Employment in Nepal and South Asia compared

According to the ILO estimates, Nepal has the highest labor force participation rate in South Asia (83.9 percent). Similarly, Nepal also has the highest employment to population rate in the region (82.1 percent). See the figures below (all data pertain to 2010).

In Nepal, the labor force participation rate of male and female is 87.7 percent and 80.3 percent respectively. The total labor force (15+) is estimated to be 16.03 million and population (15+) to be 19.12 million. Overall, LFPR of 35-54 age group is the highest (93 percent).

Labour force participation rate (%)- Nepal
Sex	Age group	LFPR	Sex	Age group	LFPR
Male and female	15+	83.9	Male	15+	87.7
Male and female	15-24	75.9	Male	15-24	76.7
Male and female	15-64	85.9	Male	15-64	88.8
Male and female	25-54	92.2	Male	25-54	96.4
Male and female	25-34	91.2	Female	15+	80.3
Male and female	35-54	93.0	Female	15-24	75.1
Male and female	55-64	84.5	Female	15-64	83.1
Male and female	65+	54.8	Female	25-54	88.3

The labor force participation rate is a measure of the proportion of a country's working-age population that engages actively in the labor market, either by working or looking for work. It provides an indication of the relative size of the supply of labor available to engage in the production of goods and services. The data are based on ILO estimates based on previous year surveys (except for India and Sri Lanka, for which reported data by governments is used).

In Nepal, the employment to population rate of male and female is 85.7 percent and 78.7 percent respectively. The total employment (15+) is estimated to be 15.71 million and population (15+) to be 19.12 million. Overall, E-to-P ratio of adults (25+) is the highest (86.4 percent)

Employment- to-population ratio (Nepal)
Sex	Group	Age group	Emp ('000)	Pop ('000)	E-to-P
Male and female	Total	15+	15,705	19,118	82.1
Male and female	Youth	15-24	4,553	6,209	73.3
Male and female	Adult	25+	11,152	12,908	86.4
Male	Total	15+	7,972	9,298	85.7
Male	Youth	15-24	2,343	3,182	73.6
Male	Adult	25+	5,629	6,116	92.0
Female	Total	15+	7,733	9,819	78.7
Female	Youth	15-24	2,210	3,028	73.0
Female	Adult	25+	5,523	6,792	81.3

The employment-to-population ratio is defined as the proportion of a country's working-age population that is employed. A high ratio means that a large proportion of a country's population is employed, while a low ratio means that a large share of the population is not involved directly in market-related activities, because they are either unemployed or (more likely) out of the labor force altogether.

[I checked on the source based on which the estimates were made. In Nepal’s case, the sources are Census 2001, NLSS 2003/04 and NLFS 2008. These are dated surveys now. I think the figures would be a little bit different if the latest surveys (NLSS III and Census 2011) are used to estimate the employment and employed status.]

Rising inequality is eating up growth dividend in Asia

A latest ADB report argues that “Asia’s rapid growth is leaving millions behind, causing a widening gap between rich and poor that threatens to undermine the region’s stability.”

The striking point of the report is the estimate that another 240 million people could have been lifted out of poverty over the past 20 years if inequality had remained stable instead of increasing as it has since the 1990s. The report states that the richest 1% of households account for 6% to 8% of total income. Close to 20% of total income went to the wealthiest 5% in most countries. It has fascinating numbers on inequality of opportunity in access to education, health and public services.

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Unequal access to education, health and other public services contributes greatly to growing inequalities, further hindering opportunities for the poor to raise their living standards. School drop-out rates are up to five times higher for children in the poorest families, while the chance of a poor infant dying at birth can be 10 times higher than those of a child born to a rich family.

Highly uneven distribution of new technology, infrastructure and investment is further fueling the divide, particularly between rural and urban areas, and coastal and inland provinces.

Governments need to focus on policy options for reducing inequality, the report says. These include the creation of quality jobs; increased spending on education and health; and expanding social protection including conditional cash transfers for the poor. Other key policy options include switching fiscal spending from untargeted price subsidies, such as on fuel, to targeted transfers; greater and more equitable revenue mobilization; and more investment in infrastructure to reduce imbalances between developed and lagging regions.

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The ADO 2012 is silent about the case where you have low growth, but both poverty and inequality are decreasing (its Nepal’s case). The latest national poverty estimate based on the National Living Standard Survey 2010/11 (NLSS III) shows that 25.2 percent of the population lived below the absolute poverty line. Similarly, the latest US$1.25 a day poverty estimate based on data from NLSS III reveals that about 24.82 percent of the population is living below the globally comparable absolute poverty line. Furthermore, the Gini index—a popular measure of inequality—has declined from 43.83 in 2003 to 32.82 in 2010, according to WB estimates. The CBS estimated Gini index at 41.4 and 32.94 in 2003/04 and 2010/2011 respectively. Meanwhile, income or consumption of those in the middle of income deciles (i.e. middle class) has also increased remarkably. Obviously, the main factor here is remittances.

The ADB estimates that Nepal’s GDP growth would be 4.5% and 4% in FY2011/12 and FY2012/13 respectively. Inflation to be 8% and 7% in the two years and current account balance (share of GDP) to be 0.5% and 1%.

I am wondering why the ADO 2012 doesn’t discuss the low growth but declining poverty and inequality in Nepal (looks like a rare case). Also, it is a bit unsettling to not see the Nepal chapter of ADO 2012 not touching upon this issue though one of the main themes of the report is growth and inequality.

Here a synopsis of what the ADO states about Nepal’s economic scenario:

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Growth slowed in FY2011 on weaker remittance inflows, a downdraft in real estate, fuel and power shortages, and continued political uncertainty. Inflation stayed hovering around the double-digit threshold, and the banking system came under stress. The outlook is for a modest pickup in growth but with some progress in bringing down inflation. Timely completion of the peace process, including an agreement on a federal structure and on a new constitution, would allow political leaders to focus on spurring growth and development.

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Here is a synopsis of South Asian growth scenario:

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South Asia will see growth improve a shade in 2012 to 6.6%. Growth in 2011 fell sharply to 6.4%, mainly reflecting India’s marked monetary tightening in the face of persistent inflation and slumping investment. Growth in Pakistan declined because of disastrous flooding, although Bangladesh and Sri Lanka did well on brisk exports. The pace of India’s growth is projected to edge up to 7.0% in 2012 and 7.5% in 2013, providing most of the lift for subregional growth to reach 7.1% in 2013. Pakistan’s growth will advance only slightly in both years because electricity will remain a bottleneck on the supply side. South Asia’s inflation is expected to fall from 9.4% last year to 7.7% in 2012 and further to 6.9% in 2013. Some cutbacks in the heavy fuel and electricity subsidies in most countries are expected, and will set a floor to how far inflation can fall.

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Presentation: An assessment of Nepal India trade

Here is a PowerPoint presentation based on a comprehensive analysis and review of Nepal-India trade potentials and treaties (forthcoming report).

Here is a news story based on the presentation. Here are more media coverage of the event.

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.