Sunday, March 31, 2019

Few points on Nepal Investment Summit 2019 and the days ahead

Nepal Investment Summit 2019, one of the flagship events of PM KP Sharma Oli's government, ended yesterday. The two-day event was organized to showcase key projects in Nepal and to sensitize investment opportunities in Nepal. The IBN said there were 735+ foreign delegates representing 300+ foreign companies, 40+ countries, 600+ domestic participants and 100+ domestic companies.

The government highlighted what it considers key achievements to create a conducive investment climate: political stability, approval of legislation (PPP and Investment Act 2019, amendments to SEZ, forest and labor bills, hedging regulations, FITTA amendment, contribution based social security scheme, etc). Particularly,  the focus was on 'one-window service' for investment approvals either through IBN (Rs 6 billion and above, and 200 MW and above hydroelectricity projects) and DoI (rest of the investments). To improve budget execution, the government is planning to bring a separate law that allows the PM to directly oversee implementation of national priority projects.

The government and private sector showcased dozens of projects (about 77) for investors to invest in agriculture, education, energy, industrial enterprises, tourism, transport, and urban infrastructure. The application received for some of the projects are listed here. Here are the list of MoUs signed or announcements made during the summit (note that some of these projects were in pipeline already and would have happened irrespective of NIS 2019).
  • Chaudhary Group and Sharaf Group for the development of multi-model logistics park
  • Chaudhary Group and SkyPower for the development of 600-MW utility-scale solar projects
  • CG LifeCell and Turkcell for 5G Mobile Network Service
  • Province 2 govt and CG Infrastructure for the development of Solar Photovoltaic Energy
  • SAPDC (Sutlej Nepal) and State Bank of India, Everest Bank and Nabil Bank for financing 900-MW Arun-3
  • Yunnan Xinhua Water Conservancy and Hydropower Investment, Hydro Solutions and Shanghai Investigation, Design and Research Institute for development of 164-MW Kaligandaki Gorge
  • IBN, IFC and SEZ Authority for development of Simara SEZ
  • Sincere Consulting and Resources Himalaya Boutique Village Resort for development of Himalaya Boutique Village Resort (Banepa)
  • NRNA and Ministry of Industry for setting up of Rs 10 billion fund
  • National Collateral Management Services and Nepal Warehouse Company for development of Grain Ware House
  • FCAN and Myanmar Licensed Contractors’ Association for infra-development cooperation
  • Financial Closure of $650M for development of216 MW Upper Trishuli - 1 by KOSEP
  • Investment of Rs 399m by Muthoot Finance, India on United Finance
  • IBN and Investment Board, South Africa for mutual cooperation
  • Api Power and Kandel Group, UK for development of energy projects

Here are a few cautionary pointers for the days ahead:

First, it was a signature event of the government that is doing everything it can to present a case for high FDI in Nepal. Nepal organized similar events in 1992 and 2017. As is usually the case, everyone sounded optimistic and praised the government for actual as well as intended reform measures. The output will be seen when they transition from talk to action

Second, the real deal is on follow-ups and implementation. Having a law is one thing, but effective implementation with all the policy, regulatory and institutional frameworks in place is another. Both are important. Nepal has been really bad in the latter. Updating or amending a law is a regular task to ensure that the investment opportunities and provisions are safer and competitive than in other countries. This is a means to an end, not an end in itself. The IBN has allowed investors to apply for any of the showcased projects by April 20. Then the government will choose the most suitable investors and proceed with realizing the investment. This is where the most important task lies. Investors will compare the government's promises against the system in place for them to realize the promises. This means a true 'one-window service', hassle free approvals, policy consistencies, etc. Lets recall that the result from NIS 2017 is almost nil. 

Third, the private sector representatives were all optimistic about opportunities in Nepal and the ease of doing business. But, they are also the ones who have been complaining about difficult times and batting for cartel associations to control resources or to seize sectoral opportunities. Furthermore, rent-seeking among government agencies is not a new thing. 

Fourth, the government will have to sort out inconsistencies in laws or clarify that there are no inconsistencies. This matters because approval and implementation hassles crop up when there are ambiguities in laws. And, there are plenty of ambiguities related to layers of approval requirement, bureaucratic discretion, income repatriation, visa restriction, negative list, etc. Also, private sector is hesitant to join the contribution-based social security scheme due to the confusion over conflicting clauses in the amended labor bill. 

Fifth, the apparent discord between the IBN and Minister of Industry, Commerce and Supplies was visible during the event too. The industry minister is not happy with the way the ministry was sidelined during the summit. Also, he has differences with the PM regarding IEA amendment. This is what breeds failure of inter-ministry coordination. 

Sixth, since IBN is taking the lead on these events, we also need think how sustainable the efforts will be given that most of the staff it has now are temporary consultants hired through an external firm (with donor funding). There needs to be an exit strategy for active donor support for recurrent spending. The government should build internal institutional mechanism with reliable revenue stream to retain and sustain experts based on the need. IBN is so reliant on donors that over 90% of its budget and staff requirement (without any O&M survey as is customary in government agencies) are fulfilled through non-government sources. What is the financial and institutional sustainability plan of IBN? It is especially important now because of its increased workload (investments over Rs6 billion and PPP work) and concerns about accountability. 

Seventh, the biggest challenge is in transforming the bureaucracy's mindset from problem-pickers to problem-solvers or facilitators. Investors repeatedly complain about the hassles they face when they have to deal with bureaucracy, which is quick to identify problems rather than to solve outstanding issues to facilitate investments.

Eighth, doing business rank may bump up this year considering the fact that the government amended major investment laws to ease approval processes. Of course, this presupposes other countries haven't made equally or better amendments to facilitate investment. Implementation aspects are not well reflected in DB rankings. 

Tuesday, March 26, 2019

Ambiguous investment laws, and Japan as new labor destination

From The Kathmandu Post: Two key laws that were passed are Foreign Investment and Technology Transfer Act and the Public Private Partnership and Investment Act. But there are concerns about contradictory provisions in FITTA, which experts say could hinder the investment flow into Nepal.

One of the contentious clauses concerns contract manufacturing operations by multinational companies. The Foreign Investment Act says multinational companies can hire other firms only to produce accessories and supporting goods and that they cannot do so to produce finished goods. Currently, numerous foreign investment firms are hiring contract manufacturers to produce finished goods for them. This has given the multinationals a comparative advantage due to various factors, including cheap labour, which lowers the production cost. But with the introduction of FITTA, multinationals may not be able to hire other firms to produce finished goods, and this could be a setback for prospective investors. […]“If multinational companies wish to contract small firms to produce the finished goods for them, foreign companies can do so by signing an agreement on technology transfer,” said Industry Secretary Yam Kumari Khatiwada.

Although the new laws talk about one-stop solution for foreign investors, in many cases the firms need to get approval from various institutions--either in capital injection or technology transfer. For instance, FITTA allows the Industry Ministry to approve foreign direct investment of Rs5-Rs10 billion. On the other hand, the Public Private Partnership and Investment Act states that foreign investment worth more than Rs6 billion has to be approved by the Investment Board Nepal. For a number of projects to be based in provinces, some clauses demand that investors take approval from the federal government, which may create unnecessary hassles for prospective investors. Similarly, foreign investors need to undergo a labyrinthine process to get permission from the central bank to repatriate profit and to hire local partners for projects. The law also has a provision that foreign companies that take permission from government agencies need to bring in investment within a set period of time.

A similar ambiguity is there in the laws concerning investment in the hydropower sector. While FITTA allows the Investment Board to issue production licence for hydropower projects with capacity above 200 megawatt, the Electricity Act says the Ministry of Energy, Water Resources and Irrigation will issue licence for hydropower projects regardless of their production capacities. The new laws were introduced with the aim to facilitate investors, but they seem to have complicated the matters more, said analysts. The government has included more sectors--remittance companies, engineering service, education consultancy, travel agencies and number of farm products--in the negative list, thereby barring foreign investment in these sectors. These sectors were included in the negative list at the last moment following pressure from some private entrepreneurs. The government has argued that including these sectors in the negative list would protect domestic firms.

The laws are also silent when it comes to hedging rules. Hedging rules attempt to mitigate foreign exchange loss that foreign investors investing in Nepal may suffer due to devaluation of the Nepali currency. The amount of hedging premium has also not been fixed and is left for future negotiations, raising questions over the effectiveness of the hedging rules.

>> Here is more on the new laws in Kantipur and on the projects IBN is showcasing during Nepal Investment Summit 2019
>> Here is a detailed report on various aspects ahead of investment summit in Himalkhabar

>> Here are the main issues regarding the new investment laws:
  • Multiple layers & duration of approval: Proposals above Rs6 billion will be approved by IBN, but procedural issues are not truly 'one window'-- foreign loan approval, issuance of bonds, establishment of investment fund, visa referral, income repatriation, etc.
  • Notification to NRB or dual approval: Foreign investment should be approved within seven days (instead of 30 days in previous version of the law). But this excludes the discretion to solicit comments from other ministries or departments, which will take much longer. How practical is seven days given the state of bureaucracy and working tendency? Clause 16(1) of FITTA amendemnet says notification to NRB is enough to bring foreign investment, but subclause 2 of the same says all processes as directed by NRB should be fulfilled first. Until now, investors had to publish a notice according to Foreign Exchange Act and then get approval from NRB (where the Governor had to approve the proposals)
  • Complication in income repatriation: Need approval of both DOI and NRB for each repatriation of each tranche of income. All laws, regulations and conditions during initial agreement with investors should be fulfilled. Previously, submitting audited financial statement and evidence of tax payments were enough. 
  • Cumbersome accounting paperwork: Multinational companies need to submit accounting and other details to Nepali authorities once there are changes to share ownership (through merge or acquisition or changes to valuation)
  • Visa restriction: Large investors are allowed two businesses visa for own and family members (it was five visas previously). Labor Act 2016 (amendment) says upto three investors and their families could get business visa.
  • Manufacturing outsourcing not allowed: Outsourcing of final manufacturing product is not allowed. Foreign firms can outsource manufacturing of intermediate goods, but not final goods. It affects firms that outsource production of branded goods.
  • Negative list violates WTO commitments: Negative list includes retail trade, remittances, internal courier, travel and tour agencies, etc. But, Nepal has committed to allow 80% foreign investment in radio and television equipment, musical goods, records, retail trade of musical scores and tapes and courier services. Similarly, it has committed 51% foreign investment in travel agency and tour operation. 
>> Three articles relevant to the investment summit

Labor deal will eliminate malicious intermediary organizations

From myRepulica: The government of Japan has said that the Memorandum of Cooperation (MoC) to send Nepali workers to Japan will establish a basic framework for information partnership in order to ensure smooth and proper sending and accepting specified skilled workers. Issuing a press statement after the signing labor deal between two countries on Monday, the Embassy of Japan in Kathmandu has believed that this deal will eliminate malicious intermediary organizations and will resolve the problems of sending, accepting and residing in Japan of specified skilled workers.

As per the MoC, a separate unit will be established under the Department of Foreign Employment (DoFE) to facilitate the recruitment process of Nepali workers with the status of residence of SSW (Specified Skilled workers) including call for applicants, facilitate the Japanese side to conduct the language and skills tests and overseeing the deployment of the successful applicants to Japan.

>>Here is a previous news about the same. 

Sunday, March 17, 2019

Universal Basic Income in the Developing World

Banerjee, Niehaus and Suri (February 2019, wp22598) have a new NBER working paper out on the what we know and don’t know so far about universal basic income, particularly 
  1. what recipients would likely do with the incremental income
  2. whether this would unlock further economic growth
  3. the potential consequences of giving the money to everyone (as opposed to targeting it)
They consider UBI as an incremental anti-poverty intervention and argue that UBI is unlikely to be cost-effective at achieving any particular narrow policy goal (health, education, nutrition, etc) or to relax any particular constraint (financial constraints such as credit or insurance market imperfections, psychological constraints such as hopelessness, or limited bandwidth). 

This blog post summarizes the main takeaway from their working paper

What recipients would likely do with the incremental income?

What we know
  • Little evidence of UBI’s effect in developing countries. 
  • Three schemes closely align with UBI: one for two years in nine villages in the Indian state of Madhya Pradesh (2010-2011), one in two villages in Namibia (January 2008-December 2009), and Iran’s nation-wide cash transfer introduced in 2011 to offset the withdrawal of food and fuel subsidies. 
  • Existing transfers have not been universal but rather targeted, both to subsets of households (through means testing, ordeals, conditions, etc.) and to specific adults within those households (often the female head). Existing transfers typically last for relatively short time periods, as opposed to the long-term commitment envisioned by UBI advocates.
  • Many transfers (particularly in South and Central America) were paid out conditional on certain conditions being met, but many others (particularly in Africa) were not. Pensions are also transfers and have structure (size, frequency and duration) quite similar to UBI payments. As of 2018, there were 552 million people living in the developing world who received some form of cash transfer.
  • Evaluations generally have not found the negative impacts that many feared. Transfers had on average reduced expenditure on temptation goods. There is no systematic evidence that transfers discourage work. 
  • Evaluations have also shown a great diversity of positive impacts on income, assets, savings, borrowing, total expenditure, food expenditure, dietary diversity, school attendance, test scores, cognitive development, use of health facilities, labor force participation, child labor migration, domestic violence, women’s empowerment, marriage, fertility, and use of contraception, among others.
What we do not know
  • Examining impacts on entire populations is important to understand the effects of a UBI. Universality could change impacts if there are interactions between the effects of one’s own and one’s neighbors (basic) income. We can say little about this at the moment as very few studies have simultaneously varied individual treatment status and the overall intensity with which communities are treated, and then tested for interaction effects. 
  • There is relatively little evidence to date on how transfers affect local markets through general equilibrium effects (transfers affect prices and wages too).
  • Delivering a UBI to each adult in a household (which is what many basic income proposals contemplate) could have different effects from delivering the same amount of money to a single adult representative of the household (which is how most existing cash transfer programs function). What evidence exists does suggest that the identity of the recipient matters, but not that one type of recipient is unambiguously better” than others.
  • Committing to deliver basic incomes for a long period of time could have effects that differ from the effects of shorter-term transfers themselves. To understand whether and how duration matters, a key issue is separating the effects of current transfers from the effects of anticipated future transfers.

Can UBI unlock economic growth?

UBI is unlikely to be the most cost-effective way to alleviate any one of the underlying constraints on investment. But we currently know little about which constraints bind for whom, or how in practice to target interventions to the specific people who need them. This is what makes UBI, which does not try to step on any specific lever, interesting as a pro-growth policy.

Several strands of research suggest that lack of access to capital constrains some more than others. Where they do, a UBI potentially provides a source of capital to relax the constraint. Firm marginal products are much more dispersed in India and China than in the US. There are various possible reasons for such results, but the most obvious theory is that some firms are (differentially) credit constrained and therefore underinvest relative to others.

At the micro level, an extensive literature on the returns to capital suggests that they are widely dispersed and very high in some cases, over 100% a year. There is also strong prima facie evidence of inefficiencies in the financial sector in most developing countries. Borrowing interest rates in the non-banking sector are often extremely high. These data co-exist with estimates from randomized trials of microcredit showing that borrowers on average do not use loans to grow their businesses. Grants also seem to have (widely varying) effects on investment.

For some, lack of insurance markets may be a binding constraint. Entrepreneurs may shy away from investing borrowed or owned capital because they want to avoid exposing themselves to business risk. Evidence that uninsured risks distort investment and production is mixed.

External constraints such as missing markets for credit or insurance have been development economist’s traditional bread and butter. But what if some people face constraints within their own minds? For some, poverty may simply tax the mental and emotional bandwidth needed to think through important decisions. 

UBI could be transformative for people bound by internal constraints. Not having to worry about making ends meet could free up the mental and emotional bandwidth needed to focus on getting ahead, or re-set hopes and beliefs about the future. Whether this is true or not is, of course, still to be seen.

Targeted or universal transfer?

A central question about UBI is whether universality is in fact efficient. For any given budget, is it better to spread those resources evenly or to give larger amounts to the poorest? There has been a large literature on different approaches and their effectiveness, ranging from by far the most common, a proxy means test (PMT), to community targeting to self-selection. Universality has several under-appreciated benefits, and targeting several underappreciated limitations. 

Work quantifying the relationship between impacts and targeted characteristics is limited, as is work on the potential disincentive effects of targeting. It is also unclear how effectively targeting poor households succeeds in targeting poor people, taking into count the unequal distribution of resources within households and redistribution of resources across them.

Universality could reduce administrative costs. Targeting well requires data collected repeatedly, given significant shares of people in developing countries change their poverty status from year to year. The administrative costs of universality are likely to be far lower, especially given the ongoing investments emerging market governments are making in digital ID and payment systems.

Universality could improve the “political economy” of redistribution. Government capacity to implement nuanced targeting schemes is often limited, particularly so in the poorest area where it is most important to get it right. In cases like these, making eligibility universal may have a modest effect on the realized incidence of benefits while at the same time substantially reducing the scope for corruption and other abuses of power. 

Broad eligibility could also help build political bases of support for sustained redistribution.

Given the discussion of costs, it is worth asking about the administration or implementation costs of a universal system, i.e. the costs of distributing the transfers themselves. To avoid double counting, it will be important for developing countries to have a well-functioning universal identification system, preferably digital, though this will be a one-time cost. When state capacity to discipline front-line bureaucrats is limited, targeting can also create opportunities for corruption and other abuses of power. 

The per-person costs of delivering transfers are falling rapidly in many places due to advances in last-mile digital payments infrastructure. All else equal this will tend to further increase the appeal of broad or universal targeting.

Tuesday, March 12, 2019

Amended SEZ Act and Forest Act approved, West Seti in offer to investors and weak consumer demand

From The Himalayan Times: The Parliament today gave its nod to the first amendment bill of the Special Economic Zone (SEZ) Act introducing a new provision under which industries located in SEZs will have to mandatorily export only 60 per cent of their produce. Earlier, the SEZ Act had a mandatory provision for industries inside SEZs to export 75 per cent of their production.

The amendment bill on the SEZ Act, which will come into effect following authentication from the president, has not only relaxed the compulsory export provision for industries within SEZ to 60 per cent of their produce, but has also allowed firms within SEZ to sell 100 per cent of their produce in the domestic market for the first one year after their production starts. This means that industries inside SEZ can supply all their produce in the Nepali market for the first year after they start production, however they will have to export 60 per cent of their production mandatorily from the second year.

The government had reduced the mandatory export provision for industries within SEZs and also turned flexible regarding other export provisions after investors within the SEZs expressed their inability to export a majority of their goods immediately after starting their production.

Law amended to ease acquisition of forest land

From The Kathmandu Post: The government has amended the Forest Act and included a new provision which will allow the developer of certain infrastructure projects to acquire forest lands required for the construction of the project by paying a fee. According to the new clause included in the act, national priority projects, national pride projects, transmission line projects of national priority and projects that have got investment approval from Investment Board Nepal are eligible to acquire wooded areas by paying money.

The new clause paves the way for the establishment of the Forest Development Fund which will charge the project developer a fee for forest lands for the construction of its permanent structures. The fund will use the fee paid by the developer to create new forests in an equivalent area of similar ecology at similar geographic regions.The amendment has been endorsed by Parliament, and the Forest Ministry is currently drafting a work plan which will determine the fee that project developers will need to pay for the type of land they acquire.  

West Seti among projects government will showcase at investment summit

From The Kathmandu Post: As the government gears up for the Nepal Investment Summit, senior officials told the Post that it is planning to invite foreign investors again for the development of West Seti Hydroelectric Project. The Investment Board Nepal has said that the West Seti project will be one of the four dozen projects which the government plans to showcase during the investment summit scheduled for March 29-30.

The multi-billion project was in limbo after the China Three Gorges International (CTGI) backed out in August 2018, citing financial infeasibility. After the deal with the Chinese developer collapsed, the government had formed a three-member task force comprising the energy minister, the finance minister and the chief executive of the Investment Board to work on a new modality for developing the project. The task force is yet to submit its final report.

Slow demand for construction material leaves industrialists worried

From myRepublica: Minister for Finance Yuba Raj Khatiwada last week said 42 percent growth in import of industrial materials indicates healthy economic growth. But same imports have become a matter of worry for industrialists in Birgunj. Steel and cement producers in Birgunj and surrounding areas increased their output, expecting robust demand for construction materials with the formation of the government with two-thirds majority. But slow demand for construction materials due to weak capital spending, among other factors, have dampened their confidence. Abrupt hike in interest rates on bank loans and high cost of production have further worsened the situation for them.

As there is not much demand for steel, GI pipes, cement, corrugated sheets, water tank and paints, among others, in the market, many industries have these products in full stock in their warehouses. Many industries say that they are selling products on credit of up to six months. Earlier, they used to sell products on credit of only up to one month.

Friday, March 8, 2019

Pitching it right ahead of Nepal Investment Summit 2019

It was published in The Kathmandu Post, 07 March 2019.

Inviting foreign investments warrants the right time and the right audience

Based on content, commitment, and coherency, Prime Minister KP Sharma Oli’s speech during the recently concluded Kantipur Conclave was probably one of the best speeches delivered by him on issues pertaining to the opportunities for and suitability of the country for foreign investment. Many viewed it as a rehearsal for the Nepal Investment Summit scheduled for March 29-30. The prime minister’s impassioned appeal to investors came at a time when foreign direct investment is decreasing, concern over the actual policy direction of the communist government is growing, attack on foreign-owned investment assets is intensifying, extortion of businesses is ratcheting up, and fiscal, financial and external sector stresses are increasing.

PM Oli stressed that the government has a clear vision, steadfast commitment, and result-oriented action plan to achieve its overarching goal of becoming a middle-income country by 2030. He made a case that the country has the right attributes for development: natural resources, stable system and institutions, sound and clear policies, young hardworking population, favourable external environment, and a government singularly focused on achieving prosperity within a short period. Additionally, he laid out broad sectoral priorities such as agricultural transformation, hydropower generation and transmission, infrastructure and human capital development, tourism, manufacturing, and ICT, among others. He assured foreign investors of secure opportunities and profitable investments and invited them to bring in money and technology. The content and setting of the speech were perhaps more suited for the summit in Davos—where he spent more time lecturing how the media should operate than making a pitch for investment in Nepal—instead of a conclave where experts deliberated on the ways to unleash the country’s potential.

Right message

Nevertheless, such an open-hearted commitment to welcome foreign investment in almost all sectors and to amend laws and regulations to facilitate investments by a chairman of a ruling party whose ideology is grounded on socialist distributive principles is always positively noted by investors. PM Oli even solicited advice from investors to improve the investment climate and to eventually establish a signature product that can be identified with Nepal (similar to Toyota with Japan, Ali Baba with China and Infosys with India).

Investors are always looking for concrete signals from the top leadership on improving investment regime and in the security of their investment and assets. Now, other ministers—particularly, finance and foreign affairs ministers—and officials from investment promotion agencies need to categorically explain to investors what PM Oli meant in the speech and what the government has in store to realise the commitments made. Unfortunately, instead of elaborating more on the broad areas touched upon by the prime minister in his speech, the ministers and officials are pretty much narrating the same thing repeatedly. This shows a lack of homework on their part.

For instance, if the prime minister is committing sweeping changes in investment laws and regulations, then the ministers and government officials need to explain what exactly they are, how they are different from the past and from what other countries have, and how the government is going to execute them. This specificity is missing amidst the self-gratifying banal talk on improved political stability and a new federal setup. These are means to an end, not an end in itself.

Investors will pay serious attention to the commitments made by the prime minister only if the ministers and officials representing investment promotion agencies clarify the vision and lay out a credible roadmap to achieve the vision. This should include the key pillars as well as enabling factors, and an implementation plan that departs from the past and is more credible and competitive than what other competing economies have. Importantly, the pitching needs to vary according to the audience.

Right audience

First, it is important to identify the right audience and know their interests and concerns. For instance, multilateral institutions have a mandate to not only invest but also to work on improving legal, regulatory and institutional capacity so that it ultimately facilitates greater private sector investment. Bilateral institutions such as EXIM banks and development agencies are interested in strategic projects rather than sectors and ideally want procurement tailored to their country’s interest. Meanwhile, private sector investors are interested in profitable projects without cumbersome regulatory compliance and bureaucratic hassles. An investment summit should be targeting the last category of investors, as the first two will not require much coaxing anyway. Furthermore, the summit should also target the financiers (such as the large private sector investment banks from the West and from the neighboring countries) and analysts who shape opinion about a country’s sovereign and investment risks.

Second, investment pitch should be simple and to the point. Hackneyed remarks on political stability, changes to laws, and investment security alone are not going to cut it. Specifically, investors like to know what is different now and how is it going to positively affect their return on investment and security of their assets. Ministers and officials need to categorically explain the solid legal basis to shield their investment from ad hoc bureaucratic or political or policy or licensing overhaul and guarantee unhindered access to internal and external markets. Note that the investors’ confidence is eroding due to the government’s meek response after the violent attack on a foreign-owned mobile company and a large hydropower project.

Third, they need to lay out why this is the right time to invest in Nepal. For instance, we have a rising middle class with increasing disposable income and a liberal trade regime with India that allows comparatively greater and easier access compared to regional rivals.

Fourth, investors love policy surprises and big announcements during such summits. For instance, moving on from the past tendency of incremental reforms to transformative measures such as generous tax regimes compared to other countries, special committees to address grievance, a strict norm to follow timelines, easier visa and work permit regime where necessary, ease in earnings repatriation, guaranteed access to enabling infrastructures such as electricity and roads, and enhanced security provision are some of the popular measures.

Finally, a proper process to follow-up on commitments made to investors is also important. We have been notoriously bad on this front.

Tuesday, March 5, 2019

New five year plan in Nepal and effectiveness of right to education in India

From The Himalayan Times: The preliminary draft of the concept paper of the 15th five-year plan (fiscal year 2019- 20 to 2023-24) prepared by the National Planning Commission — the apex body responsible for formulating the country’s development vision — has set a target to achieve a minimum average economic growth of 9.4 per cent per annum in the next five years. However, the economy can grow up to 10.1 per cent per annum in the next five years based on different scenarios, as per the draft. The government had last introduced a five-year periodic plan in 2001, which lasted till 2006.

The preliminary draft of the concept paper of the five-year periodic plan states that the country can achieve economic growth of between 9.4 per cent and 10.1 per cent every year in between fiscal years 2019-20 and 2023-24. Similarly, the draft of the periodic plan envisions that the country’s agriculture sector can witness an average growth of 5.6 per cent per annum in the next five years while the industrial sector can witness average growth of 17.1 per cent per annum. Likewise, the services sector is expected to witness 9.9 per cent growth per annum in between fiscal years 2019-20 and 2023-24.

The draft of the 15th five-year plan also states that the contribution of the services sector in the gross domestic product (GDP) can reach 57.6 per cent by fiscal 2023-24. Similarly, the contribution of the agriculture sector and industrial sector in the national GDP can reach 22.1 per cent and 20.3 per cent, respectively. The 15th five-year periodic plan will be based on the slogan of ‘Generating Prosperity and Happiness.’

The Right to Education Act: Trends in Enrollment, Test Scores, and School Quality

From a NBER working paper (Shah and Steinberg): The Right to Education Act in 2009 guaranteed access to free primary education for all children in India ages 6-14. This paper investigates whether national trends in educational data changed around the time of this law using household surveys and administrative data. They find four important trends:  
  • School-going increases after the passage of RTE, though this increase is more pronounced in “primary activity” NSS data than in official enrollment statistics
  • Test scores decline dramatically after 2010 in both math and reading
  • School infrastructure, including pupil-teacher ratios, appears to be improving both before and after RTE 
  • The number of students who have to repeat a grade falls precipitously after RTE is enacted, in line with the official provisions of the law