Sunday, May 25, 2014

Bill Gates on Jeff Sachs and international development

Bill Gates writes:

In the end, I hope poverty fighters will not let what they read in this book stop them from investing and taking risks. In the world of venture capital, a success rate of 30 percent is considered a great track record. In the world of international development, critics hold up every misstep as proof that aid is like throwing money down a rat hole. When you’re trying to do something as hard as fighting poverty and disease, you will never achieve anything meaningful if you’re afraid to make mistakes.
I greatly admire Sachs for putting his ideas and reputation on the line. After all, he could have a good life doing nothing more than teaching two classes a semester and pumping out armchair advice in academic journals. But that’s not his style. He rolls up his sleeves. He puts his theories into action. He drives himself as hard as anyone I know.

Wednesday, May 21, 2014

NEPAL: Major findings of Annual Household Survey 2012/13

The CBS is publishing annual household survey (AHS) data (no online link to the document yet) starting FY2013 to compliment the low frequency surveys (NLSS, NLFS). These high frequency survey data on key household characteristics could play an important role in steering public policy and development debates in the right direction. Basically, data on demography, housing, consumption and employment/economic activity are included. The household consumption data may also used to estimate final consumption figures in the national accounts estimate. Exercise caution while comparing annual household survey data with that of NLSS and NLFS. The latter ones are standard surveys that are used to compare various indicators (poverty, inequality, labor force participation, etc) within and across countries. The annual survey may not be as forceful as the periodic surveys. That said, they can still be used to capture changing expenditure and employment dynamics.

The average nominal per capita consumption in 2012/13 was NRs44,596, with the share of poorest 20% population at 7.6% and the richest 20% population at 45.8%. In urban and rural areas, per capita consumption was NRs84,134 and NRs.36,694, respectively.

Regarding consumption pattern, 59.2% of household expenditure was spent on food, followed by 11.6% in rent, 4% in alcohol and tobacco, 3% in education, 1.1% in durables, 0.8% in utilities, and 20.4% in non-food items. Looks like households spent more on alcohol and tobacco than education and durables combined! As a share of consumption, the poorest quintiles consume more alcohol and tobacco than the richest quintiles. Also, high inflation is particularly going to be severe in the case of poorest households because they spend about 67.1% of income on food and 17.2% on non-food items. For households in the richest quintile, this is 40.6% and 26.4%, respectively.

The AHS 2012/13 puts unemployment rate at 3.3% and labor force participation rate at 81.1%. Labor force participation includes the population employed (at least for an hour) in the past 7 days and those actively searching for jobs. Discouraged workers are not included in the labor force. Male and female unemployment rate stood at 3.2% and 3.4%, respectively. While urban areas had the highest unemployment rate (8%), folks between 20 and 24 years had unemployment rate of 7.7%. Also, unemployment was highest in the richest quintile (5.3%).

Labor underutilization rate stood at 27.8%, which includes unemployment rate (3.3%), time related underemployment (13.4%), skills mismatch (4.2%), and inadequate earnings (6.9%). Labor underutilization rate is highest in urban areas and also among households in the highest consumption quintiles. Those people who are willing to work for more than 40 hours in a week, but are not getting that much of work hours are clubbed under time related underemployment. Those folks whose skills are not fully utilized in the present job are clubbed under skills mismatched. Those people earning is less than half of the mean income are clubbed under inadequate earnings.

Agriculture, forestry and fishery accounted for about 66.5% of total employment in 2012/13, followed by 6.8% in wholesale and retail trade, 5.2% in manufacturing, and 3.4% in education.

A majority of the population is of working age (15-59 years) — almost 57%. There are 88.5 males per 100 females (partly reflective of the large number of males who go abroad) and average household size is 4.6.  About 15.4% of households have 1-2 persons and 37.9% have 3-4 percent, meaning that 53.5% of households have less than or equal to 4 persons. About 36.6% of households are headed by less than 40 years old. About 25.3% of households are headed by females.

While a majority of the households owns a house, just 10.2% households take it on rent for living. But, the renter households are higher in urban areas (38.8%) than rural areas (just 3.6%). In urban areas, 57.5% households own a house. Now, the richest quintile appears to rent more than the lower quintiles. A general trend is that the richer your household is, the higher the probability that you will be living in a rented place. Quite surprising!

Furthermore, while a majority of dwelling of households in rural areas is mud bonded, in urban areas the majority of dwelling is pillar bonded. Given the large number of households in rural areas, the overall average for Nepal is 49.5% dwellings that are mud bonded. Also, the poorest quintiles tend to have more mud bonded dwelling (58.7%) and the richest quintiles tend to have pillar bonded (45.3%). Sounds obvious, but it is always good to get the near-exact  numbers.

About 43.7% of households have toilet with flush connected septic tank and just 6.1% of households have toilet with flush connected to public sanitation. About 20.2% of households in the richest consumption quintile have toilet with flush connected to public sanitation. Overall, 31.6% of total households do not have toilet facility (among lowest consumption quintile households, the figures is 63.4%).

In terms of access to ICT, 82.1% of households have access to mobile phone, with households in the richest quintile have 95.4% access to mobile phone. About 60% of households in the poorest quintile have access to mobile phone.

Tuesday, May 20, 2014

Trip to Manang (& Pokhara)


Mini waterfall.

Lamjung Himal

Commercial sheep farming in Timang.

Dhukurpokhari, Manang, @3060 meter

Phewa Lake

Begnas Lake

Friday, May 9, 2014

Snapshot of what living standards survey tells us about remittances in Nepal

Understandably, there is a lot of interest on the impact of migration and remittances on the Nepalese economy, which receives remittances to the tune of 25% of GDP and was the third largest recipient (% of GDP) in 2011. I see a lot of numbers thrown around to justify various points (including illogical and inconsistent arguments), and I too get a lot of questions on the data and the impact on Nepalese economy.

Below is a chart showing remittances data sourced from Nepal Living Standards Surveys (NLSS). And yes, there are internal remittances as well!

More on remittances in Nepal here (dig in the archives for information, data and analysis!). A recent Al Jazeera news story here. And, here is a link to a research paper titled 'Remittances in Nepal: Boon or Bane?'.

Sunday, May 4, 2014

Nepal and the knowledge economy

As economies shift workers and economic activities from low productivity to high productivity sectors, especially when they are near the middle-income threshold, advancing the knowledge economy helps them overcome the ‘middle income trap’— crucial for a continued and meaningful structural transformation. A knowledge economy not only propels high value added services activities, but also contributes to moving manufacturing activities up the value chain. Think of it as follows: With cheap labor cost a country can competitively produce normal garments and light machinery goods—all require either copying already existing techniques or importing intermediate raw materials and technology to produce these goods. But, to climb up the value chain and to not get stuck at lower middle- to middle-income levels, there has to be progress on four fronts so innovation and mastery of management skills takes place domestically, and these are readily absorbed by the backward firms in the value chain— contributing to a continual build up of competitiveness.

The four essential elements of a knowledge economy, according to WB’s Knowledge Economy Index, are:
  1. Economic and institutional regime: tariff and non-tariff barriers, regulatory quality, rule of law
  2. Education and skills: adult literacy rate, gross secondary enrollment rate, gross tertiary enrollment rate
  3. Information infrastructure: Telephones per 1,000 people, computers per 1,000 people, internet users per 1,000 people
  4. Innovative systems: royalty payments and receipts ($ per person), technical journal articles per 1 million people, patents granted to nationals by US Patent and Trademark Officer per 1 million people
So, where does Nepal stand in the cross-country knowledge economy indicators? Well, it stands well below the average for Asia and the Pacific. Below is a chart from ADB’s highlights from a forthcoming report titled “Asia’s Knowledge Economies: Next Policy Agenda”.

Below is a chart, sourced from Kenichi Ohno’s discussion paper on middle-income trap, showing how countries can move up the value chain and avoid the middle-income trap.

Now, what can be done to promote the knowledge economy? Some of the recommendations from the road map outlined in the ADB report are as follows:

  • Increase investment in R&D (at least 1.5% of GDP)
  • Create knowledge hubs and focus on gaining IPR for inventions
  • Pursue imported technologies and adaptation of R&D to build the base for domestic capabilities
  • Green innovation in energy and agriculture
  • Expand quantity and quality of innovation infrastructure (IT parks, innovation hubs, R&D labs, incubators)
  • Support start-up entrepreneurial firms
  • Expand financing for innovation by promoting capital markets
  • Increase tertiary education enrollments and access to technical and vocational education and training and skills development
  • Revitalize established and large university campuses with greater financial and administrative autonomy
  • Promote a diversified education system
  • Incentivize industry giants to set up leading research labs in universities
  • Support establishment of technology incubation centers and technology accelerators
  • Improve network readiness and invest in backbone ICT infrastructure
  • Invest in next-generation mobile broadband infrastructure
  • Promote market competition and liberalization in telecom sector
  • Augment use of ICT to strengthen e-governance and service delivery
Economic and institutional regime:
  • Better coordination across various agencies to promote knowledge based economy
  • Accelerate commercialization of innovation in key sectors with high social impact (off-grid solar and wind power technologies)
  • Promote high tech start-ups with a range of incentives and support mechanisms
  • Provide financing for R&D of SMEs
  • Strengthen IPR regimes
  • Promote spread of broadband connectivity through affordable and reliable models
  • Develop capital markets