Income mobility as drivers of welfare

In this paper, Loungani develops an analytical framework for the estimation and welfare-theoretic evaluation of individual income dynamics that takes into account these different drivers of income mobility.

Abstract

This paper develops a framework for the quantitative analysis of individual income dynamics, mobility and welfare. Individual income is assumed to follow a stochastic process with two (unobserved) components, an i.i.d. component representing measurement error or transitory income shocks and an AR(1) component representing persistent changes in income. We use a tractable consumption-saving model with labor income risk and incomplete markets to relate income dynamics to consumption and welfare, and derive analytical expressions for income mobility and welfare as a function of the various parameters of the underlying income process. The empirical application of our framework using data on individual incomes from Mexico provides striking results. Much of measured income mobility is driven by measurement error or transitory income shocks and therefore (almost) welfare-neutral. A smaller part of measured income mobility is due to either welfare reducing income risk or welfare-enhancing catching-up of low-income individuals with high-income
individuals, both of which have economically significant effects on social welfare. Decomposing mobility in its fundamental components is thus seen to be crucial from the standpoint of welfare evaluation.

Energy ministry opposes govt attempt to empower NIB

Protesting the government preparation to delegate more authority to the Nepal Investment Board (NIB) to enable it to handle mega projects independently, the Ministry of Energy (MoE) has written to the Office of the Prime Minister and Council of Ministers (OPMCM) to rethink the move.
The OPMCP in preparation to forward a proposal to the cabinet to empower the NIB has been collecting comments from different line ministries.
The OPMCM has received a letter from the MoE, which has clearly urged the government to rethink its move stating that NIB lacks necessary human resources and expertise to independently handle hydropower projects of above 500 megawatts.
"The letter from MoE explicitly asks us to do a rethink before submitting a proposal -- that will delegate more authority to the NIB to handle mega projects -- to the cabinet for approval," a high level official at the OPMCM said in condition of anonymity.
The OMPCM had sought comments from all the concerned ministries before submitting a proposal to delegate authority to the NIB to facilitate implementation of 14 select projects including five mega hydropower projects, namely, Tamakoshi III (600 MW), Upper karnali (900 MW), Upper Marshyangdi (600 MW), Arun III (900 MW) and West Seti (750 MW).
The source, however said, other ministries have not shown any strong reactions regarding the proposal to strengthen NIB. "However, the MoE has asked the OMPCM to rethink before taking any decision stating that it would weaken the government´s implementation capacity regarding mega projects if more authority is delegated to NIB, which is lacking in institutional capacity," the source further revealed.
Meanwhile, officials at the MoE said that handing over projects to the NIB would not be practical without boosting its its capacity and human resources. "NIB doesn´t have technical know-how, lacks in institutional capacity and required human resources, whereas the ministry has experience of 30 years in implementing hydropower projects besides a department, Nepal Electricity Authority (NEA) and qaualified human resources under it," a high level official at the MoE told Republica.
"There should be tremendous improvement in NIB´s institutional set up and human resources capacity if it wants to capacitate itself to implement mega projects. It will be a mistake if the government decides to ignore the institutioanl capacity of the MoE and delegate more authority to a new-born institution," the official said.
NIB, set up under the Investment Board Act- 2011, has long been seeking more teeth to handle mega projects independently.
The government in May last year had handed over 14 mega projects such as Second International Airport in Nijghad, Kathmandu-Tarai Fast Track, Project to upgrade and manage Tribhuvan International Airport (TIA), Waste Management Project, Fertilizer Company and the aforementioned five hydropower projects among others.
However, Tulsi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) said that the ministry has no objection if NIB finds investors for project development. "But NIB is not the implementing agency for the selected projects," Sitaula said.

Minister Jha off to India to discuss regional trade

A team of government officials and businessmen led by Ministry of Industry Anil Kumar Jha left for India on Friday to attend a program titled ´South Asia Economic Integration: On a New Path of Progress and Hope´.
Issuing a press statement, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said Minister Jha will address a special session of the program that will hold discussion on ways to unleash regional potentiality through cooperation. FNCCI President Suraj Vaidya is also scheduled to address the program organized by Confederation of Indian Industries (CII).
Additionally, business delegation of FNCCI will also hold a meeting with officials from Federation of Indian Chambers of Commerce and Industries (FICCI) in New Delhi on January 31.
"The meeting between officials from FNCCI and FICCI will focus on bilateral trade, renewed Transit Treaty and developing infrastructure for energy trade," the statement said, adding that the FNCCI officials will also approach French, German and British investors in India to put their money in Nepal.
FNCCI Vice President Pashupati Murarka, energy expert Gyanendra Lal Pradhan, executive member of FNCCI Shekhar Golchha and President of Non-Resident Nepalese Association Jiba Lamichhane are also in the delegation.

Govt agencies join forces for cleaner Valley

Three government agencies have come together to make the Valley greener and cleaner after the road expansion drive leaves the roads wider and more open.
"The Ministry of Urban Development (MoUD), Kathamandu Metropolitan Office (KMO) and the Ministry of Forest and Soil Conversation (MoFSC) have come up jointly with plans to make the Valley more beautiful," said Krishna Hari Banskota, secretary at the Office of Prime Minister and Council of Ministers (OPMCM).
Secretary Banskota, who is also coordinator of the road expansion program, said that the three different agencies concerned, namely MoUD, KMO and MoFSC, have come up with different plans for a building code for the front part of roadside buildings, 24-hour cleaning service in the Valley, and planting of trees on the roadside and in open spaces.
"The joint initiative of the three line agencies will make the Valley greener and cleaner," Banskota said.
However, the agencies are still working on how they can jointly carry out the task of making the Valley more beautiful and add a flavor of greenery to the roads that are now wider, according to Banskota.
"We will soon come up with proper plans and implement them," Banskota said, citing high-level officials from agencies such as MoUD and KMO, after inspecting the road expansion work on Saturday.
According to Banskota, Valley denizens whose houses are on the roadside should comply with the building code that the government or the local body -- KMO -- develops.
A team of officials including Tulasi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM), Kishore Thapa, secretary at MoUD, and Kedar Bahadur Adhikari, executive officer at KMO, among others, had inspected the progress made so far under Banskota´s leadership.
According to Banskota, various road sections, such as Dillibazar-Bhatbhateni-Bhairavnathgan (3.3 km), Kamalpokhari-Maitidevi (1 km) and Gairidhara-Baluwatar (1 km), have been blacktopped.
Similarly, the Chabahil Chowk (150 meters), Anamnagar-Kalikasthan (700 meters), Naniganj-Gairidhara (300 meters), Gairidhara-Chhateganesh (280 meters), Gairidhara-Police Headquarters (300 meters), Maitidevi-Setopul Sadak (320 meters), Bhatkekopul-Chabahil Ganeshsthan (500 meters) and Bhatbhateni-Bishalnagar (700 meters) road sections have already been blacktopped.
Meanwhile, Secretary Banskota has asked all the agencies concerned, including Kathmandu Upatyaka Khanepani Limited (KUKL) and Nepal Electricity Authority (NEA), to speed up the task of replacing water pipes, electricity poles and transformers. "The road expansion should be completed as soon as possible," Banskota said.
Furthermore, Banskota said that the Department for International Development (DfID) of the UK is ready to demolish its compound wall to support road expansion in Lalitpur.

MoI outsources task of conducting audits of 30 firms

The government has outsourced the job of conducting due-diligence audits of around 30 firms waiting to be declared as ´sick industries´.
The Ministry of Industry (MoI) outsourced the task to four chartered accountants as it lacked expertise on evaluating financial status of those firms.
"Four chartered accountants from the Association of Chartered Accountants of Nepal (ACAN) are currently trying to identify the actual financial status of the firms that are waiting to be tagged as sick industries," Bishnu Dhakal, under secretary at the MoI, told Republca.
The MoI outsourced the job as a technical committee, formed to identify sick industries and recommend facilities for them, required complete financial details of those firms.
The technical committee, which has the ultimate authority to identify and recommend facilities for sick industries, is now working with the team of chartered accountants to chart out financial support required by the firms.
More than 30 firms filed applications at the MoI to get status of sick industries almost a year ago.
"The chartered accountants will conduct audits of those firms and prescribe financial support they require from the government for recovery." Dhakal said. "Additionally, they will also carry out study on what pushed them to the verge of collapse."
Earlier, the Council of Ministers had approved the terms of reference of the technical committee, providing it more teeth to finalize the task of identifying actual sick industries.
"The ministry will prepare a list of sick industries and support they need to rebuild themselves after carefully analyzing their financial status," Dhakal said.
The government had earlier announced to provide relief package to sick industries through its Immediate Relief Program 2011/12.
The MoI was assigned to identify actual number of sick industries after the Sick Industries Rehabilitation High Level Task Force prepared a report with recommendations to revive sick industries in 2011.

NIB seeks more teeth to implement 14 mega projects

The government is preparing to authorize the Nepal Investment Board (NIB) to independently handle 14 mega projects after the latter faced implementation hurdles due to lack of cooperation from different line ministries.
The NIB officials have long been seeking more teeth to ensure smooth functioning of project implementation.
"The Office of the Prime Minister and Council of Ministers (OPMCM) is soon forwarding a proposal to the cabinet that envisages delegating more authority to NIB,” a source at the OMPCM told Republica. The source said lack of cooperation from line ministries prompted the government to take the fresh move.
“NIB has already asked the OPMCM to delegate more power to it for implementation of the projects,” the source said.
The NIB, which is chaired by the Prime Minister, is presently taking necessary decisions regarding the implementation of these mega projects.
The meeting of the board of directors of the NIB had decided to take over 14 mega projects including 5 hydropower projects such as Tamakoshi III (650 MW), Upper Karnali (900MW), Upper Marsyangdi (600MW), Arun III (900MW), West Seti (950 MW) in May.
NIB also has been overseeing Kathmandu-Terai Fast Track, a project to upgrade Tribhuvan International Airport, Nijgadh International Airport project and waste management project, among others.
Confirming the fresh developments, Krishna Hari Baskota, secretary at the OPMCM, said his office was seeking feedback from the concerned ministries on the issue. "We are holding discussion with concerned ministries before forwarding the proposal to the cabinet for approval," Baskota told Republica on Friday.
According to the source, NIB is facing difficulties even in getting the current status of the projects from concerned ministries. For example, NIB had asked Ministry of Culture, Tourism and Civil Aviation (MoCTCA) to provide documents related to Nijgadh International Airport project around a couple of months ago. After the MoCTCA cold-shouldered its request, NIB had to approach Landmark Worldwide (LMW) - the firm that prepared detailed project report of the mega project - for the document.
The source also said the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) is reluctant to let Kathmandu-Tarai Fast Track project to slip out of its hand. In yet another case, Ministry of Energy (MoE) has not given any document related to five mega hydropower projects to NIB.
The NIB officials claim the board reserves the authority to facilitate the implementation of all hydropower projects above 500 MW.
"The ministries have to comply with the decisions taken by the cabinet," the source said. "That is why NIB is seeking for stronger decision from the government to make it mandatory for all line ministries to extend cooperation to it."

Nepal-India power trade deal delayed

Signing of the Nepal-India Power Trade Agreement (PTA) has hit a snag with India seeking more time to study Nepal´s proposal.
Though Nepali officials proposed to discuss the contents of the proposed Memorandum of Understanding (MoU) on bi-lateral electricity trade at the seventh meeting of the Nepal-India Joint Committee on Water Resources (JCWR) being held in Kathmandu, participating Indian officials said they need time to study the proposal.
“Nepal-India power trade agreement is likely to be delayed as Indian officials have sought more time to study the proposal,” said a Nepali official who participated in the JCWR meeting that concluded on Friday.
Nepal had submitted a draft of MoU on PTA to India in 2009 before sitting for talks. The fifth meeting of JCWR held in Pokhara in November 2009 had decided to finalize the draft. The signing of PTA would have paved the way for laying cross-border transmission line and power trade between the two countries.
The Nepali side had also drawn the attention of Indian officials about implementation of the first phase of 400 kV Dhalkebar-Mujaffarpur cross-border transmission line. The transmission line is to be developed and operated by the private sector.
The bilateral meeting dwelled on a host of pending issues such as Pancheshwar Multipurpose Project, Tanakpur Barrage, Tanakpur-Mahendranagar Link Road, Koshi High Dam Project, Gandak Project and Naumure, among others.
“The Indian government needs some more time to review and respond to the terms of reference (ToR) of Pancheshwar Development Authority (PDA) as the Indian finance ministry has offered suggestions on clause 17 regarding exemption of taxes and duties on equipment and materials to be used in the projects,” reads the minute signed by officials of both the countries.
Energy Secretary Hari Ram Koirala from the Nepali side and secretary of the Indian ministry of water resources Dhruv Vijay Singh signed the minute.
Similarly, Indian officials have said it would take some more time for securing forest clearance approval for one kilometer section of the Tanakpur-Mahendranagar Link Road that passes through a forest in Uttrakhand, India. However, the meeting has decided to appoint RITES Ltd India for preparing the Detailed Project Report (DPR) for the remaining section of the road parts.
Meanwhile, Nepali side also demanded that the issue of compensation for 10,306 bighas of private land damaged by the Koshi project be resolved at the earliest.
Nepali side also picked up the issue of crop damages and other problems caused by western main canal of the Gandak Project. However, India refused to discuss the issue further stating that it had already been dropped during the third meeting of Joint Committee on Koshi and Gandak Projects (JCKGP).