The demand for subsidized rice in Nepal

The picture says it all.

Caption says: People thronging at Nepal Food Corporation depot in Dailekh. The state-owned depot is providing subsidized rice to the people.

Related new story here (in Nepali language). It is reported that people are staying in line for two days to get subsidized rice. Other are staying in hotel to get their share of subsidized rice. People are given coupon to purchase a fixed quantity. The news report state that people who are close to the officials get coupon and rice easily. Those without any links to officials have to wait for days. But, the depot officials refute the allegation.

The subsidy is Rs 10 per kg for Japanese rice and Rs 5 per kg for Sona Mansuli rice. A sack of Japanese rice (30 kg) costs Rs 625 and a sack of Sona Mansuli (50 kg) costs Rs 1520. So, the government is subsidizing Rs 300 per sack of Japanese rice and Rs 250 per sack of Sona Mansuli rice.

High Food Prices in South Asia: Status, Impact and Solution

Below is a presentation I made during South Asian consultation on ‘Food Justice in a Resource Constrained South Asia’, 26-27 September. The event was organized by Oxfam and SAWTEE in Kathmandu.

High Food Prices in South Asia_presentation_2011-09-27

Latest population estimate of Nepal (26.6 million)

The Central Bureau of Statistics (CBS) has published preliminary findings of Census 2011. Surprisingly, total population in Nepal is found to be at 26.6 million, against previous estimation of around 30 million. Also, population growth rate has come down to 1.4 percent.

Major findings:

• Nepal’s population is 26,620,809 (male 12,927,431 and female 13,693,378).
• The annual growth of population in Nepal is 1.4 per cent which is a little less than what was found 10 years ago. In 2001, the population growth was 2.25 per cent.
• Total new addition in the population in the past decade was 3.45 million.
• The size of the household in Nepal has decreased from 5.44 in 2001 to 4.7 in 2011.The household size is recorded to be highest in Rautahat (6.33) and lowest (3.7 1) in Kathmandu.
• Absentee population increased to 1,917,903, more than double than in 2001.
• More than half of the total population of the country (50.2 per cent) lives in Terai followed by Hill and Mountain belt that constitutes about 43 percent and 7 percent of the total population respectively.
• The urban population constitutes about 17 percent of the total population.
• Kathmandu district has the largest population followed by Morang. Manang constitutes the lowest population.
• Population density of Nepal is estimated 181 per sq.kms. Kathmandu district has the highest density (4408) and Manang (3) has the least.
• Kathmandu has recorded the highest decadal population growth (60.93 %) compared to all Nepal (14.99 %) and lowest in Manang (-31.92 %).
• Sex ratio is estimated to be 94.41 (male per hundred female) in the current census as compared to 99.80 in the previous census 2001.

Reason for decrease in population growth rate:

• Migration (led to decline in fertility rate)
• 1.92 million people living abroad
• Impact of insurgency: 23 districts in hilly region saw negative population growth rate while Kathmandu saw 60 percent growth in population.

Distorted economic advise and selfish politician

---

This paper investigates, in a simplified macro context, the joint determination of the (incorrect) perceived model and the equilibrium. I assume that the model is designed by a self-interested economist who knows the true structural model, but reports a distorted one so as to influence outcomes. This model influences both the people and the government; the latter tries to stabilize an unobserved demand shock and will make different inferences about that shock depending on the model it uses. The model's choice is constrained by a set of autocoherence conditions that state that, in equilibrium, if everybody uses the model then it must correctly predict the moments of the observables. I then study, in particular, how the models devised by the economists vary depending on whether they are "progressive" vs. "conservative".

The predictions depend greatly on the specifics of the economy being considered. But in many cases, they are plausible. For example, conservative economists will tend to report a lower keynesian multiplier, and a greater long-term inflationary impact of output expansions. On the other hand, the economists' margin of manoeuver is constrained by the autocoherence conditions. Here, a "progressive" economist who promotes a Keynesian multiplier larger than it really is, must, to remain consistent, also claim that demand shocks are more volatile than they really are. Otherwise, people will be disappointed by the stabilization performance of fiscal policy and reject the hypothesized value of the multiplier. In some cases, autocoherence induces the experts to make, loosely speaking, ideological concessions on some parameter values. The analysis is illustrated by empirical evidence from the Survey of Professional Forecasters.

---

Here is the full paper by Gilles Paul.

Unusually high wage overheads & low labor productivity in Nepal

The chart says it all.

Nepal has the highest labor cost in South Asia and probably the lowest labor productivity. Where is our labor cost competitiveness going? Hello, labor unions?? Hello, FNCCI?? Hello, government??

Four million missing women each year in developing countries

The latest World Development Report 2012 (Gender Equality and Development) argues that “countries that create better opportunities for women and girls can raise productivity, improve outcomes for children and make institutions more representative, and advance development prospects for all.”

• Excess female mortality after birth and “missing” girls at birth account for an estimated 3.9 million women each year in low- and middle-income countries.
• About two-fifths are never born due to preference for sons, a sixth die in early childhood, and over a third die in their reproductive years.
• Ensuring equal access and treatment for women farmers would increase maize yields by 11 to 16 percent in Malawi and by 17 percent in Ghana.
• Improving women’s property rights in Burkina Faso would increase total household agricultural production by about 6 percent, with no additional resources—simply by reallocating resources such as fertilizer and labor from
  men to women.
• The Food and Agriculture Organization estimates that equal access to resources for female farmers could increase agricultural output in developing countries by as much as 2.5 to 4 percent.
• Eliminating barriers that prevent women from working in certain occupations or sectors would have similar positive effects, reducing the productivity gap between male and female workers by one-third to one-half and increasing output per worker by 3 to 25 percent across a range of countries.
• Among developing countries, girls now outnumber boys in secondary schools in 45 countries, and there are more young women than men in universities in 60
  countries.
• Women in low-income countries not only outlive (life expectancy) men but live 20 years longer than they did in 1960.
• Gaps in labor force participation have narrowed with over half a billion women having joined the workforce in the last 30 years. 

The report calls for action in four areas:

• Addressing human capital issues, such as excess deaths of girls and women and gender gaps in education where these persist
• Closing earning and productivity gaps between women and men
• Giving women greater voice within households and societies
• Limiting the perpetuation of gender inequality across generation

In South Asia:

• Missing girls at birth in South Asia —excluding India— was 1,000 in 2008.
• But, missing girls at birth increased in 2008 in India to 257,000.
• The abuse of new technologies for sex-selective abortions, such as cheap mobile ultrasound clinics, accounted for much this shortfall, despite laws against such practices in many nations.
• In countries like Afghanistan and Pakistan, discrimination by parents toward girls is still a serious problem.
• Bangladesh and India have maternal mortality ratios comparable to Sweden’s around 1990, and Afghanistan’s similar to Sweden’s in the 17th century.
• Maternal mortality ration was 280 maternal deaths per 100,000 live births in 2008.
• In 2008, there were about 95 girls for every 100 boys in primary school in the region.

Over five decades of experience with SEZs

A nice review (by Thomas Farole) of what we have learned from special economics zones (SEZs) in the past 50 years. SEZs are primarily aimed at attracting FDI, to increase employment, to support wider economic reform strategy, and to test application of new policies and approaches to industrial growth. SEZs have been increasingly becoming popular in developing countries after its success in East Asia, which enjoyed a favorable export-led growth. Its number has grown rapidly: from 176 zones in 47 countries in 1986 to 3500 zones in 130 countries in 2006.

Traditionally, EPZs were designed to attract FDI by allowing companies to exploit low-cost labor and other relaxed barriers to investment (regulatory, infrastructure, tax, exchange controls, licensing). Mauritius, Malaysia, South Korea, China, Taiwan, Honduras, El Salvador, Madagascar, Bangladesh, Vietnam and Dominican Republic successfully operated SEZs and created thousands of jobs in manufacturing sector and bring about structural transformation. Typically most of the industries in SEZs are labor intensive and assembly-oriented activities, including light manufacture goods such as textiles, apparel, leather, and light electrical and electronic goods.

However, this model is reaching its limit due to changed macroeconomic and regulatory environment in the global economy. Now, the relevance of SEZs will depend on “the effectiveness with which they are designed, implemented, and managed on an ongoing basis that will determine success or failure.” Just attracting investment, creating jobs, and generating spillovers to local economy, and adopting a compelling master plan will not suffice. Since Nepal is ready to enact a SEZ bill and is preparing to build SEZs, it will have to learn from SEZs experience in the past and how effective it will be in the rapidly changing global markets and demand.

Lesson learnt as outlined by Farole:

• Some countries have been more successful in attracting FDI, encourage export-oriented production, and create jobs than others.
• SEZs should be designed to leverage country’s comparative advantage. For instance, Bangladesh used its low-wage labor factor to take off to be a successful garment exporter. It initially focused on attracting high-tech investment but was only successful when it adjusted SEZs design and incentives to suits its comparative advantage, i.e. low-wage labor. Bangladesh provided good incentives such as serviced industrial land infrastructure and relatively reliable supply of power. Infrastructure reliability is an important aspect on SEZ success.
• The incubation period is might be high. It took 5 to 10 years to build momentum in China and Malaysia.
• Private sector involvement is key. For instance, Honduras’s success is led by local entrepreneurs and private sector, who were allowed to developed zones. The government focused on providing regulatory framework, supplied critical infrastructure and services and on-site customs services.
• Failure of SEZs in Africa is primarily linked to the political interference, mainly the failure to separate political support from political objectives in zone projects. Zones are for commercial success, not a political tool. Furthermore, the success depends on how entwined SEZs are with competitiveness of national economy and national investment environment. Critical infrastructure should be adequately supplied so that zones are linked to ports and markets. There should be clear legal and regulatory frameworks.
• Small countries should look to exploit potential for using zones to link up regional suppliers and leverage economies of scale in production.
• For dynamic economic benefits, domestic firms should be encouraged to locate inside zones, strengthen forward and backward links, support business and facilitate movement of skilled labor and entrepreneurs between the zones and the domestic economy. There should be continual training of human resources. This helps in bring structural transformation.
• Sustainability should also be a top priority. It means gender balance, environment conscious activities, clear standards, and effective monitoring and evaluation. SEZs can also be seen as an opportunity to experiment with policy innovations.