Views of a Nepali Economist

China's economic development has a potential demography problem

Over the past 30 years, China’s total fertility rate....has fallen from 2.6, well above the rate needed to hold a population steady, to 1.56, well below that rate...... Because very low fertility can become self-reinforcing, with children of one-child families wanting only one child themselves, China now probably faces a long period of ultra-low fertility, regardless of what happens to its one-child policy.......Shanghai reported fertility of just 0.6 in 2010—probably the lowest level anywhere in the world. According to the UN’s population division, the nationwide fertility rate will continue to decline, reaching 1.51 in 2015-20........

Scotland is voting for independence from the UK in 2014. Is it a good idea?

The political and cultural issues around independence are hotly debated. Yet fittingly, in the birthplace of Adam Smith economic arguments seem to weigh heaviest. Opinion polls suggest that they will determine whether or not Scots go for independence. One poll found that just 21% of Scots would favour independence if it would leave them £500 ($795) a year worse off, and only 24% would vote to stay in the union even if they would be less well off sticking with Britain. Almost everyone else would vote for independence if it brought in roughly enough money to buy a new iPad, and against it if not.

Massive corruption in the Chinese military

...."Certain individuals exchange public money, public goods, public office and public affairs for personal gain, flouting the law and party codes of conduct, even resorting to verbal abuse and threats, clandestine plots and set ups," he said. "They physically attack loyal and upstanding officials, kidnap and blackmail party leaders, and drag in their superiors to act as human shields. They deploy all of the tricks of the mafia trade within the army itself." The way Liu describes it, the web of military cliques, factions, and internal knots of organized crime sounds more like the workings of warlord armies before the communist revolution than the rapidly modernizing force that is currently rattling China's neighbors.

Open border between India and Nepal is a cause of concern: Akhilesh Yadav, the newly elected Chief Minister of Uttar Pradesh

....the newly-elected UP CM said the 550km-long border with the state requires special policing arrangement to put a check on any possible anti-national activity....

Labels: border, china, corruption, economy, India, scotland

The Secret Document That Transformed China

In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.

The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village's collective farm; there was no personal property.

[...] In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate.

So, in the winter of 1978, after another terrible harvest, they came up with an idea: Rather than farm as a collective, each family would get to farm its own plot of land. If a family grew a lot of food, that family could keep some of the harvest. [...]

[...] One evening, they snuck in one by one to a farmer's home. Like all of the houses in the village, it had dirt floors, mud walls and a straw roof. No plumbing, no electricity. [...]

[...] Despite the risks, they decided they had to try this experiment — and to write it down as a formal contract, so everyone would be bound to it. By the light of an oil lamp, Yen Hongchang wrote out the contract.

The farmers agreed to divide up the land among the families. Each family agreed to turn over some of what they grew to the government, and to the collective. And, crucially, the farmers agreed that families that grew enough food would get to keep some for themselves.

The contract also recognized the risks the farmers were taking. If any of the farmers were sent to prison or executed, it said, the others in the group would care for their children until age 18. [...]

[...] Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn.

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed.

At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined.

That huge harvest gave them away. Local officials figured out that the farmers had divided up the land, and word of what had happened in Xiaogang made its way up the Communist Party chain of command.[...]

Labels: capitalism, china, communism

How the U.S. Lost Out on iPhone Work

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.

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.

Will emerging markets fall in 2012?

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

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

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Union leads to closure of Fire and Ice restaurant

Asian Development Bank projects four per cent growth in 2012 for Nepal Nepal slips eight positions down in the Economic Freedom rankings

Nepal has slipped eight position down to be ranked at 129th among the 141 economies with a score of 5.50 in this year’s Economic Freedom of the World report released here today. Last year, Nepal was at 121st rank with a score of 5.54.

World Development Report 2012: Gender Equality and Development shows that closing gender gap boosts growth

“Countries that create better opportunities and conditions for women and girls can raise productivity, improve outcomes for children, make institutions more representative, and advance development prospects for all,” it said, adding that in Nepal as many as 14 per cent married women are largely silent on how their earned money is spent. “But they are more actively involved in the decision making recently,” according the World Bank that revealed that women’s greater public voice not only benefits women and children but also men. “Giving women bigger say in managing forests in Nepal has significantly improved conservation outcomes too,” it added. “The disparities between boys and girls in primary education have almost closed over the past 25 years, and at the secondary level, the gaps are shrinking rapidly,” it said, lauding Nepal’s efforts in closing the gender gap.

National Information Technology Centre to be established in Hetauda

The Centre’s building will be constricted at the estimated cost of Rs. 300 million with the grant assistance of the Korean government

India set to overtake Japan as world's third largest economy

India is now the fourth-largest economy behind the US, China and Japan. Last year, Japanese economy was worth $4.31 trillion, while India´s was at $4.06 trillion. But after the devastating tsunami and earthquakes in March, Japan´s economy is expected to contract while India´s economy will grow between 7-8 percent this fiscal year.

Earlier, a report by PwC suggested that the Indian economy would surpass the Japanese economy in 2012. The IMF expects the Japanese economy to contract 0.7 percent this year while India is expected to grow 8.2 percent.

BFIs told to insure deposits up to Rs 500,000

Banks and financial institutions (BFIs) that were required to compulsorily insure deposits up to Rs 200,000 will now need to insure all deposits up to half a million rupees.

Labels: banks, central bank of nepal, china, gender inequality, India, IT, Japan, labor unions

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1. Nepal's 238 percent tax on imported vehicles is a waste of taxpayers' money

2. Nepalese Commercial banks show low trust on other Financial Institutions

3. US Ambassador to Nepal says "It's the economy, stupid."

4. British Army announces Gurkha troop reduction

5. China promises to promote tourism in Nepal

6. Department of Customs suspects capital flight using fake bills

...The department has unearthed fake abbreviated customs declaration forms...there could be two reasons behind producing fake abbreviated customs declaration forms: to produce legal documents to the imported goods through illegal points or to misuse foreign currency

The department has suspected capital flight by two Birgunj-based firms — Shyam Galla and JB traders and arrested them. It is estimated that some Rs 300 million has been misused by Shyam Galla and Rs 160 million by JB Traders

The issue had come into the light after police on August 29 nabbed five people with fake customs declaration forms. They were trying to get more than Rs 7.52 million transferred to India on the basis of the counterfeit documents.

7. Food security situation remains stable in Nepal

...attributed to a good harvest of winter crops (April-June) and employment opportunities generated by development aid...wheat and barley production increased by 12.2 per cent and 9.6 per cent respectively compared to last year

...but, 28 Village Development Committees (VDCs) in the south-western belt of the district as highly food insecure...because of...a 60 per cent reduction of wheat and spring paddy production due to a dry spell, which was cumulative to the 2010 reduction of 40-60 per cent in the main paddy production.

Parts of the Eastern Hill and Mountain districts are reported as moderately food insecure...Most of the Mid and the Far Western Hill and Mountain districts reported a food secure situation...a seasonal deterioration is reported in part of the Eastern Hill and Mountain districts where the winter crops of wheat and barley are cultivated in limited areas and do not play a vital role in food security...situation in upper Dolpa and some Village Development Committees in the northern and the southernbelt of Baitadi are likely to deteriorate to the highly food insecure phase during the next cycle as there will be no incoming harvest and employment opportunities as well as market supply will be affected by monsoon

According to the central bank, High food prices remain a concern. The year-on-year inflation, measured by the Consumer Price Index, increased by 8.8 per cent in mid-June 2011 whereas the indices of the cereal subgroup increased by 10.4 per cent.

8.Tourist arrivals via air up by over 26 percent in August...Some Numbers

*arrivals from South Asian region have gained robust growth of 38.7 percent
*India 50 percent
*Bangladesh 20.9 percent
*Sri Lanka 11.7 percent
*Pakistan 1 percent

*arrivals from other Asian regions have also registered growth by 57.2 percent
*China 157.6 percent
*Malaysia 95.2 percent
*Thailand 55.6 percent
*Singapore 51.6 percent
*Japan 9.5 percent
*Arrivals from South Korea declined by 10.7 percent

*arrivals from Europe registered overall positive growth of 0.9 percent
*Germany 51.5 percent
*Belgium 28.2 percent
*Denmark 16.2 percent
*Italy 9.3 percent
*Sweden 7.5 percent
*UK 3 percent
*Arrivals from France declined by 13.8 percent
*Arrivals from Netherlands declined by 11 percent
*Arrivals from Russia declined by 31.2 percent
*Arrivals from Spain declined by 10.3 percent

*arrivals from Australia registered growth of 19.7 percent
*arrivals from New Zealand registered growth of 7 percent

*arrivals from USA registered growth of 16.9 percent
*arrivals from Canada registered growth of 33 percent

*49,858 foreign tourists departed from TIA in August 2011.
*52,811 Nepali arrived while 64,326 departed from TIA in August 2011.

Labels: banks, capital flight, china, customs, financial institutions, food security, gurkhas, imports, tourism, vehicle tax

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1. Korean Language Test results out
*50,043 applicants had taken the test
*only 15,298 passed
*13,298 applicants will work in production related job and remaining 2,000 in agriculture sector
*South Korea is a lucrative destination for Nepali workers with a monthly average income of $1,000

2.Deposits in commercial banks up in Q4

RBB, which has the highest deposit base among commercial banks, saw its deposits rise 13.44 percent in Q4 against a growth of 4.02 percent in the previous quarter. The bank collected deposits worth Rs 8.75 billion during Q4. RBB’s total deposits as of the end of fiscal 2010-11 amounted to Rs 73.92 billion.

Nepal Bank Limited collected more than Rs 4.47 billion in deposits during Q4. Its total deposits at the end of fiscal 2010-11 stood at Rs 46.80 billion, up 10.56 percent from the previous quarter.

Agricultural Development Bank saw its deposits going up 6.17 percent in the last quarter against a growth of 1.61 percent in previous quarter.

3. Chinese team to study Ring Road widening has arrived in Kathmandu

The 18-member team has geotechnical engineers, traffic engineers, material engineers and other technical experts.

The team will spend 40 days in Kathmandu to do a survey for widening 9.5 km of the 27-km long Ring Road in the first phase.

The Ring Road improvement project will upgrade the current four-lane road to eight lanes (a four-lane, two-way main road, a four-lane, two-way relief road, a two-way bicycle path and a two-way pedestrian path, including bus stations and parking lots).

The road widening work is expected to be completed by 2013 utilising resources received as grant assistance from China annually.

On Feb 28, 2011, the Chinese government had agreed to provide a grant assistance of RMB 50 million (Rs 547 million) for widening the Ring Road and other projects. The technical team will design a simple urban flyover; three pedestrian overpasses will also be built. Even though the locations for the flyover and overpasses have not been fixed, the project is likely to select Kalanki Chowk to build the flyover with a signalised intersection underneath for pedestrians.

4. Indian overland tourist arrivals up 74pc

*298,821 Indian tourists visited Nepal in 2009 via land routes
*520,522 Indian tourists visited Nepal in 2010 via land routes
*This is a 74 percent increase

*154,086 third-country tourists entered Nepal by land in 2010

*Major entry points for Indian tourists were: Vittamod (Janakpur) with 17 percent, Birgunj with 13 percent, Kakarbhitta with 8 percent, Biratnagar with 5 percent, Nepalgunj and Mahendranagar with 3 percent each and Dhangadhi with 1 percent.

*96,928 vehicles entered Nepal through eight border points in 2010, an increment of 22 percent over the previous year's figures.
*46 percent of tourists coming via Indian land routes came by public bus and 39 percent by private vehicles.

*For 2010:
Entry Point // Number of Tourists // Percent Of the total
Birgunj // 89,544 // 13 Percent
Vittamod (Janakpur) // 112,038 // 17 Percent
Kakkarbhitta // 55,098 // 8 Percent
Biratnagar // 32,320 // 5 Percent
Nepalgunj // 17,919 // 3 Percent
Dhangadhi // 8,730 // 1 Percent
Mahendranagar // 21,117 // 3 Percent
Bhairahawa // 337,842 // 50 Percent

5. BFIs barred from opening accounts amongst themselves
According to the NRB:

Financial institutions should collect deposits and lend...If they park their deposits in other institutions, it will create anomalies. Therefore, we have decided to stop it

I believe this is a good step by the NRB especially because:

NRB’s latest statistics show that commercial banks have deposits worth Rs 670 billion, development banks Rs 90 billion and finance companies Rs 84 billion.

6. Whole-Genome Study proves that Nepalese UN-peacekeepers brought Cholera to Haiti that has killed 6000 people so far

7. Bhutanese refugee numbers in Nepal nearly halved after re-settlement overseas

8. New Hydropower rules in Nepal makes it difficult for Indian investors to invest in Nepal

Labels: ADBL, Bhutan, china, cholera, haiti, hydroppower, korean language test, liquidity, migration, NBB, nepal rastra bank, refugees, ring road, tourism