Per capita consumption of soft drinks in South Asia

Per capita consumption of soft drinks:

• Nepal: 6-7 bottles
• India: 6-7 bottles
• Pakistan: 17 bottles
• Sri Lanka: 21 bottles

Here is more. At US$10 billion market size, the soft drinks industry in India is growing at 6-7 percent per annum.

Optimal food price stabilization policy in a small open developing country

Gouel and Sebastien recommend an activist policy to stabilize the impact of high food prices. They argue that the optimal trade policy for a single low-income country is to subsidize imports when domestic availability is low and tax exports when world prices are high, which will benefit consumers at the expense of producers, because it reduces the likelihood of high prices. Meanwhile, a pure storage policy might have an opposite effect: it raises the average domestic price because of the increased stock accumulation, and is detrimental to consumers. They argue that to protect consumers from food price volatility in an efficient way, storage policies need to be complemented by trade policies, which would provide some isolation from the world market.

Here is the abstract of the paper:

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In poor countries, most governments implement policies aiming to stabilize the prices of staple foods, which often include storage and trade measures insulating their domestic market from the world market. It is of crucial importance to understand the precise motivations and efficiency of those interventions, because they can have consequences worldwide. This paper addresses those issues by analyzing the case of a small, open developing country confronted by shocks to both the crop yield and foreign price. In this model, government interventions may be justified by the lack of an insurance market for food prices. Considering this market imperfection, the authors design optimal public interventions through trade and storage policies. They show that an optimal trade policy largely consists of subsidizing imports and taxing exports, which benefits consumers at the expense of producers. Import subsidies alleviate the non-negativity of food storage. In other words, when stocks are exhausted, subsidizing imports prevents domestic price spikes. One striking result: an optimal storage policy on its own is detrimental to consumers, since its stabilizing benefits leak into the world market and it raises the average domestic price. By contrast, an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices.

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Interview: Inflationary dynamics in Nepal

Here is a snapshot of an interview published in Annapurna Post on April 9, 2012. For more on the same issue, see Creeping prices.

Travel & Tourism sector supported 3.3 percent of total employment in 2011 in Nepal

According to a latest report Travel and Tourism Economic Impact 2012 Nepal published by the World Travel and Tourism Council (WTTC), travel and tourism sector supported 412,500 direct jobs in 2011. It represented 3.3 percent of total employment in 2011.

By 2022, Travel & Tourism will account for 562,000 jobs directly, an increase of 2.8% pa over the next ten years. It is forecast to support (direct, indirect and induced) 1,341,000 jobs (8.3% of total employment), an increase of 3.1% pa over the period. The direct employment provided by the sector includes employment by hotels, travel agents, airlines and other passenger transportation services (excluding commuter services). It also includes the activities of restaurants and leisure industries directly supported by tourists.

The direct contribution of Travel & Tourism to GDP was Rs 53.5 billion (4 percent of total GDP) in 2011, and is forecast to rise by 4.7 percent in 2012, and to rise by 3.7 percent per annum, from 2012-2022, to Rs 80.8 billion in 2022 (in constant 2011 prices). Its total contribution is equal to 8.8 percent of GDP (Rs 119.1 billion) in 2011 and is expected to rise by 4.1 percent per annum to Rs 185.5 billion in 2022.

Visitor exports generated Rs 28.6 billion (24.5 percent of total exports) in 2011. This is forecast to grow by 2.8 percent in 2012, and grow by 3.9 percent per annum, from 2012-2022, to Rs 43.2 billion in 2022 (22.3 percent of total). By 2022, international tourist arrivals are forecast to total 1,083,000.

Travel & Tourism investment in 2011 was Rs 12 billion, or 4.9 percent of total investment. It should rise by 5.4 percent in 2012 and by 4.9 percent per annum over the next ten years to Rs 20.4 billion in 2022 (5.8 percent of total). Travel & Tourism’s share of total national investment will rise from 5.0% in 2012 to 5.8% in 2022.

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FYI, tourism sector is the second highest foreign exchange income earner in Nepal.

The biggest contributor to total convertible foreign exchange income is remittances, which comes under the services trade heading. In 2010/11, the share of remittances, tourism and investment in total convertible foreign exchange income of services trade was 85.27 percent, 11.35 percent, and 3.38 percent respectively. In numbers, these translate to Rs Rs 214 billion, Rs 29.39 billion, and Rs 5.42 billion respectively. The total convertible foreign exchange income of merchandise trade and services trade was Rs 38.45 billion and Rs 248.80 billion respectively.

Employment, sales and productivity growth in Nepal

The labor unions have been a serious drag to the development of industrial sector in Nepal. Their demand for wage hike and other services are never-ending, leading to closure of many domestic as well as foreign companies. When the militant labor unions were shutting one firm after another by raising unreasonable demands, I argued if the they would ensure that labor productivity increases with wage hikes. Though some of the union bosses were angry at me for allegedly being insensitive to their demands, they could not furnish a credible answer.

Now, lets see if labor productivity has increased in Nepal. The data from Enterprise Survey 2009 shows that it hasn’t. Real annual sales growth was 2 percent, annual employment growth was 7.6 percent, but annual labor productivity growth was negative 3.9 percent (wages increased by substantially more than the inflation rate). In Bhutan and Sri Lanka, employment, sales and labor productivity growth have been positive. Nepal already has unusually high wage overheads.There is evidence that when real wage growth outpaces labor productivity growth, employment creation is suppressed. We might soon see this happening in Nepal as firms start closing down due to rise in labor cost without a proportional increase in labor productivity.

Looking at sector-wise performance, it appears that labor productivity was negative in manufacturing, retail and services sectors. In small, medium and large firms as well, though real annual sales growth and annual employment growth were positive, annual labor productivity growth was negative.

Enterprise Survey 2009
Subgroup	Subgroup level	Real annual sales growth (%)	Annual employment growth (%)	Annual labor productivity growth (%)
	Overall	2	7.6	-3.9
Sector	Manufacturing	-0.9	0.9	-1.8
	Retail	-1.3	14.1	-13.3
	Other Services	5.6	9.5	-1.4
Size	Small (5-19)	0.5	6.8	-4.2
	Medium (20-99)	11.3	13	-2.7
	Large (100+)	2	2.5	0

Nepal’s pathetic readiness in information technology

The latest Global Information Technology Report 2012 ranks Nepal 128 out of 142 countries in terms of network readiness. Insufficient development of ICT infrastructure has limited its ability to leverage information and communications technologies to boost country competitiveness. It has stifled entrepreneurship and innovation.

Out of a total score of 7, Nepal scored 2.9. Overall, Nepal’s technology readiness is lower than the average of low income countries (except for in affordability--in mobile cellular tariffs PPP $/min, Nepal is eighth competitive in the world).

The Networked Readiness Index 2012
Rank	Country	Score	Rank	Country	Score
1	Sweden	5.94	69	India	3.89
2	Singapore	5.86	71	Sri Lanka	3.88
3	Finland	5.81	102	Pakistan	3.39
4	Denmark	5.70	113	Bangladesh	3.20
5	Switzerland	5.61	128	Nepal	2.92
6	Netherlands	5.60	138	Chad	2.55
7	Norway	5.59	139	Mauritania	2.55
8	United States	5.56	140	Angola	2.49
9	Canada	5.51	141	Yemen	2.41
10	United Kingdom	5.50	142	Haiti	2.27

The index is composed to ten pillars. Nepal’s ranking (out of 142 countries) in each category is listed in brackets.

• Political and regulatory environment (123)
• Business and innovative environment (122)
• Infrastructure and digital content (135)
• Affordability (74)
• Skills (128)
• Individual usage (136)
• Business usage (130)
• Government usage (128)
• Economic impacts (132)
• Social impacts (126)

The report notes that ICT readiness in sub-Saharan Africa is still low, with most countries showing significant lags in connectivity due to insufficient development of ICT infrastructure, which remains too costly, and displaying poor skill levels that do not allow for an efficient use of the available technology. Even in those countries where ICT infrastructure has been improved, ICT-driven impacts on competitiveness and well-being trail behind, resulting in a new digital divide.

Under the theme Living in a Hyperconnected World, the report explores the causes and consequences of living in an environment where the Internet is accessible and immediate; people and businesses can communicate instantly; and machines are interconnected. The exponential growth of mobile devices, big data and social media is a driver of this process of hyperconnectivity and, consequently, fundamental transformations in all areas of society are being witnessed. This year’s report tracks how societies leverage ICT to derive important competitive advantages and increase social well-being.

Nepal: Aid at a glance (2010)

Net ODA to Nepal amounted US$821 million in 2010, down from US$854 million in 2009. Austerity in the donor countries is squeezing ODA as well. The UK seems to be the largest bilateral donor (US$107 million). A major portion of the ODA went to education (almost 20 percent), followed by health and population, other social sectors, and economic infrastructure and services, among others. For more, see here