Sunday, October 7, 2018

South Asia firms up its growth lead despite budget woes

With growth topping 6.9 per cent in 2018 and set to accelerate to 7.1 per cent next year, South Asia is firming up its position as the world’s fastest-growing region, further extending its lead over East Asia and the Pacific, says the World Bank in its twice-a-year regional economic update.
The latest edition of the 'South Asia Economic Focus, Budget Crunch,' finds however that the region’s growth performance is uneven across countries – with Afghanistan notably bucking the upward trend – and mainly driven by domestic demand.
The report, however, warns that a more turbulent external environment, manifested by trade wars and capital outflows from emerging markets, calls for prudent economic policy and fiscal discipline. Instead, most South Asian countries generate low tax revenue and run large budget deficits, often made worse by economic shocks and election cycles. At 4.4 per cent of its gross domestic product (GDP), South Asia’s fiscal deficit is projected to be the second largest in the world this year after the Middle East and North Africa region. The average fiscal deficit over the last three years has been around 5.5 per cent in Pakistan and above 6 per cent in Maldives, India, and Sri Lanka.
“Budget deficits in South Asia are among the highest in the world, and this could be storing up trouble for the future,” World Bank vice president for the South Asia Region Hartwig Schafer, said, adding that South Asia’s fiscal weaknesses reduce its ability to address external shocks or economic slowdowns. "It would be wise to use these good economic times for countries to get their budgets in better shape.”
While fiscal challenges vary across the region, the report notes that tax revenue is consistently low across most South Asian countries and at rates below that of other developing countries with a similar income per capita, sometimes by a vast margin. Although some countries have expanded their tax bases and curbed tax exemptions and fraud, revenue remains lower than government expenditures, creating large fiscal deficits that need to be financed through public borrowing.
South Asian countries have also favored procyclical approaches to spending – with expenditures going up fast as their economies expand – that amplifies boom-and-bust cycles.
Together with public debt, hidden liabilities, arising from non-viable borrowing by state-owned enterprises, the failure of infrastructure projects involving the private sector, and non-performing loans in commercial banks, should be closely monitored.
While fiscal outcomes vary across the region, the fiscal situation in each country reveals more profound development challenges, which range from large security expenditures in conflict-affected countries, weak discipline by sub-national governments in federal states, to the high cost of service delivery in island nations.
“Substantial government spending is understandable, even beneficial if well-invested, given South Asia’s enormous development needs,” World Bank chief economist for the South Asia Region Martin Rama, said, adding that South Asian economies but need to address their fiscal challenges to give themselves room to maneuver and sustain their journey toward greater prosperity.

Saturday, October 6, 2018

‘Nepal has already internalised SDGs’

Nepal has already internalised the SDGs in its policies and programmes and is working towards integrating them at local levels.
Inaugurating a SAWTEE Centre for Sustainable Development – launched South Asia Watch on Trade, Economics and Environment (SAWTEE) – here today foreign minister Pradeep Gyawali said that the integration will, however, necessitate support from all stakeholders, domestic and international.
The SAWTEE Centre for Sustainable Development (SAWTEE-CSD) – launched to promote inclusive and sustainable development – will initially focus on economic transformation in line with the Sustainable Development Goals’ (SDGs) principles of inclusiveness, equity, sustainability, gender mainstreaming, multi-stakeholder approach, good governance and global partnership, while also looking at all SDGs in an integrated manner, according to former under-secretary-general of the United Nations (UN) Gyan Chandra Acharya, who will be leading the centre.
Speaking on the occasion, former foreign minister Dr Prakash Saran Mahat emphasised that Nepal’s constitution envisaged sustainable and inclusive development, but the goals could be attained only through rule-based implementation of these laws and rights.
The private sector should lead the growth while the government should undertake equitable distribution, he added.
"The centre will bring together politics, policies and expertise devoid of ideological content and material interest while fully adhering to the scientific approach and ensuring non-partisan research," chairperson of SAWTEE Dr Posh Raj Pandey said, adding that the activities of the centre will contribute not only to existing issues and policies, but will also provide alternate ideas to decision makers.
The centre seeks to play the role of a catalyst and contribute to the country’s accelerated development through research, analysis, dialogue and advocacy, realising that the government has to take a lead role in the development of a country as it cannot deliver alone, he added.
Emphasis will be on structural transformation and job creation, also envisioned by SDGs. The fundamental essence of these goals – an integrated, holistic and multi-stakeholder approach, sustainability, gender mainstreaming, leaving no one behind, and global partnership – will guide the centre’s activities.
The centre will be collaborating with all stakeholders in carrying out its activities, including political leaders, civil servants, private sector, development partners, experts, the academia and beneficiaries, reads a press note issued by the SAWTEE.
The centre aims at pursuing a bottom-up approach and contributing to developing a coherent national strategy for structural transformation of Nepal’s economy that is people-centred and sustainable. Nepal’s adoption of a federal, democratic and republican structure warrants this as all the constituent federal units are responsible for economic development and related activities.
Nepal is a least developed, landlocked and post-conflict country, which needs huge support from the international community to meet the SDGs. Global support and partnership plays a critical role in its development efforts.

South Korea to allow family to visit Nepali workers, increase quota

South Korea is going to allow family members of Nepali migrant workers in South Korea to pay a visit at least once during their employment tenure, and increase the quota of Nepali migrant workers.
Responding to the labour minister Gokarna Bista, South Korean ambassador to Nepal Park Young-sik, said that Nepali migrant workers will soon be able to meet their family members in South Korea. "The South Korean government is making official arrangements for this purpose," he added.
Ambassador Youngsik – during the meeting with the labour minister Bista today at the ministry – said that some families have already visited South Korea to meet their keens.
Labour Ministry spokesperson Prakash Dahal informed that minister Bista had requested envoy Young-sik during their previous meeting to facilitate family members' visit at least once during the migrant worker’s contract period.
Though, South Korea is known for offering better facilities and remuneration among other foreign job destinations, the suicide rate of Nepali migrant workers has been increasing in South Korea in recent years. Family visits could give workers a psychological relief from anxiety, loneliness and dispel thoughts of committing suicide. The Nepali migrant workers have a-four-year-and-a-10-month contract period.
Bista also requested the ambassador to increase the jobs quota for Nepali migrant workers in South Korea. The South Korean government has fixed the maximum ceiling of 7,100 Nepali workers, who pass the qualifying test (EPS) and enter its job market in 2019 as potential candidates. Bista urged to hire Nepali workers in service sector too. Praising the performances and conduct of Nepali workers in South Korea, envoy Young-sik said he would do his best to increase the quota for Nepali workers and their placement in service sector, according to a press note issued by the ministry.
According to Department of Foreign Employment (DoFE), some 54,363 Nepali migrant workers are in South Korea currently.

Thursday, October 4, 2018

Trade war threatens outlook for global shipping

Seaborne trade expanded by a healthy 4 per cent in 2017, the fastest growth in five years, while UNCTAD forecasts similar growth this year, according to its Review of Maritime Transport 2018. Volumes across all segments are set to grow in 2018, with containerised and dry bulk commodities expected to record the fastest growth at the expense of tanker volumes.
The 2018 edition of the UNCTAD Review of Maritime Transport, marking its 50th year of publication, was launched at the Global Maritime Forum’s Annual Summit taking place in Hong Kong on October 3-4.
"While the prospects for seaborne trade are positive, these are threatened by the outbreak of trade wars and increased inward-looking policies,” UNCTAD secretary-general Mukhisa Kituyi said, adding that escalating protectionism and tit-for-tat tariff battles will potentially disrupt the global trading system which underpins demand for maritime transport.
The warning comes against a background of an improved balance between demand and supply that has lifted shipping rates to boost earnings and profits. Freight-rate levels improved significantly in 2017 – except in the tanker market – supported by stronger global demand, more manageable fleet capacity growth and overall healthier market conditions.
Supply-demand improvements, namely in the container and dry bulk shipping segments, are expected to continue in 2018. Freight rates may benefit accordingly, although supply-side capacity management and deployment remain key. UNCTAD projects an average annual growth rate in total volumes of 3.8 per cent up to 2023.
On the supply side, after five years of decelerating growth, 2017 saw a small pick-up in world fleet expansion. During the year, a total of 42 million gross tons were added to global tonnage, equivalent to a modest 3.3 per cent growth rate.
Looking at the shipping value chain, Germany remained the largest containership-owning country with a market share of 20 per cent at the beginning of 2018, although it lost some ground in 2017. In contrast, owners from Greece, China and Canada expanded their containership-owning market shares.
Meanwhile, in 2018, the Marshall Islands emerged as the second largest registry, after Panama and ahead of Liberia. More than 90 per cent of shipbuilding activity in 2017 occurred in China, the Republic of Korea, and Japan, while 79 per cent of ship demolitions took place in South Asia, notably India, Bangladesh and Pakistan.
Liner shipping consolidation, technological advances, and climate change policy are key drivers of change in global shipping, the report reads.
Consolidation activity in liner shipping continued unabated: the liner shipping industry witnessed further consolidation through mergers and acquisitions and global alliance restructuring.
As of January 2018, the Top 15 shipping lines accounted for 70.3 per cent of all capacity. Their share has increased further with the completion of the operational integration of the new mergers in 2018, with the Top 10 shipping lines controlling almost 70 per cent of fleet capacity as of June 2018.
Three global liner shipping alliances dominate capacity deployed on the three major East-West container routes, collectively accounting for 93 per cent of deployed capacity. Alliance members continue to compete on price while operational efficiency and capacity utilisation gains are helping to maintain low freight-rate levels. By joining forces and forming alliances, carriers have strengthened their bargaining power vis-à-vis the seaports when negotiating port calls and terminal operations.
Growing consolidation can reinforce market power, potentially leading to decreased supply and service quality, and higher prices. Some of these negative outcomes may already be in effect. For example, in 2017-2018, the number of operators decreased in several small island developing States and structurally weak developing countries.
“There is a need to assess the implications of mergers and alliances and of vertical integration within the industry, and to address any potential negative effects. This will require the commitment of all relevant parties, notably national competition authorities, container lines, shippers and ports,” director of UNCTAD’s Division on Technology and Logistics, Shamika N Sirimanne, said.

ADB to provide $180 million to improve East–West Highway

The Board of Directors of the Asian Development Bank (ADB) has approved a loan of $180 million to support improvements to East–West Highway, the country’s main domestic and international trade route also known as the Mahendra Highway.
“The highway’s road surface – Nepal’s busiest route – is in fair to poor condition and does not segregate oncoming traffic or slow-moving vehicles and pedestrians,” said ADB transport specialist Johan Georget. “Improving the road will boost the efficiency of Nepal’s transport system, strengthen national and regional connectivity to promote growth and trade, and improve road safety.”
Nepal’s road network, which includes eight north–south and three east–west corridors, carries more than 90 per cent of passengers and goods in the country. The project road carries an average of 8,600 vehicles daily, with more than a quarter of them heavy vehicles. This average is forecast to grow to 25,400 vehicles a day by 2033.
The project will improve and rehabilitate about 87-km between Kanchanpur and Kamala on the East–West Highway, and will upgrade the highway section to a four-lane dual carriageway to cater to the projected increase of traffic demand, including a new road surface and drainage. Road safety will be significantly improved, as a center median will reduce head-on collisions, while service lanes in populated areas will reduce rear-end, sideswape, and side-on collisions, particularly for pedestrians, motorcycles, and cyclists.
The project will also finance civil works and equipment packages to improve road safety along the entire 1,027-km of the East–West Highway, and support road safety campaigns. The loan will also finance preparation of detailed designs for future road projects along the corridor. Accompanying the loan is an ADB technical assistance grant of $750,000 to help prepare a national road safety policy and action plan, strengthen the road safety council, carry out a road safety assessment of the corridor, identify the location of potential service areas, and promote gender equality measures in the transport sector.
Contractors are currently invited to purchase bidding documents and submit their proposals, and construction is expected to start in the first quarter of 2019. Civil works contracts will include a performance-based maintenance period of 5 years after completion of construction, which is due to finish in 2022.
The total project cost is $256.4 million, of which the government will $76.4 million.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members, 48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.

Wednesday, October 3, 2018

'Made in Pakistan' expo kicks off in capital

The ninth edition of 'Made in Pakistan' expo kicked off in Kathmandu today. President of Nepal-Pakistan Friendship Association Himalaya SJB Rana inaugurated the weeklong expo.
The single country 'Made in Pakistan Expo' is organised by the Rawalpindi Chamber of Commerce and Industry in collaboration with a number of Pakistani businesspersons, according to a press note issued by the Embassy of Pakistan based in Kathmandu.
The Pakistani products including furniture, leather items, handicrafts, textile products and artificial jewelry are on sale at the exhibition. 

Global report highlights transformative impact of digital technologies on trade

The 2018 edition of the WTO’s flagship publication, the World Trade Report, finds that digital technologies – the Internet of Things, artificial intelligence, 3D printing and Blockchain – will have a profound impact on global trade, adding up to 34 percentage points to trade growth by 2030 thanks to lower costs and higher productivity.
However, they could also create a challenging environment for those seeking to keep up with the latest innovations. The Report launched today at the WTO Public Forum also shows that digital technologies are likely to further reduce trade costs and boost trade significantly, especially in services and for developing countries. Global trade is projected to grow by an additional 2 percentage points annually between 2016 and 2030 as a result of digitalisation, falling trade costs and the increased use of services. This corresponds with a 31-34 percentage point higher trade growth over 15 years.
The share of services in global trade is projected to grow from 21 per cent in 2016 to 25 per cent in 2030. The report also finds that the reduction in trade costs could be especially beneficial for micro, small and medium sized enterprises (MSMEs) and firms from developing countries, provided they have the ability to keep up with the adoption of digital technologies. In the best scenario, developing and least-developed economies' share in global trade is predicted to grow to 57 per cent by 2030, from 46 per cent in 2015, whereas if they cannot keep up, this share is predicted to rise to 51 per cent.
The report discusses how digital technologies can unlock savings, such as through better route planning, autonomous driving and smart inventories made possible by artificial intelligence and robotics. Blockchain solutions – a system of decentralised, digital transactions – can reduce time spent on customs compliance and logistics. The Internet of Things, the networking and processing capabilities of everyday objects, can help to improve operational efficiency through better preventative maintenance of machinery and products. These technologies can therefore reduce transportation and storage costs, which represent a major share of overall trade costs.
Digital technologies can also significantly affect what the world trades. For example, remote controlled robotics have led to revolutionary advances in trade in services and the emergence of new services such as telesurgery. Enhanced technological capacities which allow faster and simpler processing of traded products could also foster trade in time-sensitive, certification-intensive and contract-intensive goods.
The report argues that new technologies are likely to change the established ways the world trades, with comparative advantages predicted to change across economies. AI, 3D printing and advanced robotics could reduce the role of labour as a source of comparative advantage, while factors such as the quality of digital infrastructure and market size as well as institutional and regulatory determinants of comparative advantage, including intellectual property protection, might become more relevant. 3D printing, furthermore, may to some extent reduce the need for outsourced assembly, the number of production steps and other factors related to global value chains.
The report identifies certain areas which may warrant international cooperation. These include key initiatives being undertaken by multilateral organisations such as facilitating a favourable legal and regulatory framework, competition-related issues, intellectual property rules, supporting MSMEs, promoting digital inclusion, and addressing challenges related to trade facilitation and infrastructure for information communication technology. The report concludes that, overall, the expansion of digital trade holds the potential to generate considerable benefits if it takes place under conditions that adequately address important public policy challenges. Issues concerning inclusiveness, privacy protection and cybersecurity are likely to figure prominently in debates on the future governance of digital trade.