Potential synergy between tourism industry and export performance

Reis and Varela (full paper here) argue that better tourism industry performance in Nepal could negate some of the costs associated with export market search and reach by providing a “relatively inexpensive platform for cost discovery and acting as a low-cost in-house trade fair”. Interestingly, they find that there is a positive association between tourist inflows from given destinations and their expenditures with future merchandise exports of tourist-related products to those destinations. One clear suggestion is that there greater coordination should be sought between tourism and export promotion activities.

The inflow of tourists reduce the costs of self-discovery associated to exportable products as visiting tourists usually take back samples and indirectly market it in their home country, leading to induced demand for Nepali niche products there. In effect, Nepali tourism entrepreneurs can test demand overseas without incurring much of the usual transaction costs that crops up when merchandise goods are exported. Furthermore, tourist inflows to Nepal itself act as a cost-free promotion of Nepalese niche products just as in trade fairs (where entrepreneurs incur costs).

They find that a 1 percent increase in tourist inflows from a particular country is systematically associated with a 0.5 increase in exports of traditional goods to that particular country one year later, on average, controlling for world demand for the product and product-and year-specific factors.

Excerpts from the paper:

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Overall, results strongly suggest that the quantity of tourist inflows are associated with exports of tourist-related products to the tourists’ home countries in the year after their visit to Nepal. This confirms spillover effects from tourism into exports of niche or country-specific goods. Consistently with this hypothesis, the quantity of tourists is not associated with exports of non-tourist-related products in the year after their visit. The spillovers are significant statistically and economically; indeed, their magnitude is sizable. The observed average increase in the number of tourists of about 5 percent per year is systematically associated with, all else being equal, higher exports of tourist-related products by about 2.85 percent per year, taking as a reference the results from the most demanding specification.

How effective are awareness campaigns?

Ravallion, van de Walle, Dutta and Murgai looked at the impact of awareness generation schemes for employment guarantee scheme in Bihar and found that there was no employment gains on average. But, it did show gains in knowledge and relatively favorable positive perceptions about the impact of the scheme.

Abstract from the paper:

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Public knowledge about India's ambitious Employment Guarantee Scheme is low in one of India's poorest states, Bihar, where participation is also unusually low. Is the solution simply to tell people their rights? Or does their lack of knowledge reflect deeper problems of poor people's agency and an unresponsive supply side? This paper reports on an information campaign that was designed and implemented in the form of an entertaining movie to inform people of their rights under the scheme. In randomly-assigned villages, the movie brought significant gains in knowledge and more positive perceptions about the impact of the scheme. But objectively measured employment showed no gain on average, suggesting that the movie created a "groupthink," changing social perceptions about the scheme but not individual efficacy in accessing it. The paper concludes that awareness generation needs to go hand-in-hand with supply-side changes.

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State of hunger in Nepal is improving (Global Hunger Index 2013)

IFPRI has published the latest update on Global Hunger Index (GHI), which shows that hunger in Nepal has consistently declined since 1990. The latest GHI score of 17.3 corresponds to 2008-2012 period. It is the second lowest score in South Asia. Sri Lanka has a GHI score of 15.6. In 2005 (data covering 2003-2007), Nepal had a score of 22.3.

In GHI 2012 (data covering 2005-2010), Nepal had a score 20.3, ranking 60 out of 79 countries. In GHI 2013, Nepal ranked 49 out of 78 countries.

2013 Global Hunger Index						Rank
Higher GHI score indicates more hunger	1990	1995	2000	2005	2013	2012	2013
	(with data from 1988-92)	(with data from 1993-97)	(with data from 1998-2002)	(with data from 2003-2007)	(with data from 2008-12)
Bangladesh	36.7	35.1	24.0	20.2	19.4	68	58
India	32.6	27.1	24.8	24.0	21.3	65	63
Nepal	28.0	27.3	25.3	22.3	17.3	60	49
Pakistan	25.9	22.8	21.6	21.2	19.3	57	57
Sri Lanka	22.3	20.7	17.8	16.9	15.6	37	43

The GHI ranks countries on a 100-point scale in which zero is the best score (no hunger) and 100 the worst. This year's GHI reflects data over 2008-2012 period. Hunger level is categorized as follows:

• <= 4.9 is low
• 5.0-9.9 is moderate
• 10.0-19.9 is serious [Nepal falls in this category]
• 20.0-29.9 is alarming
• >= 30.0 is extremely alarming

In order to identify hunger levels and hotspots, the GHI scores countries based on three equally weighted indicators: the proportion of people who are undernourished, the proportion of children under five who are underweight, and the child mortality rate.

In Nepal, the largest contribution to the reduction in hunger score between 2005 and 2013 came from the progress in reducing the prevalence of underweight in children under five years (down from 38.8% in 2005 to 29.1% in 2013).

Excerpts from the report:

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Across regions and countries, GHI scores vary considerably. South Asia and Africa south of the Sahara are home to the highest GHI scores. South Asia significantly lowered its GHI score between 1990 and 1995, mainly thanks to a large decline in underweight in children, but was not able to maintain its fast progress. Social inequality and the low nutritional, educational, and social status of women continue to contribute to the high prevalence of underweight in children under five.

[…]It is not surprising that many of the countries with “alarming” or “extremely alarming” scores have not been among the most stable. Higher GHI scores tend to be typical of countries that experience social or political unrest or are perennially exposed to shocks such as floods and droughts. Natural and manmade disasters can directly affect the food and nutrition security of people and communities that are particularly vulnerable or lacking resilience. By extension, a critical part of building resilience is ensuring food and nutrition security; and conversely, efforts to build food and nutrition security must be designed with a resilience lens. Poor people have long been vulnerable to “hunger seasons,” droughts, and other natural and manmade disasters. In recent years, this vulnerability has been exacerbated by food and financial crises and large-scale humanitarian crises such as the recurring droughts in the Sahel and the Horn of Africa. These short-term shocks have long-term consequences.

Policymakers and practitioners across the development and relief communities now recognize the need to build the resilience of vulnerable populations. More resilience will help them climb out of poverty, remain out of poverty, or avoid slipping into it in the first place. Conceptually, resilience has been expanded to include the capacity not only to absorb mild shocks, but also to learn from and adapt to moderate shocks and to transform economic, social, and ecological structures in response to severe shocks.

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High housing prices in Kathmandu (most can’t afford)

A new study, as reported in The Kathmandu Post, shows that the average price (in Kathmandu, Lalitpur and Bhaktapur) of a housing unit is Rs 12.3 million and an apartment unit Rs 9.2 million.

This is beyond the reach of most of the Nepalese people. The existing demand and price is likely fueled by easy bank credits to developers and prospective buyers. The prices are unsustainable and a further downward correction is warranted to ensure that the prices set during the ‘bubble’ time are not persistently sticky at a high level even during the slowdown in this particular sector. Hopes of rebounding of the real estate and housing prices, which are still high even after about 30% reduction from its peak level around 2010, are not reasonable as this point of time. A majority of Nepalese still cannot afford housing and apartment units prices beyond their lifetime income.

The housing and apartment markets appear to have plateaued as (i) NRB has imposed a 25% cap on lending to real estate and housing sectors; and (ii) the number of customers that the BFIs thought creditworthy (at least in the books!) have pretty much maxed out (unless they broaden their horizon and come up with innovative, affordable stuffs).  

Excerpts from the news piece:

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• 82 percent of housing and 72 percent of apartment projects sold had price range of Rs 5-10 million.
• Of the 858 housing units with a price value between Rs 5-10 million, 702 were sold. Likewise, 829 out of the 1,147 apartment units in the same price category were also sold.
• A higher demand for low end, ready to move in and instant ownership transferable units, the report entitled, ‘Real Estate Market Outlook 2013’, states.
• The average price for housing units stands at Rs 12.3 million, while the price of an apartment unit is Rs 9.2 million. A total 3,708 units of housing and apartments projects, out of 6,282, have so far been sold. This means 41 percent of units are yet to be sold.
• Even between the housing and apartment projects, there is a higher demand for housing units. The study showed that 76 percent of housing projects have already been sold, while only 51 percent of apartment projects have been sold as of July 2013.
• There are a total of 1975 housing units and 4307 apartment units in the valley.
• The real estate sector has recorded a total average investment value worth Rs 64.4 billion, including Rs 24.25 billion in housing projects and Rs 39.75 billion in apartment projects.
• The total investment value in housing projects is 37 percent, while 63 percent is in apartment projects.
• The report has attributed factors such as preference for owner built houses, lack of buyer confidence, change in customer preference and lack of flexible financial plans towards the selling of total units and accomplished projects as major challenges.
• The highest number of housing and apartment projects had been registered and launched in 2007-08, these numbers declined by 52 percent and 50 percent respectively in the next year.

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No blogging for a week more

A short break from blogging. Traveling around India. Blogging may commence from next week.

12 post-2015 development agenda relevant to Asia and the Pacific

Below are the 12 post-2015 development agenda (relevant to Asia and the Pacific) proposed in a new joint study by ESCAP, ADB and UNDP:

1. Zero income poverty – The region should build on its recent achievements in poverty reduction and set an ambitious goal of ‘zero poverty’.

2. Zero hunger and malnutrition – The aim should be universal food security, through among other things, much more attention to agriculture.

3. Gender equality – Gender will need to be assessed comprehensively, with more indicators on empowerment and on violence against women.

4. Decent jobs for everyone of working age – This would require full and productive employment and government commitment as an ‘employer of last resort’ translated into an explicit recognition of employment goals and targets in all policies and programmes.

5. Health for all – Priority should go to maternal, newborn and child health, universal access to sexual and reproductive health, including family planning, and to reducing the prevalence of communicable diseases and controlling the spread of non-communicable diseases.

6. Improved living conditions for all – Everyone should have access to safe and sustainable drinking water and sanitation, as well as basic energy services.

7. Quality education for all – This should start with early childhood care and education, followed by higher quality education at all levels, including adult literacy and lifelong learning, and providing learning and life skills for young people and adults.

8. Liveable cities – The poorest city dwellers should have effective shelter and secure tenure along with essential social infrastructure. They should also have access to affordable, safe and energy-efficient mass transport.

9. Environmental responsibility and management of natural resources – This will mean protecting critical ecosystems while reducing resource intensity and avoiding overexploitation of natural capital. At the same time countries will need to address climate change.

10. Disaster risk reduction – The region has witnessed natural disasters that have wiped out long-term development efforts. Any new development agenda should help mainstream disaster risk reduction in national budgets and development programmes.

11. Accountable and responsive governments – There is a call for more accountable, transparent and effective government at both national and local levels for more capable and efficient management of public resources and service delivery.

12. Strong development partnerships and reformed global governance – Countries in Asia and the Pacific will benefit from global and regional partnerships to manage global public goods, particularly in finance, health, trade, technology transfer, environment, and climate change. The reform of global governance should reflect the Asia-Pacific ascendance in the global economy. The prospect and scope of financial and economic crises and commodity price volatility must be minimized in order to protect development gains.

Linking smallholders to markets

A majority of farmers are smallholders and supporting them is the key to a sustained structural transformation and poverty reduction. Linking them with markets would do a great deal in moving forward in that direction.

It would require (according to to a new report by ODI—Leap & Learning: Linking Smallholders to Markets):

• Business case for smallholders and their partners in supply chains (enabling rural investment climate and provision of public goods)
• Good linking approaches (facilitation, learning, flexibility, clear exit strategies)
• Organizing the links (private sector participation, contracting, cooperatives)

Necessary condition:

• An enabling investment climate (peace, security, macroeconomic stability, property rights, rules pertaining to standard and measurement)
• The provision of rural public goods provisioned by the state (roads, power, education, healthcare, drinking water, agriculture R&D)

Also, enhancing access to inputs, technical advise, insurance, credit and other financial services is required.