Foreign Aid and Corruption

I have posted a few times (here and here and here) on the effectiveness of foreign aid in general and in Nepal. Most recently I wrote about it in the Op-Ed forThe Kathmandu Post (CLICK HERE). Most of these posts relate to the systemic issues with foreign aid, however, I do think that corruption adds to the ineffectiveness of foreign aid. This news article (CLICK HERE) published on MyRepublica points out  that "a report of Ministry of Finance says that the level of corruption in the country has increased over the last 10 years and it has gone on to hurt the development results badly. Rise in corruption has mainly led to reduced cost effectiveness and efficiency of the development programs, states the Nepal Country Evaluation Report of the Paris Declaration that the national evaluation team submitted to the government recently."

Labor v Leisure in Kathmandu

The wealth of the richest 20 % in Nepal, mostly concentrated in Kathmandu valley, has been growing over the last decade (CLICK HERE). Also, the labor force participation rate for women 15 and older has been steadily increasing (CLICK HERE). This economic shift has increased the opportunity cost of event planning, especially big ones like weddings. This article (CLICK HERE) on ekantipur.com points to an interesting shift of wedding celebrations in Kathmandu. People have started to hire catering services rather than doing it themselves. According to the article "the caterers say the business is growing by ten to fifteen percent."
Mehdi lagake rakhna, doli sajake rakhna, lene tujhe oh gori aayenge tere sajna... at the Party Palace! 

Happy Holidays!

A story from lala land...

The hypothetical example used in this article (CLICK HERE) to demonstrate the negative impact of a cap on CEO salary is just that- a hypothetical scenario! The various numbers and strong assumptions made could (but not necessarily) lead to the outcome presented; however, to suggest that this action will create “bloated financial institutions with the management’s mandate to seek total asset growth irrespective of other factors” is ludicrous!
The fallacy of the argument lies in the direction of the causality. It is the NRB’s action that is the effect here not the other way around. Also, if a management is looking for a short term salary benefit then they need to increase and sustain the average salary of their employees as well, because the NRB’s rules suggests “the BFIs to limit the fixed annual salary and allowances for chief executives to less than 5 percent of the average staff expenses incurred over the previous three fiscal years or less than 0.025 percent of the company´s total assets at the end of the previous fiscal year, whichever is lower." (CLICK HERE) If true this will be financially difficult and possibly a long-term suicide.

"Of Penguins and People"

I was reading about social businesses in Creating a World Without Poverty by Muhammad Yunus (CLICK HERE) this morning and it reminded me of what penguins do to survive through the harsh winter of Antarctica.

A series called Planet Earth (CLICK HERE) on the Discovery channel shows how penguins deal with four months of extreme winter weather. The females head for the ocean in search for food leaving the males behind with the task of protecting the egg. The scheme that the penguins come up with is quite fascinating! They form a big tight circle that rotates ensuring that the penguins on the perimeter move towards the center and vice versa. This allows them to preserve valuable body heat.

This in turn reminded me of a bar scene in the movie A Beautiful Mind (video below) where John Nash (Russell Crowe)  says--  “The best result will come where everyone in the group doing what’s best for themselves and the group.”


Instead of extremes the best outcome might be a middle ground-- where market based practices are conducted with social benefit in mind.
Should we call it Buddhanomics?

Joseph Stiglitz on The World Bank

"Jamindari Microfinance"

It may not be common knowledge but a source tells me that microcredit lending programs, including major INGOs, have used Jamindars and other local loan sharks that have been in the business for generations, because of their “experience” in lending activities. One cannot ignore the fact that there is a deep rooted disregard for these village lenders, and rightfully so. The vile practices of the past that forced people into perpetual debt and a life of servitude will not be washed away easily. This feeling amongst borrowers gives rise to mistrust of the lender. Moreover, the system becomes very fragile and a slight voice of decent could quickly escalate into a community backlash similar to the recent events in India (CLICK HERE).


Isn't it time to learn that same old practices do not yield different results?

"Girl Power!"

When I logged in to Facebook this morning, I read something that my young cousin (7yrs old) had posted on her profile. I am sure it was innocent, yet it was powerful enough to remind me that the patriarchal society in Nepal is alive and well--a sad reality! She wrote: "serving man is serving god"--needless to say my jaw hit the floor! 

Here is a video for her and others like her...

Research Methods 101

A simple question about how much your country gives in development assistance to poor countries could result in different answers. The problem could be in the way one asks the question. Xavier Marquez, a political science lecturer in NZ, points out in his blog (CLICK HERE) that "European public opinion turns out to be uncannily accurate at determining the answer to that question, far more than Americans."

"I Dream of Gini"

According to the World Bank data for Nepal, the Gini-index, a measure of income disparity, stood at 38 in 1996 and increased to 47 in 2004—an increase of about 24 percent (INTERACTIVE GRAPH HERE). Joseph Stiglitz argued in his post on Real Clear Politics (CLICK HERE) that the "growing inequality in most countries of the world has meant that money has gone from those who would spend it to those who are so well off that, try as they might, they can't spend it all." This will then lead them to make risky ‘investments,’ which may fuel asset prices, giving rise to  bubbles.

Does this answer the recent real estate and banking volatility in (Kathmandu) Nepal?

Reducing Poverty-- One Catwalk at a Time!

In my recent Op-Ed for The Kathmandu Post (CLICK HERE) I did mention the lavish office spaces aid agencies occupy in developing countries' capitals. However, I was not aware of these kinds of activities that were also 'eating up' the funds allocated for poverty alleviation and other socio-economic programs. I came across this news at DEVEX (CLICK HERE), which refers to this (CLICK HERE) blog post by Alex Singleton for The Telegraph. Your tax Dollars (Euros) at work!
 
Source: (CLICK HERE)

Salary Cap for CEOs in Nepal

Nepal Rastra Bank (The Central Bank of Nepal) recently made public its guidelines to limit CEO pay. According to My Republica (HERE) "NRB has asked the BFIs to limit the fixed annual salary and allowances for chief executives to less than 5 percent of the average staff expenses incurred over the previous three fiscal years or less than 0.025 percent of the company´s total assets at the end of the previous fiscal year, whichever is lower."

In response to this news Mr. Prakash Shrestha and Ms. Kalpana Khanal have written an interesting Op-Ed in The Kathmandu Post (CLICK HERE) titled "Through the Roof." They point out that "financial institutions are not like private industries," but rather "public institutions by nature."  They argue that "the ever-growing perks and salaries of CEOs tend to bring anomalies in the financial sector."

"The Poverty Lab"-- Part Deux!

On November 18th, 2010, I talked about an article (CLICK HERE) titled "The Poverty Lab" published in The New Yorker that lauded the work of MIT professor Esther Duflo. The article wrote that Ms. Duflo "runs field experiments that measure different ways to save the world, " which she compares to various scientific experiments that take place in the field of medicine every day.

A similar experiment is about to be implemented in NYC. The experiment is applying same methodology applied by Ms. Duflo, to study the effectiveness of a program to prevent homelessness. The New York Times reports (CLICK HERE) that "half of the test subjects — people who are behind on rent and in danger of being evicted — are being denied assistance from the program for two years, with researchers tracking them to see if they end up homeless."

I did wonder about the ethical issues with the involvement of human subjects in the experiments conducted by Ms. Duflo in India. However, I quickly dismissed them when I read that the experiments had to be approved by MIT's ethical board. Well, the NYT article (which quotes Ms. Duflo) reports that the experiment planned for NYC is receiving some resistance and "some public officials and legal aid groups have denounced the study as unethical and cruel, and have called on the city to stop the study and to grant help to all the test subjects who had been denied assistance."

Is there a double standard with the ethical level applied to the West vs. the East/South?

The Reading List

"The Reading List" compiles some interesting business and economic news from Nepal and the  field of development.

• "Center of Confusion"  The Kathmandu Post (CLICK HERE)
• "Realtor's Cut Prices" My Republica (CLICK HERE)
• "ADB's Regional Transportation Plan" My Republica (CLICK HERE)
• UNDP Mid-Level Job for Nepal- Application due December 9th, 2010 (CLICK HERE)
• 

Engineered Seeds-- Vandana Shiva

In the light of this (CLICK HERE) story posted on The Kathmandu Post last month about infertile seeds distributed to the farmers in Nepal, I thought it might be interesting to listen toVandana Shiva. If you would like to listen to the entire talk--Part 2 is available here (CLICK HERE) and Part 3 is available here (CLICK HERE)

Sad Reality...

I was going through my daily reading of the Nepali newspapers when I ran across this Op-Ed (CLICK HERE) by Mr. Bihari Krishna Shrestha, an anthropologist and a previous member of the National Planning Commission-Nepal, published on The Kathmandu Post. It is an interesting and candid account of reality--economic, social, and political. If you enjoyed reading my Op-Ed (CLICK HERE) that I posted last week, you will enjoy this one! Here is an excerpt from the article.

"The many Andolans in Nepal have been useful only in restoring them to power. The Constituent Assembly itself has been the latest manna from heaven. Since its enormous horde of 601 members makes more than half a million rupees a year each in hard cash, the incentive is heavily stacked against writing the Constitution. The longer the delay, the larger the monetary intake both for the members and their parties. While democracy and development are mutually reinforcing and indispensable for the people, Nepal’s traditional socio-economic context demands a different methodology to them."

Yes They Can, The Kathmandu Post (CLICK HERE) for the full article.

Op-Ed on The Kathmandu Post

Here is the article that I promised I would post upon completion. I sent it to all major publications in Nepal. It was picked up by The Kathmandu Post and published on December 1, 2010. Please click on the link below to get to the article.

Something's Wrong The Kathmandu Post (CLICK HERE FOR THE ARTICLE)

"Kukhuree Kan" (Cocorico in French) Part Deux

I posted an article a while back (CLICK HERE) that appeared in MyRepublica's Business & Economy section which discussed the surge in poultry production. The article pointed to the fact that the "investment in poultry sector has shot up by over 30 percent."

At the time I asked the question "Does this mean a price relief is on the way for consumers?" Well, the chickens have come home to roast (wink)! This article (CLICK HERE) from The Kathmandu Post provides the answer.

I remember when everyone flocked towards mushrooms, carpets, garments and now chicken...what's next? Herd mentality is alive and well!

Microfinance Under Microscope

A few weeks ago I posted this article (CLICK HERE) from the New York Times talking about high interest charges, high default rates and the rough collection practices in India. The NY Times article also pointed to the fact that people were trapped in a debt cycle with multiple loans, which prohibited them from making any financial progress. There were talks about capping the interest rates that MFIs charge. The Economist in their issue dated November 20th-26th 2010 came out against the capping of interest rates arguing that it will "hurt the poor." It went on to suggest that MFIs may be able to allow very poor people to save by offering small amount savings accounts as "they already have existing relationships with the kinds of people who would use such basic savings accounts." The article concluded by saying that "fewer restrictions on microlenders, not new ones, would be the best way of helping the poor."

According to an article in The Kathmandu Post (CLICK HERE)  there is a conference on Microfinance going on in Kathmandu, Nepal. The conference "organized by the Rural Microfinance Development Centre (RMDC), Nepal and the Institute of Microfinance, Bangladesh in cooperation with the SAARC Secretariat, Nepal, the two-day regional conference entitled “Microfinance in SAARC Countries: Sharing Lesson and Way Forward” aims to present the state of microfinance in SAARC and discuss key issues of sustainability and regulation of microfinance institutions in the days ahead."

Let us wait and see what they say about the state of microfinance in Nepal and the region when they release their report at the conclusion of the meeting.