Inflationary Nepali economy soon!

So, the newly elected Finance Minister Dr. Baburam Bhattarai, Maoist party's second-in-command, has outlined highlights of the upcoming budget. Here are some:

• Relief to civil servants and those displaced by conflict ("to boost the national economy")
• Allowances to elderly people and widows (why not introduce a valid federal mandated Medicare and Medicaid kind of program rather than giving allowances based on pure discretion?)
• Salary of lower level government employees would be increased
• Emphasis on industrialization and boosting economy to increase per capita income
• Support to families of martyrs and those displaced by the state during the armed conflict

The budget is due mid-September. Does not these few highlights sound inflationary? Note that at present the inflation level is hovering around 9 percent.

South Asia: Energy trade, and trade and transport facilitation

Both these links come from the World Bank publications. Lately, I have been studying/working on prospects and scope of energy trade (hydropower), especially Nepal as an exporter. Does Nepal has a comparative advantage? How far can this trade go in the present investment and supply chain constraints? I will try to write an Op-Ed on this issue this weekend!

South Asia Energy: Potential and Prospects for Regional Trade

• Energy trade is very minimal in South Asia. Only Nepal, India, and Bhutan currently trade electricity.
• Despite being one of the most richest sources in current/flowing water having potential to produce huge amount of hydro energy, this region produces just 45 of the world's electricity.
• Bhutan’s unexploited hydropower potential exceeds 23,000 MW and Nepal's exceeds 43,000 MW.
• Bhutan’s electricity export in 2007 is expected to be 25% of its GDP and 60% of its state revenues.

South Asia: Trade and Transport Facilitation

• Intra-regional trade constitutes less than 5 percent of total trade.
  South Asia's share of global trade is less than 2 percent.
• International air freight is less than 1 percent of total trade volume.
• Over a third of the South Asia’s exports consist of textiles and clothing.
• The ports in the Bay of Bengal have low levels of productivity.
• The South Asian logistics sector is at a formative stage but it is developing quickly.

Links of Interest

The global consensus on trade is unravelling

(Lawerence Summers discusses the difficult economic policy faced by the US and the emerging nations):

...it is unclear which underlying driver of global growth will replace the one in place for the past decade – the US as importer of last resort. Global growth has depended on US growth, which has depended on the US consumer; and the US consumer has depended on rising asset values first of stocks and more recently of real estate. With falling house prices and a challenged financial system, US consumer spending is falling. The US is no longer in a position to be a net source of demand for the rest of the world. Indeed, with the drop in value of the dollar, US growth – which had been focused on imports and which had enabled the export-led growth of other countries – is a thing of the past. Already, Europe and Japan are in or are very close to being in recession.

The Bogs and Pitfalls of Democracy (Yubraj Acharay writes about the delicate foreign policy balance Nepal needs to maintain in order to not irritate both China and India. The recent visit by Nepal's Maoist's prime minister to China is against the usual tradition of first visiting India before going to China. India is already showing some concern in this matter.)

Workforce development as a response to information asymmetry

The Next Frontier: The Road Ahead for Low-Income Countries

What's the single thing most likely to double living standards in poor countries over the next decade? 

(For Antionette Sayeh, head of IMF's African Department and former Finance Minister of Liberia, it is roads; for Domenico Lombardi, President of the Oxford Institute for Economic Policy and Nonresident Senior Fellow at the Brookings Institutions, it is governance; Kumi Naidoo, Honorary President, CIVIVUS: World Alliance for Citizen Partnership, it is national ownership; for Andrew Kumbiatira, Executive Director of Malawai Economic Justice Network, it is investment in education; for Eveline Herfkens, Founder of the UN Millennium Campaign, it is delivering on promises to meet the MDGs; for Roy Cullen, Member of Parliament, House of COmmons, Canada, and author of The Poverty of Corrupt Nations, it is tackling corruption; and for Enrique v. Iglesias, former President of the Inter-American Development Bank, it is boosting productivity).

Simon Johnson on the emergence of the emerging markets (here is related video)