana rule and the Panchayat system. However, a stronger state need not always imply a weaker civic society.
Labels: china, development, federalism, Kathmandu Post, poverty, Republica, SSR
Tuesday, January 17, 2012
Links for January 17, 2010
On the morning of 11 January Mostafa Ahmadi Roshan, the deputy head of Iran's uranium enrichment facility at Natanz, was in his car on his way to work when he was blown up by a magnetic bomb attached to his car door.......Since 2010, three other Iranian nuclear scientists have been killed in similar circumstances, including Darioush Rezaeinejad, a 35-year-old electronics expert shot dead outside his daughter's nursery in Tehran last July. But instead of outrage or condemnation, we have been treated to expressions of undisguised glee...........
......"On occasion, scientists working on the nuclear programme in Iran turn up dead," bragged the Republican nomination candidate Rick Santorum in October. "I think that's a wonderful thing, candidly." On the day of Roshan's death, Israel's military spokesman, Brigadier General Yoav Mordechai, announced on Facebook: "I don't know who settled the score with the Iranian scientist, but I certainly am not shedding a tear" – a sentiment echoed by the historian Michael Burleigh in the Daily Telegraph: "I shall not shed any tears whenever one of these scientists encounters the unforgiving men on motorbikes."
.....western liberals who fall over one another to condemn the death penalty for murderers – who have, incidentally, had the benefit of lawyers, trials and appeals – as state-sponsored murder fall quiet as their states kill, with impunity, nuclear scientists, terror suspects and alleged militants in faraway lands. Yet a "targeted killing", human-rights lawyer and anti-drone activist Clive Stafford Smith tells me, "is just the death penalty without due process".Libertarian Illusions
Libertarianism is the single-minded defense of liberty. Many young people flock to libertarianism out of the thrill of defending such a valiant cause. They also like the moral freedom that libertarianism seems to offer: it's okay to follow one's one desires, even to embrace selfishness and self-interest, as long as it doesn't directly harm someone else.
Yet the error of libertarianism lies not in championing liberty, but in championing liberty to the exclusion of all other values. Libertarians hold that individual liberty should never be sacrificed in the pursuit of other values or causes. Compassion, justice, civic responsibility, honesty, decency, humility, respect, and even survival of the poor, weak, and vulnerable -- all are to take a back seat........
.....By taking an extreme view -- that liberty alone is to be defended among all of society's values -- libertarians reach extreme conclusions. Suppose a rich man has a surfeit of food and a poor man living next door is starving to death. The libertarian says that the government has no moral right or political claim to tax the rich person in order to save the poor person. Perhaps the rich person should be generous and give charity to the neighbor, the libertarian might say (or might not), but there is nothing that the government should do. The moral value of saving the poor person's life simply does not register when compared with the liberty of the rich person.
Most ethical and political systems find the libertarian position abhorrent, indeed preposterous. Most would hold that the government can, should, and indeed must, tax the rich person to save the poor person. That's because most ethical and political systems hold that liberty is only one value among many important values, and that the value of the indigent's life takes priority over the liberty of the rich individual.Leading by Example: The presence of female politicians boosts aspirations, educational achievement of young women.
A newly published study co-authored by MIT economist Esther Duflo, along with three colleagues, shows that the increased presence of local female political leaders in India has had a marked impact on adolescents and their families, raising the career aspirations and educational performance of young women.
.........having women serve as the leader, or pradhan, of a village council erases the prevailing “gender gap” that tends to work in favor of young men, provided that female politicians remain visible in local government for an extended period of time..........due to a role-model effect: Seeing women in charge persuaded parents and teens that women can run things, and increased their ambitions............Fake malaria drugs putting millions at risk
Fake and poor quality anti-malarial drugs are threatening efforts to control the disease in Africa and could put millions of lives at risk.........counterfeit medicines could harm patients and promote drug resistance among malaria parasites..........New findings on Heisenberg's uncertainty principle
Heisenberg's Uncertainty principle is arguably one of the most famous foundations of quantum physics. It says that not all properties of a quantum particle can be measured with unlimited accuracy. Until now, this has often been justified by the notion that every measurement necessarily has to disturb the quantum particle, which distorts the results of any further measurements. This, however, turns out to be an oversimplification, new research suggests.10 reasons the US is no longer the land of the free--Washington Post
Assassination of U.S. citizens
Indefinite detention
Arbitrary justice
Warrantless searches
Secret evidence
War crimes
Secret court
Immunity from judicial review
Continual monitoring of citizens
Extraordinary renditions
Labels: freedom, heisenberg, India, Iran, jeffrey sachs, libertarian, libertarianism, malaria, nuclear
Monday, January 16, 2012
Poem: Mero Nepal
The direct link for Nepal Weekly is here.
बरु म मेरै खहरेको पानी पिउँछु
क्याभियार खाएर
सोफेस्टिकेटेड हुनु छैन मलाई
म नेपाली ढिँडो-सिस्नुमै जिउँछु
र, यदि तिमीहरू
मेरो नेपाललाई टुक्रा पार्छौ भने
लिम्बूवान, भोटेवान, चमारवान
बाहुनवान, नेवारवान किन बनाउँछौ ?
बरु तीन करोड टुक्रै पारेर लुछ !
तीन करोडै टुक्रा पार्यो भने पनि
एक टुक्रामा त
मरो पनि हक लाग्छ !
रियल स्टेटको लोभ छैन मलाई
मलाई बरु
वर्षौं पानी नपरेको
चाउरी परी, जोवन गई फुटेका
उग्र तिब्बती हावाका वेगले
उदाङ्गै भई अस्मिता लुछेका
अनगिन्ती मुस्ताङे भीरमध्ये
कुनै एउटा भीरको
एउटा सानो टुक्रो मात्र भए पनि हुन्छ ।
मलाई हर बिहानी उठी
ती जग्मगिला उत्तरी हिमाल अगाडि
झुक्न पाए पुग्छ
बरु मुस्ताङको मरुभूमि सरिय
बालुवै होओस्
मेरो नेपालको
माटो चुम्न पाए पुग्छ ।
एन्जेलिना र ऐश्वर्याको
रूपको बखान नगर मलाई
मलाई तल्लाघरे कान्छीसँग
प्रीत बुन्न पाए पुग्छ
वाग्नर र बाकका
सांगीतिक बखान नसुनाऊ मलाई
मलाई गाइने दाइका
पीर-व्यथा सुन्न पाए पुग्छ ।
अहँ, मोजार्ट सुन्नु छैन मलाई
मनसुनको वषर्ायाममा
खेतका ती भ्यागुताका
टरटर र टुरटुर सुनेका छैनौ भने
तिमीले संगीत सुनेको छैन
गाउँले दिदीहरूले
धान रोप्दै गाउने
असारे धून सुनेको छैनौ भने
तिमीले गीत सुनेको छैन ।
देवगणहरू आए मलाई भेट्न
र भने, "नवारले बाहुनलाई ढाँट्ने,
बाहुनले सार्कीलाई डाँट्ने,
नेता देश साट्ने,
अनि, दाइले भाइ काट्ने
यस्तो देशमा के बस्छस् ?"
कामदेव आए र भने,
"हिँड्, म दिन्छु सुन्दर रूपको खजाना !"
अहँ, मैले भनेँ,
आत्मा पवित्र छ मेरो
चाहिन्न मलाई रूप सुन्दर, सयाना ।"
कपटी देव इन्द्र आई भने,
"हिँड म दिन्छु स्वर्गको आनन्द बास !"
अहँ मैले भने,
मेरो नेपालप्रति कर्तव्यविमुख हुन्न म
नदेखाऊ मलाई तुच्छ आश ।
तिम्रो आँखामा बिझाउँछ होला
तर मेरा लागि त
मेरो नेपाल मेरो आँखाको नानी हो
खट्किन्छ होला तिम्रा लागि
मेरो देशको इतिहास
तर मेरा निम्ति त यो
सबैभन्दा सुन्दर कहानी हो
तिम्रा नापतौलमा
केही पनि नहोला यो देश
तर मेरो बुद्धको करुणा यही हो
मेरो मुटुको धड्कन अनि
मेरो इन्देणीको झरना यही हो ।
मेरो नेपाल
चाहिन्न मलाई तिम्रो कोक र पेप्सीबरु म मेरै खहरेको पानी पिउँछु
क्याभियार खाएर
सोफेस्टिकेटेड हुनु छैन मलाई
म नेपाली ढिँडो-सिस्नुमै जिउँछु
र, यदि तिमीहरू
मेरो नेपाललाई टुक्रा पार्छौ भने
लिम्बूवान, भोटेवान, चमारवान
बाहुनवान, नेवारवान किन बनाउँछौ ?
बरु तीन करोड टुक्रै पारेर लुछ !
तीन करोडै टुक्रा पार्यो भने पनि
एक टुक्रामा त
मरो पनि हक लाग्छ !
रियल स्टेटको लोभ छैन मलाई
मलाई बरु
वर्षौं पानी नपरेको
चाउरी परी, जोवन गई फुटेका
उग्र तिब्बती हावाका वेगले
उदाङ्गै भई अस्मिता लुछेका
अनगिन्ती मुस्ताङे भीरमध्ये
कुनै एउटा भीरको
एउटा सानो टुक्रो मात्र भए पनि हुन्छ ।
मलाई हर बिहानी उठी
ती जग्मगिला उत्तरी हिमाल अगाडि
झुक्न पाए पुग्छ
बरु मुस्ताङको मरुभूमि सरिय
बालुवै होओस्
मेरो नेपालको
माटो चुम्न पाए पुग्छ ।
एन्जेलिना र ऐश्वर्याको
रूपको बखान नगर मलाई
मलाई तल्लाघरे कान्छीसँग
प्रीत बुन्न पाए पुग्छ
वाग्नर र बाकका
सांगीतिक बखान नसुनाऊ मलाई
मलाई गाइने दाइका
पीर-व्यथा सुन्न पाए पुग्छ ।
अहँ, मोजार्ट सुन्नु छैन मलाई
मनसुनको वषर्ायाममा
खेतका ती भ्यागुताका
टरटर र टुरटुर सुनेका छैनौ भने
तिमीले संगीत सुनेको छैन
गाउँले दिदीहरूले
धान रोप्दै गाउने
असारे धून सुनेको छैनौ भने
तिमीले गीत सुनेको छैन ।
देवगणहरू आए मलाई भेट्न
र भने, "नवारले बाहुनलाई ढाँट्ने,
बाहुनले सार्कीलाई डाँट्ने,
नेता देश साट्ने,
अनि, दाइले भाइ काट्ने
यस्तो देशमा के बस्छस् ?"
कामदेव आए र भने,
"हिँड्, म दिन्छु सुन्दर रूपको खजाना !"
अहँ, मैले भनेँ,
आत्मा पवित्र छ मेरो
चाहिन्न मलाई रूप सुन्दर, सयाना ।"
कपटी देव इन्द्र आई भने,
"हिँड म दिन्छु स्वर्गको आनन्द बास !"
अहँ मैले भने,
मेरो नेपालप्रति कर्तव्यविमुख हुन्न म
नदेखाऊ मलाई तुच्छ आश ।
तिम्रो आँखामा बिझाउँछ होला
तर मेरा लागि त
मेरो नेपाल मेरो आँखाको नानी हो
खट्किन्छ होला तिम्रा लागि
मेरो देशको इतिहास
तर मेरा निम्ति त यो
सबैभन्दा सुन्दर कहानी हो
तिम्रा नापतौलमा
केही पनि नहोला यो देश
तर मेरो बुद्धको करुणा यही हो
मेरो मुटुको धड्कन अनि
मेरो इन्देणीको झरना यही हो ।
Labels: poem
Friday, January 13, 2012
India’s identity scheme
The Economist has an article on the Universal ID that is being championed in India by Nandan Nilekani, the co-founder of the Indian IT giant Infosys. Some highlights:
Poverty has many causes, and no simple cure. But one massive problem in India is that few poor people can prove who they are. They have no passport, no driving licence, no proof of address. They live in villages where multitudes share the same name. Their lack of an identity excludes them from the modern economy. They cannot open bank accounts, and no one would be so foolish as to lend them money.
The government offers them all kinds of welfare, but because they lack an identity, they struggle to lay hands on what they have been promised. The state spends a fortune on subsidised grain for the hungry, but an estimated two-thirds of it is stolen or adulterated by middlemen. The government pays for an $8 billion-a-year make-work scheme for the rural poor, but much of the cash ends up in the capacious pockets of officials who invent imaginary “ghost workers”.
.........
This month India’s unique identity (UID) scheme will enroll its 200 millionth member, having had almost none only a year ago (see article). By the end of this year, says Nandan Nilekani, a former software mogul who runs the project, the tally could stand at 400m, a third of all Indians. The scheme is voluntary, but the poor are visibly enthusiastic about it. Long lines wait patiently in the heat to have their fingerprints and irises scanned and entered into what has swiftly become the world’s largest biometric database.
For the poor, having a secure online identity alters their relationship with the modern world. No more queueing for hours in a distant town and bribing officials with money you don’t have to obtain paperwork that won’t be recognised if you move to another state looking for work. A pilot project just begun in Jharkhand, an eastern state, will link the new identities to individuals’ bank accounts. Those to whom the government owes money will soon be able to receive it electronically, either at a bank or at a village shop. Ghost labourers staffing public-works schemes, and any among India’s 20m government employees, should turn into thin air. The middlemen who steal billions should more easily be bypassed or caught.
............
Companies—and their customers—stand to gain from the system too. Mr Nilekani talks of India stealing a march on other countries if firms have an easy, secure way of identifying their customers. Banks will be more likely to lend money to people they can trace. Mobile-phone firms will extend credit. Insurers will offer lower rates, because they will know more about the person they are covering. Medical records will become portable, as will school records. Ordinary Indians will find it easier to buy and sell things online, as ordinary Chinese already do. Just as America’s Global Positioning System, designed for aiming missiles, is now used by everyone for civilian navigation and online maps, so might UID become the infrastructure for India’s commercial services.
Labels: India, nandan nilekani, UID
Tuesday, January 10, 2012
An apple Vs an Apple: the Infographic
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Friday, January 6, 2012
Global Poverty Facts and Stats
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Source of today's charts and graphs: www.globalissues.org
Source of today's charts and graphs: www.globalissues.org
Thursday, January 5, 2012
Challenges of the Nepali economy in the next few years
The following was published in an online news portal www.hamrakura.com. The direct link to the web article is here.
Challenges of the Nepali economy in the next few years
Nepali economy has had a rough ride in the past few years. The
escalating Maoist conflict sent the economy into doldrums during 2006/07. The
economy went into a further fragile state due to the worldwide financial crisis
in 2007/08, the domestic liquidity crisis since 2009/10, and the real estate
crisis since 2008/09. Although the economy has recovered substantially, growth
has been poor when compared to neighbors, inflation has not stopped its goliath
run, and jobs are hard to come by for un-skilled or semi-skilled youths. Now
that the year 2011 is well behind us, let us look at some problems that the
Nepali economy will have to face in the coming year and beyond.
Urbanization
Urbanization is a boon and a curse. On one hand, urbanization is an
indicator of economic growth. On the other hand, it creates a crisis in terms
of delivery of public service goods and services because of increasing demand
for said goods and services that, in turn, constrain resources and create
crisis in delivery.
The escalating war between the Maoists and the Nepali state resulted in
a rapid internal migration of Nepalese citizens from rural areas to urban
centers. One of the
major problems that arose out of this internal displacement was the classic urban giantism problem in the
Kathmandu Valley. Unlike cities in China or India, the urban giantism problem
of Kathmandu and a few other cities was not because they provided more jobs and business opportunities, but because of safety and security that they provided to people’s lives and
properties. Despite the end
of the decade-long Maoist rebellion, that started this rapid urbanization
phenomenon, the urbanization trend has not stopped. It is on the rise.
Like many
other Least Developed Countries
(LDCs), urban
centers of Nepal receive disproportionately larger budget in terms of
development than rural areas. They have more
hospitals and schools. As a result, the rural-urban migration has resulted in the creation of slums and
makeshift communities in Kathmandu and other urban centers in Nepal. This has
made the
poverty situation worse. In
addition, the weak
economy implies that the poor and the hungry that arrive in today’s urban
centers and cities remain poor and hungry because the government cannot take care of their basic needs.
Urbanization
is happening, and is unavoidable. But, proper mechanisms can be put in
place through anticipation or progressive efforts. Basic amenities and services
should be provided all over the country so that people do not flock to urban
centers to receive such services and amenities. There aren’t enough roads
connecting different places in Nepal. Rural areas need roads to stay connected
with the rest of the country. Unless an inclusive approach is taken, Nepali cities will keep
experiencing rapid urbanization and crowding.
The Remittance
Economy
When the Maoist rebellion was at its throes in 2006, the state of
Nepali economy was in a mess, and was on the verge of collapse. The one thing
that saved the economy was remittance money flowing in from overseas. Thanks to
remittance, the consumption did not wane, and the economy stayed its course.
However, that does not mean remittance is always good.
The latest NLSS reported that 53 percent of Nepali households have at
least one member working away from home, out of which 32 percent work in
foreign countries. The reason why so many Nepalis go overseas for work is
because our state cannot provide them with jobs. However, that is not the worst
news to come out of NLSS-III. It is this: 79 percent of the total remittance
received by Nepali households is spent on consumption, and only 2.4 percent is
spent on capital formation activities.
That is, the remittance income that our country receives each year
finances our consumption, and only a small fraction is actually invested in a
useful manner.
Another fact: over 65 percent of those that go to work overseas are
between the ages 15 and 29 while the rest are between the ages 30 and 44. This
does not bode well for our own economic development. How can our economy foster
if the best and the ablest of our labor force goes overseas to build some other
country’s economy? And, it does not look like we are going to see an improvement
in this regard. The Youth Charter designed by our very own National Planning
Commission has 6 bullet-points to help the youths of this country. One of those
bullet points says something to the effect of “to train and provide our youths
with skills that will enable them to land jobs overseas”.
The Youth Charter designed by the NPC explicitly says that one of the
best things it can do for our youths and our economy is to train and educate
our youths just enough so that they can land overseas jobs as laborers. If that
is the best our country can do for our youths, we have no hope. How about
mentioning something like “to create jobs at home for our youths so they don’t
have to toil as menial workers in lands with no laws”?
And, then, there’s something called the spoil effect that we have
to deal with. A study in Kosovo has shown that remittance money sent by family
members from overseas made the youths reluctant towards seeking higher
education. It also reduced their incentives to work. Similar results have been
observed in studies done in remittance heavy economies like the Philippines,
Egypt and Somalia. The spoil effect, essentially, suggests that an easy
availability of remittance money sent from abroad by family members distorts
the work efficiency and working mentality of the recipient young family
members. What good is our remittance economy if we risk losing an entire
generation of our youths to poor education and poor skills due to the spoil
effect?
Nepali
Agricultural Decline
The share of agriculture in national GDP has been on a perpetual
decline. Agriculture contributed 72 percent to the Gross Domestic Product (GDP)
in 1975. Today, it contributes only about 30 percent to the GDP. The situation
is dire due to the fact that we still lag behind in the adoption and use of
technology in our agricultural practices. Agriculture in Nepal cannot compete with highly subsidized and
technologically superior large producers like China and India.
This decline would not be worrisome in itself. But, the reason why
agriculture’s decline is much more worrisome in our case is because 65 percent
of our labor force is still engaged in agriculture. This
is not going to change soon because this labor force does not have the skills
and education to get hired by other sectors. Nepali agricultural labor
force is mostly uneducated/under-educated and unskilled/low-skilled. Most of
this labor force lives in rural areas, and therefore, lacks basic education,
training and healthcare.
Our
liberalization policies and free trade agreements will push a large chunk of
the agricultural labor force into poverty. Although globalization benefits the
world, the fact remains that underdeveloped and developing countries, like
Nepal, have been unable to use it to their benefit. Lack of infrastructure to
transport goods to the market and vulnerability to risks posed by
liberalization make it harder for Nepal to benefit from it when compared to
countries that are already developed.
Agriculture can no longer remain our
leading economic sector. Sooner or later, as in all other nations that have
developed before us, other sectors are bound to surpass agriculture as Nepal’s
leading contributor to its GDP. However, instead of giving up on agriculture
altogether, the government should train and educate the agricultural labor
force in a way that the transition from agriculture vis-à-vis services and
industry should be a smooth flow instead of a painful process.
Liquidity
Crisis Will Return
As the NLSS-III showed, most Nepalis spent the remittance income on
consumption and spent only a small fraction in capital formation activities.
The same is true of any type of income, and not just remittance. So, one of the
reasons why the Nepali financial system went through a liquidity crisis since
late 2009 until late 2011 is because of the Nepali public’s reluctance in
saving their money in banks and financial institutions (BFIs). However, the
main culprits of the recent liquidity crisis are the banks themselves who used
to have surplus money in their vaults, but gave it away recklessly to whoever
came asking for it. And, those that came asking for it were the housing and the plotting people.
Nepal Rastra Bank (NRB) did its best to mitigate the crisis. It
suggested bank mergers hoping that the merger would create a larger institution
that would experience lower costs due to economies of scope and scale, increase
in market power, diversification, and reduced operational expenses. The belief
was that the newly created larger bank would free up vital cash and other
resources to infuse more liquidity into the market while ensuring lower costs,
maximum efficiency and stability. However, no conclusive evidence exists of
such perceived gains occurring in real life.
The NRB also lowered the Cash Reserve Ratio (CRR) from 5.5 to 5
percent, and claimed that this move would infuse Rs 3-4 billion liquidity into
the market in order to ease the liquidity crunch. However, the NRB's tactics of
lowering the CRR was undertaken to provide the bankers an accounting gimmick
that could free up some cash in order to show profit, however minimum, to their
shareholders. Any cash that opened up due to lower CRR would simply be invested
in acquiring government treasury bills to ensure that SLR remained at 15
percent. The move was a sham.
One move that could have mitigated the crisis was if the NRB had
lowered the interest rates to make it easier to borrow money. However, NRB
could not lower the interest rates without giving the impression of loosening
its anti-inflationary stance. If the rates were lowered so much that it came
close to being zero percent, it risked turning the liquidity crunch into a
“liquidity trap”. Also, a low interest rate would mean that people would hoard
cash in their homes instead of depositing in their banks since interest rates
signal the returns they would get on their deposits. That would make the crisis
even worse. In addition, a low interest rate would also cause capital flight
from Nepal to India where Indian banks provided higher interest rates. The
capital flight scenario was highly plausible given the constant pegging of NRs
with IRs, the high volume of traffic crossing the border between India and
Nepal, and the easiness of converting NRs into IRs.
The above reasons make the NRB’s monetary policies
ineffective in its fight against financial crises like the liquidity crisis. In
addition, economists, like Paul Krugman, believe that monetary policies should
be pursued only if a financial disturbance has the potential to affect
inflation or the real economy. It should not be pursued to solve a financial
distress. The liquidity crunch that we saw recently in Nepal had the tendency
to affect neither the inflation nor the real economy. Therefore, there is
serious doubt as to whether the NRB’s policies mitigated the recent liquidity
crunch or if it was just the market correcting itself. In either case, majority
of loans provided by our banks are still in the real estate sector. Until the
lending portfolio of our banks do not change, we will be going through another
round of liquidity crunch in the coming couple of years.
(Copyright) Mukesh Khanal
Labels: capital flight, central bank of nepal, crisis, CRR, economy, financial institutions, housing, IRs, jobs, liquidity crisis, monetary policy, NPC
Wednesday, January 4, 2012
Development and Politics in Nepal
The problem with developmental process in Nepal is this: it is mired in
politics. We in Nepal, involved in the developmental processes, have a hard
time realizing the fact that development should be an apolitical process. If we
in the developmental arena wish to succeed, we need to separate the politics from
the developmental process. However, there is a noticeable feeling in the Nepali
development community that in order to achieve true and effective development
in Nepal, the bureaucratic and the political actors need to get involved in any
and all development processes. That, I think, is a fallacy that we continue to
suffer to this day.
Development activities in Nepal will not succeed if the targeted group
knows that political actors are involved in the process—either as facilitators
or as decision makers. This is because the Nepali public has a genuine distrust
and loathing towards politics and politicians. And, this is where many I/NGOs
in Nepal have gone wrong. They have clearly been affected by the political
process and actors. Many openly cavort to those in the political spectrum while
at the same time claiming to be apolitical and non-partisan to their core
customers. When the public discovers this, it views it as a charade and a
façade. This negative vibe in the public, then, hinders the effect and influence
of such I/NGOs. As a result, the desired outcomes do not occur, and the
developmental activities become ineffective and a failure. This has become a common
storyline among donor funded agencies operating in Nepal today.
Now, it would be unfair to put 100 percent of the blame on these organizations
for this inability to separate the politics from development. My guess is that
the cavorting and cohort-ing with politics is a survival strategy. Without
active support and participation of political parties and actors, these programs
face greater difficulty succeeding in Nepal regardless of the strength and/or
capacity of the program or the organization running that program. These organizations
have come to the brutal realization that in order to succeed in Nepal, the
political “connection” is a must. And, so, they do in Rome what Romans do:
establish and enhance political connections.
Unstable politics and government in Nepal is one reason why these
organizations cavort to the politicians. We have lost count of how many prime
ministers we have had since the democracy in 1990. We have lost count of how
many governments we have had. The constantly changing political and
governmental landscape makes it difficult for development organizations in
Nepal to carry on their activities if they do not establish political influence
and links. Therefore, the political connection and hobnobbing continues today while
claiming to be apolitical to the public, potential donors and funders.
The claim of being apolitical has been nothing but a tactic to provide
refuge and a safe working environment for their workers who work with the
public day in and day out all over Nepal. The hobnobbing with the politicians
has been nothing but a tactic to provide a safe bureaucratic and political
environment for continued presence in this country.
While it is understandable that these organizations have had to cater
to the masses as well as to those in the political spectrum for their existence
and continued work, it is also true that their political relationships diminish
their essence. Although they do not wish to acknowledge, it cannot be denied
that their increasing connection with those in politics has contributed to increased
corruption and abuses of power in Nepal. The closer ties of our politicians
with these organizations enable the politicians to think that their
interaction, participation and influence on these organizations will blanket
them from any or all criticisms. The I/NGOs in Nepal are making their own work
difficult by providing this sort of sense of security to our political actors.
Can we deny the fact that free money that the Maoist party kept getting from
various foreign donors, in one way or another, helped develop the thuggish wing
of the party? That is, but, only one example. The hobnobbing has hindered
political accountability.
Marina Liborakina, a Russian activist, once said: “As citizens, we are
responsible for how we are governed. The main issue is…to broaden citizens’
participation…especially in decision-making on crucial issues of security,
peace and military”. However, in today’s Nepal, this is not possible. Activists
have a difficult time fulfilling their responsibilities because the kind of
support they expect from various I/NGOs is lacking. And, the reason it is
lacking is because those involved in the developmental process in this country
have not separated themselves from politics.
(Copyright) Mukesh Khanal
Labels: development, INGOs, NGOs
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