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Dec 17, 2012

Growing Enterprises in Nepal

Since the fall of Soviet Union and dire performance of centrally planned economies, the world in general is moving towards open and market economies. The trend is highlighted by the increasing economic freedom around the world. According to the Economic Freedom of the World Report, the average economic freedom score of the world in 1980 was 5.30 which has ever since increased steadily to 6.83 in 2010. One of the important aspects of a market based economy is the crucial role entrepreneurs and private sector play in the economic growth and development. Entrepreneurship is slowly getting the recognition it deserves for its role in among other things, poverty alleviation. United Nations' Commission on the Private Sector and Development has acknowledged that “the private sector can alleviate poverty by contributing to economic  growth, job creation and poor people’s incomes. It can also empower poor people by providing a broad range of products and services at lower prices.”

According to Global Entrepreneurship Monitor which makes an annual assessment of the entrepreneurial activity worldwide, India and China alone are home to more than 200 million small firm owners and entrepreneurs currently. India is said to be already enjoying the third wave of entrepreneurship that has transcended the national boundaries and vying for international supremacy. Prior to the reforms of early 1990s, in their first wave of entrepreneurship, Indian entrepreneurs were busy fighting the bottlenecks, regulations and limits as well as other non-political hurdles and had limited impact in the economy.

Unfortunately, Nepal till date seems to be caught up in that particular phase. Entrepreneurship as a means of poverty alleviation and economic growth as of now does not resonate well with the government, intelligentsia and the development sector of Nepal. So it should not come as a surprise that major employment programs of the government are focused on providing employment or equipping people with 'marketable' skills which is supposed to them a better employee but not necessarily a job creator.

However, with a comparatively lesser amount of resources more jobs could be created through fostering entrepreneurship in Nepal. An estimated 400,000 people enter the job market in Nepal annually and very few of them have the idea of starting their own venture on their mind. As observed around the world and in case of Nepal too, entrepreneurship development requires more than just a program and more than just one of the actors of the society. To create a sustainable environment for fostering entrepreneurship and reaching out to a wide range of the populace, there is a necessity to create an entrepreneurial ecosystem which can support aspiring entrepreneurs in every step of their entrepreneurial journey. Addressing just one aspect of the entrepreneurial ecosystem is likely to end up in failure. E.g. Even if the government's Youth Self-Employment Fund had been implemented as intended, it would have ended up in failure because it seemingly addressed only one aspect of entrepreneurship- access to capital.

So what constitutes an entrepreneurial ecosystem and how can it be built? The first step to building an entrepreneurial ecosystem would be finding ways to tackle the stigma held by our society towards entrepreneurship and profit-making. Society's attitude towards business and profit-making as immoral and tantamount to cheating and robbing people can be a self-fulfilling prophecy and encourage the already pervasive crony capitalism in Nepal that has been benefiting a few at the cost of many. Values of entrepreneurship and innovation can be instilled in the students by introducing entrepreneurship in the curriculum from school level. Lack of any encounter with the idea of entrepreneurship during school curriculum has resulted in students seeking good employment as career goals rather than starting a venture on their own. Although a few educational institutions like King's College have started entrepreneurship in the syllabus of their tertiary level education, and few organizations like Samriddhi, The Prosperity Foundation have been running courses on entrepreneurship that focuses on introducing the concept of entrepreneurship to university level students, there is a need to introduce the concept in younger levels too.

Next, in the entrepreneurial ecosystem is the access to capital and mentorship required for aspiring entrepreneurs. Venues for aspiring entrepreneurs to pitch their ideas and acquire necessary funding, to network with other entrepreneurs working in similar fields and practical suggestions and guidelines from a more experienced entrepreneur or leader have to be created to turn the ideas of entrepreneurship into reality. Private sector, especially non-governmental organizations and even self-help styled groups that aspiring entrepreneurs can form on their own can achieve this step in the ecosystem. The rising popularity of interaction and story sharing programs like Entrepreneur for Nepal's Last Thursdays with an Entrepreneur shows that there is huge demand for such initiatives. Similarly, Biruwa Ventures, an attempt by 3 Nepali students to adopt the model of venture capitalism and provide support mechanism for aspiring entrepreneurs is getting wide appreciation. The concept of mentorship of young aspiring entrepreneurs by well-established entrepreneurs is slowly getting popular. Entrepreneurs for Nepal, a loosely connected group of entrepreneurs of Nepal has been providing avenues for such mentorship through its sounding board and boot camp programs. It is high time that programs like these be replicated across the nation, especially other cities and major economic areas. Development organizations working in economic development and livelihood issues can play a vital role in getting these programs across the country and have a larger impact.

Entrepreneurial journey does not stop here. Expansion and sustainability of the business venture that comes next is a crucial step for ensuring that businesses have a significant impact in the society through  creation of long term job opportunities and capital formation. Commercial banks play a major role in this step. Financial institutions as of now are not eager to invest in areas outside of their traditional domains and businesses outside the well-established business houses although a few banks like Mega Bank have come up with loan mechanisms for aspiring small scale ventures.

Government and civil society should also start focusing on recognizing entrepreneurs for their contribution in the economy and nation's prosperity. The recently concluded Global Entrepreneurship Week which had 35000 activities being organized around the world bringing message of entrepreneurship across to more than 7 million participants in  130 countries including Nepal is one such platform. Similarly, increasing recognition of social entrepreneurs and their contribution in solving society's problems can be harnessed by complimenting such efforts with efforts from government as well.

Last but not the least important aspect of entrepreneurship development is the policy regime of a country. Regulatory hurdles, corruption, political intervention in the economy has made Nepal one of the toughest countries to do business. The poor performance of Nepal is the Doing Business Report is a well-known fact for our private sector as well as policymakers. Being the domain of the government, policy reforms and business environment enhancements have to be carried out by the government. The government's priority should be on how to create a nation of entrepreneurs rather than a nation of job-seekers or providing employment to everyone.

-Surath Giri

Nov 30, 2012

Moral Criticisms of Capitalism: Paul Heyne's Thoughts!

Paul Heyne
Yesterday I stumbled upon a lecture titled 'The Moral Critics of Capitalism' by Paul Heyne. It's a shame that I had never heard of him before. Paul Heyne, as I have come to know now, is the author of the acclaimed textbook "The Economic Way of Thinking" and was one of the legendary teachers of economics in United States. I loved this lecture which happens to be his last public lecture and was delivered on given February 17, 2000 in Seattle.

In this lecture he talks about the moral criticisms of capitalism or as he would prefer to say 'market-coordinated' system. As a person who came to the field of economics from theology, he indeed has interesting perspectives on the morality of free market system. Previously an ardent Marxist, Haynes started reading economics when his friends suggested him that he might be on the right track by criticizing capitalism but it would help him if he studied some economics as well. He says later on he found  that 'almost all of the moral criticisms of capitalism that he had been triumphantly parading around in the seminary campus were misunderstandings'. He argues that capitalism evolves naturally and competition is an inevitable thing as long (Read forever) as there is scarcity.

He also says that there, however, is a very valid moral criticism of capitalism that is often forgotten by the moral critics. Capitalism subverts community which almost every one of us are fond of. He suggests people to find ways to nurture community without destroying the market so that we can get the best of both worlds.

You can listen to the lecture here:
So what do you think? Feel free to post your comments below:

Nov 18, 2012

Destination Nepal

Blessed with mesmerising natural beauty and one of the rarest entourage of natural and cultural heritages in the world, Nepal could easily attract millions of tourists — at least in theory. But the highest number of tourists we have received in a year so far was some 736,215 in 2011, which was short of the initial target of a million tourists by more than one-fourth. Similarly, the tourism sector’s contribution to the gross domestic product (GDP) remains less than four per cent.

Nepal’s tourism potential can be estimated by the fact that the total number of tourists that arrived in Nepal in 2011 was just about one per cent of the total outbound Chinese tourists and about six per cent of the total outbound Indian tourists in the same year. With rapid economic growth and a growing middle class, the numbers of outbound tourists from both nations are expected to increase significantly. Hence, even if a significant portion of either Chinese or Indian tourists could be attracted to Nepal, tourism could play a major role in the economic growth of the country. But this is easier said than done.

Problems galore

For a tourist intending to visit Nepal, problems start at home. Travel advisory warnings issued by foreign governments regarding Nepal during the civil war period are still in place, forcing tourists to reconsider their travel destination. Meanwhile, due to the lack of effective marketing, especially online marketing, Nepal is yet to receive the international recognition it deserves with regards to tourism.

Then comes the somewhat hard to find and unreasonably expensive air travel to Nepal. After major international airlines like Lufthansa, Aeroflot and Singapore Airlines cancelled operations in Nepal, there is no direct flight connectivity between Nepal and Europe as well as Northern America. Expensive ground-handling charges, monopolised by Nepal Airlines Corporation (NAC), has been constantly cited as a prominent problem by other airlines. Similarly, the deplorable performance of NAC has resulted in sign-ificant portion of the money spent by tourists to Nepal going to foreign airlines.

Similarly, the poor condition and performance of the country’s only international airport gives a very shoddy first impression. The continuous labour strikes, bandhs and other disruptions, along with the poor state of tourism infrastructures accentuate the negative image, whereas lack of innovation in the tourism sector have limited the choice of tourists to the decades old and already saturated destinations and activities.

Domestic tourism, which has grown rapidly in recent years, suffers from negligence from both the government and private sector. Inconsistency of policies is one of the factors affecting domestic tourism, for example, though domestic tourists are recognized as tourists, they are not allowed to use tourist vehicles for commuting.

What can be done

First and foremost, a makeover of the NAC is necessary. The public-private partnership (PPP) model could be followed for this, but it will also be necessary to look into other options like full privatisation in case the PPP model does not work properly. Also, incentives to international airlines to operate in Nepal must be improved. To this end, more open air service agreements should be implemented.

Since internet is becoming the primary source of information for citizens around the world, it is imperative that Nepal also focuses its marketing efforts online rather than just the traditional mediums. As China and India are developing as major sources of tourist inflow for Nepal, marketing campaigns should focus on these two countries. But while India and China could be the major source of volume, European and North American nations can be the source of high-value tourists.

Attracting these new sources of tourists requires innovation in the packages Nepal will have to offer. Developing religious tourism could be an effective means of catering to the Indian and Chinese tourists. Hence, the upcoming priorities of the concerned authorities,especially the government and Nepal Tourism Board, should be to develop major religious destinations of the country like Lumbini, Pashupatinath and equip them with appropriate tourism infrastructures.

The discourse related to tourism in Nepal is overwhelmingly focused on dev-eloping tourism for economic growth. However, the fact is, economic growth and development also attract more tourists, especially the high value tourists. For example, Hong Kong, despite its very limited tourism resources, attracts more than 36 million tourists a year and India’s tourism growth has been, in part, a correlation to its rapid economic growth.

With right actions, Nepal’s tourism sector could be the best sector to bring prosperity to the country.

-Surath Giri

Oct 2, 2012

13 shocking facts about ordinary people's life in North Korea

I recently finished reading Barbara Demick's Nothing to Envy: Ordinary Lives in North Korea. My understanding of life in North Korea hitherto was based on my interaction with a North Korean defector who was the keynote speaker on our graduation ceremony of summer course in Hong Kong and a couple of documentaries I had watched, most notably the documentary called “Inside North Korea”. This book, in which Demick follows the life of six North Koreans of various walks of life, provided me a much deeper understanding of what it's like to live as an ordinary citizen in the 'Hermit Kingdom'. Here are the 13 facts about life in North Korea that I found shocking:

1. It is compulsory for every household to have the portraits of Kim Il-Sung, Kim Jong-Il and Kim Jong-Un. Nothing else can be hanged on the wall except the portraits, not even the family pictures. The portraits are supposed to be cleaned regularly with the special piece of cloth provided by the government. The authorities can come for a random inspection any day and any time and having a dusty portrait can land you in prison or labour camp.

2. Even in the best of times North Korea can produce only about 60 percent of the food needed for its population, and it currently cannot afford to import the rest. In the 1990s, more than 1,000,000 people died of hunger and starvation. The hospitals however were forbidden to list the cause of death as starvation. When United Nations and other international provided food for the starving population, the food was taken by the army to feed themselves and sell the rest in the black market. The undernourishment has caused a whole generation of North Koreans to have stumped heights and abnormal body structures. A North Korean child on average is 8 inches shorter than his/her South Korean counterpart because of undernourishment.

3. By 1996, even frogs and stray dogs were almost extinct from North Korea because people ate them in absence of any other food. People even ate grass and barks of trees to survive. Several people were executed for cannibalism as well. Majority of the people who stole things from defunct government factories to sell them for food or started a private business to survive during the famines were later executed for violating the 'socialist' principles and 'giving up to the charms of capitalism.'

4. During the 1980s (still is?) North Korea  was chronically short of chemical fertilizer and needed to use human excrement since there were few farm animals. Each  family had to provide a bucketful each week, delivered to a warehouse miles away. In exchange, they were given a chit  certifying that they had done their duty and that chit would later be traded for food. Failure to provide bucketful of human excrement would result in punishment for the family.

5. Less than 1 percent of the population has access to Internet. The 1 percent consists of elite students and government officials. Majority of the population doesn't know what Internet means. Similarly, until recently general people didn't have access to cell-phones. One of the defectors, whose story has been included in the book, was an elite student in the Pyongyang University and after growing tired of the restrictions that denied him access to knowledge defected to China where he for the first time, found out about Internet. He never returned back.

6. All the outside books, publications, films and broadcasts have been banned. Citizens can legally use radios and televisions only after getting a license and after the sets have been pre-fixed to play the nationals stations only. Anyone found tampering with the radio sets and television sets to gain access to foreign, especially South Korean channels is sent to prison. General public doesn't know till date that man has already walked on moon.

7. There are spies everywhere. Spying on one’s countrymen is something of a national pastime.  Neighbours denounce neighbours,friends denounce friends. Even lovers denounce each other.  Even a small complaint regarding the terrible shortage of food or a joke made about Dear Leader during drunken stupor or a critical remark made regarding the news in the television  attracts questioning and gruelling by the Secret Police and often results in imprisonment of the 'offender'. Children are encouraged to spy on their parents. Children ratting out on their parents and relatives are featured as heroes in newspapers and other medias.

8. Ordinary citizens need a travel permit to visit cities or places other than their hometowns like in the medieval Europe. Ordinary citizens rarely get a travel permit to Pyongyang as it is reserved for the bureaucrats and elites of the army.

9. Until the 1990s, girls  weren’t supposed to ride bicycles. There was a social stigma—people thought it unsightly and sexually suggestive—and  periodically the Workers’ Party would issue formal edicts, making it technically illegal.

10. Most of the cities of North Korea have a fictional history. The government has altered the history to undermine the role of Japanese in their development and glorify the Worker's party. Senior people born before the Korean War are forbidden to talk about the history of the cities.

11. North Koreans currently use a calendar known as “Juche Calendar” which begins in 1912  with the birth of Kim Il-sung . So, year 2012 is Juche 100 for North Koreans. Kim Il-sung is the eternal president of the country.

12. Children are taught from their initial years in school that Japanese, American and Christians are evil and war mongers and it is the Great Leader who is saving North Koreans from being killed or harmed. First grade math book has following questions:

“Eight boys and nine girls are singing anthems in praise of Kim Il-sung. How many children are singing in total?” 

“A girl is acting as a messenger to our patriotic troops during the war against the Japanese occupation. She carries  messages in a basket containing five apples, but is stopped by a Japanese soldier at a checkpoint. He steals two of her  apples. How many are left?” 

“Three soldiers from the Korean People’s Army killed thirty American soldiers. How many American soldiers were  killed by each of them if they all killed an equal number of enemy soldiers?”

All of the larger elementary schools have one room set aside for  the purpose of teaching about the Great Leader, called the Kim Il-sung Research Institute. This room is kept clean, bright, and better heated than the rest of the school. The Workers’ Party conduct periodic spot checks  to make sure the school janitors were keeping the place immaculate. The room is treated like a shrine. Even the  kinder-gardeners know they qrenot permitted to giggle, push, or whisper when in the special Kim Il-sung room.

13. The North Korean society is divided into a hierarchy system as discriminative as caste system prevalent in countries like Nepal and India. Every North Korean belongs one of the three categories, namely - the core class, the wavering  class, and the hostile class . Government officials, dictator's family, relatives and favorites, resistance fighters who fought against Japanese and their families, people who fought for North Korea during the Korean war, members of the Worker's Party with trusted loyalty to the dictator fall in the core class and enjoy special privileges accordingly. Wavering classes consist of people whose loyalty to Dear leader is questionable whereas poorer segment of the population, South Korean POW, Japanese sympathizers fall under the hostile class. Hostile class is the first to suffer any persecution brought on by the government and are assigned the toughest and least awarding jobs. Children from hostile class, no matter how good they are, rarely get an opportunity to pursue higher education in major universities or live in Pyongyang. People from hostile class are constantly under surveillance. If a person from core class marries a person from lower classes, his/her prospects of a good career is doomed.

If you have any more information, please share in the comments below!

Oct 1, 2012

Economic Freedom: The Ignored Agenda

The recently released Economic Freedom of the World Report 2012 by Fraser Institute, a prominent think tank in Canada, shows a bleak picture of economic freedom in Nepal. Nepal’s economic freedom, albeit slightly better than the previous year, still has a long way to go. In the study which uses a measure of 42 economic and political components, Nepal is categorized among the least free economies in the world, ranking 110th among 144 countries. Nepal has scored 6.33 out of 10 which is below the world average of 6.83. So much for the notion that Nepal has adopted an open economy since the political changes of 1990s.

For one, the key to most of our economic ailments may lie in the absence of economic freedom. The prolonged transition and the resulting escalation of chaos, anarchy and corruption have thrown Nepal into a turmoil. The people’s movement of 2006 and doing away with monarchy has failed to live up to the promise of better economic opportunities and better living standards. It is time that our discourse brings the hitherto ignored but most essential component for economic prosperity?economic freedom, from fringe to focus.

Empirical studies have shown that societies with higher degree of economic freedom enjoy higher living standards, higher per capita income, higher economic growth rates, higher life expectancy, cleaner environments, lower unemployment rates and lower infant mortality rates. Moreover, the poorest 10% of the population of economically free societies are better off than the poorest 10% living in economically not free societies.

The importance of a free economy is also heightened by the fact that countries like Hong Kong, Singapore, Estonia, which are relatively small and have limited resources, are among the freest economies in the world and have living standards much higher than resourceful countries like Nepal, Congo, and Venezuela. Contrary to the arguments that economies like Nepal are too small to open up and adopt free market, the sample of freest economies in the world suggests that it is the relatively small countries like Nepal that need economic freedom the most. It is so because countries like these have only one thing to count on for development and prosperity: human ingenuity and entrepreneurship that can flourish only under a system that allows economic freedom to individuals.

It is time that we stop blaming countless factors and actors for our poverty and stagnant economy. For too long, Nepalese have been revolting against one or other political agendas and political changes have come frequently too. From autocratic Rana regime, absolute monarchy, constitutional monarchy and parliamentary democracy to republic, the political journey has been long and eventful. Unfortunately, the economic journey has not been equally dynamic. The basic characteristics of the economic system, although slightly changed with political changes, remain largely the same. Contrary to the limited but effective government required for economic freedom, we have unlimited but a pathetically ineffective government. Virtually no sector of the economy has remained untouched by political interference. From decision of where roads will be built to how an educational institution will be directed are fraught with political wrangling.

Similarly, citizen’s equal access to economic opportunities remains a distant dream because of the nepotist tendency of political leaders to hand out favors to their near and dear ones. The access has not been able to go beyond the small circle of elites with close connections to the leaders. The nepotism in political decision making, even in economic matters is far too evident in the way licenses are awarded ranging from hydro-power projects to new transportation routes. Non-competitive practices plaguing the economy, which political leaders and intellectuals often blame on the market economy, are in fact the result of the government’s inability to provide security of life and property of people daring to go against cartels and syndicates. Even more unfortunate is the fact that such practices are still prevalent mainly because they are backed up by the vested interest of political parties.

Politicization of labor in Nepal has become exemplary in the world. Very few places in the world are so anti-investor and anti-entrepreneur. Very few places in the world have labor and trade unions so intent on killing the golden goose called “entrepreneur”. Nepal has scored 3.33 in the Hiring and Minimum Wage regulations, 4.13 in hiring and firing regulations and 2.05 in the mandated cost of worker dismissal. This is definitely not an encouraging scenario for attracting foreign investment and technology in a country with a serious deficiency of capital. Similarly, Nepal has scored 3.22 in the extra payments/bribe/favoritism category making it one of the most corrupt countries in the world.

Hence, economic freedom, the prerequisite for prosperity, remains absolutely ignored in the current political and economic discourse of Nepal. This will not only diminish our prospects of prosperity but also undermine the promises of the countless revolutions we have had so far.

-Surath Giri

Sep 13, 2012

The Secret of the Successful "Socialist" Sweden

Whenever I get engaged in a debate where I argue that mixed economies, although very promising in theory, get too mixed up too work, I invariably face a statement similar to this: "But look at the Scandinavian countries, especially Sweden. Mixed economy and welfare state is working so well there and in fact  doing better than the free market economies."

Well, Sweden seems to be the ultimate example of the promise of welfare state. But is it really? When a well-functioning and sustainable welfare state seems to elude every nation around the  world, Sweden seems to have turned into reality all the rosy promises offered by socialists. What's the secret of the successful socialist Sweden?

Institute of Economic Affairs has recently published a discussion paper by the Swedish author Nima Sanandaji which has tried to explain the secret. The discussion paper entitled "The surprising ingredients of Swedish success – free markets and social cohesion" makes a few points about the Swedish success which are as follows:

Sweden did not become wealthy through social democracy, big government and a large welfare state. It developed economically by adopting free-market policies in the late 19th century and early 20th century. It also benefited from positive cultural norms, including a strong work ethic and high levels of trust.
As late as 1950, Swedish tax revenues were still only around 21 per cent of GDP. The policy shift towards a big state and higher taxes occurred mainly during the next thirty years, as taxes increased by almost one per cent of GDP annually.

The rapid growth of the state in the late 1960s and 1970s led to a large decline in Sweden’s  relative economic performance. In 1975, Sweden was the 4th richest industrialized country in terms of GDP per head. By 1993, it had fallen to 14th.

Big government had a devastating impact on entrepreneurship. After 1970, the establishment of new firms dropped significantly. Among the 100 firms with the highest revenues in Sweden in 2004, only two were entrepreneurial Swedish firms founded after 1970, compared with 21 founded before 1913.

Since the economic crisis of the early 1990s, Swedish governments have rolled back the state and introduced market reforms in sectors such as education, health and pensions. Economic freedom has increased in Sweden while it has declined in the UK and USA. Sweden’s relative economic performance has improved accordingly.

Sweden was a poor nation before the 1870s. As a capitalist system evolved out of the agrarian society, the country grew richer. Property rights, free markets and the rule of law, in combination with large numbers of well-educated engineers and entrepreneurs, created an environment in which Sweden enjoyed an unprecedented period of sustained and rapid economic development. In the hundred years following the market liberalization of the late 19th century and the onset of industrialization, Sweden experienced phenomenal economic development (Maddison, 1982). 
 The complete discussion paper can be downloaded here

So what do you think? Feel free to share you views and opinions in the comments below.

Sep 8, 2012

The Kiwi Revolution: How New Zealand transformed itself

Sir Roger Douglas, the Finance Minister of New Zealand during the initial reforms.

I just watched a documentary about the economic reforms and the transformation of New Zealand from one of the most heavily regulated economies until 1984 to one of the freest economies in the world today.

New Zealand is one of the freest economies in the world making it a prime example of how free markets can make create competitive economies and prosperous societies. However, New Zealand didn't always use to be so. In fact, until 1984 it used to be a paradise of the welfare statists as it used to be one of the most heavily regulated economies among the advanced countries in the world. It was also among the first developed countries to introduce welfare programs when Labour government introduced welfare programs in 1930s.

By 1984, however, decades of heavy-handed state interference in the economy and excesses of Prime Minister Muldoon had taken its toll pushing the Kiwi economy to the brink of bankruptcy.

In an ironic twist of events, the Labour government that came to power in the 1984 elections initiated sweeping economic reforms towards a free economy. The reforms were pushed even further by Nationalist government that came into power in 1988 continued it until 1991 transforming New Zealand into what it is today. The reforms, no matter how beneficial, were very painful though. But I was very surprised by the way Kiwi people accepted the reforms and the way both National party and Labour party put aside their ideological agendas and pushed for reforms and even pushed further reforms initiated by the other party.

Here is the documentary in four parts in You Tube. It is a must watch for anyone interested in economic reforms and free market economics.

First episode: Fortress New Zealand

Second episode: The Grand Illusion

Third Episode: The Great Divide

Final episode: The New Country

Happy watching! By the way, what do you think about the economic transformation of New Zealand? Feel free to share your opinions in the comments.

Aug 23, 2012

How to make good policies? : 10 principles

1. A sound policy has government do only what individuals and associations cannot do for themselves.

2. A sound policy considers long-term consequences over all groups of people not just the short terms effects on one group.

3. A sound policy will enhance: choice, competition and freedom.

4. A sound policy focuses on measurable outcomes, not just inputs and good intentions.

5. A sound policy aligns incentives by moving up the hierarchy of Friedman's Law of Spending.

6. A sound policy would enable governance (like decisions about taxes and expenditures) closest to the people.

7. A sound policy would impose the same standards, norms and punishments for non-performance on governments as are imposed on non-state providers.

8. A sound policy will not sacrifice the rights of an individual for the interest of many.

9. A sound policy is based on the premise that people are responsible, resilient, and self-governing given the right set of incentives and framework of law.

10. A sound policy should often have an expiry date (sunset clause).

(Source: Social Change & Public Policy by Parth J. Shah)

Jul 29, 2012

Free People are not Equal

Economic inequality is one of the most popular issues in our political and economic discourses. With the ‘Occupy Wall Street’ movement around the world, the debate has resurfaced in the global scenario too. In our context, totalitarianism is sought after for the sake of equality. The issue, no matter how well-intended, begs for a different perspective.

Opportunities against outcome

Equality of opportunity is indeed a prerequisite for a free society and the government can play a crucial role. Ensuring rule of law, property rights for every class of people and equal access to economic activities are things a government can do to achieve a prosperous society.

On the other hand, equality of outcome sought through government actions is not only antithetical to a free society but also counter- productive to economic growth. Many intellectuals and politicians advocating equality tend to ignore that free people are not equal and equal people are not free.

In a free society, economic outcome largely depends on the talent, intelligence and preferences of an individual. Some people may prefer to work harder and choose a less luxurious lifestyle, whereas some may want a lesser paying endeavour and put more preference on luxury. Some may choose the safety of a regular job with a secure income while  some may wish to take risks and start their own venture. Moreover, what a person earns is determined by the value society is ready to pay for the services he or she offers.

So should it come as a surprise that some street vendors are earning better than a teacher or a clerk? Entrepreneurs, no matter how small, generally earn better than a jobholder but the extra income is usually a compensation for the risk they take and better value they are creating through their services.

Equality versus growth

For a poor country like Nepal, the importance of economic growth is unquestionable. Higher economic growth would mean lower mortality rates, better living standards and longer lives. Countless revolutions have occurred already in the name of bettering people’s lives. Agendas of increasing government control over the economy and lives of people in the name of equality have been in the forefront of these revolutions, which may explain why we have not achieved expected economic growth so far.

Economic freedom, which is a precondition for growth, has largely been ignored in favour of cheap populist agendas like government providing food, shelter, education, health, employment, entertainment and what not. Studies have shown that economic growth and economic equality cannot go hand in hand. This tendency is shown by the increasing inequality in the rapidly growing economies like China and India too. Although lack of equal opportunities in all segments of population contributes more in increasing inequality, economic growth has a part to play in the phenomenon.

On the other hand, re-distributive efforts by the government tends to retard economic growth, making everyone equally poor. The ineffectiveness of government efforts to alleviate poverty is highlighted by the fact that foreign employment has lifted more people out of poverty in less than a decade than the populist government programmes in the past half a century.

Freedom and equality

Huge inequality in a society can be disastrous. High income inequalities encourage rent-seeking behaviour and social unrest. Crony capitalism, which has been flourishing rapidly in Nepal, is a prom-inent contributor in increasing inequality. One of the major causes of crony capitalism is the provision that allows government’s extend-ed intervention in the economy.

Regardless of their objectives, such interventions create the avenues for crony capitalism, which in turn contributes to increasing inequalities in the society.

Hence, our obsession with inequality is going to be counter-productive in the long run, even if our actions are well-intended. It is necessary to bear in mind that society trying to put equality before economic growth will end up keeping everyone equally poor, whereas putting economic freedom first will result in greater growth and equality.

-Surath Giri
(Published on The Himalayan Times - Perspectives of 29th July 2012.)

Jul 20, 2012

दासत्वको बाटो कस्तो हुन्छ (कार्टुन चित्रमा )


 माथिका कार्टुनहरु नोबेल पुरस्कार बिजेता एफ ए हाएक को पुस्तक रोड टु सर्फडमको नेपाली अनुवाद 'दासत्वको बाटो' बाट साभार गरिएका हुन । उक्त पुस्तक बजारमा सर्वत्र उपलब्ध छ । ईच्छा लागेमा  पढ्नुहोला । माथिका कार्टुनमा केहि प्रतिकृया भए तल व्यक्त गर्नु होला ।

Jul 10, 2012

What Milton Friedman Means to Me

Nobel Laureate economist Milton Friedman's contribution to the economic discourses around the world, mostly the Western world, through revitalizing free markets movement is indeed something 'liberty' lovers around the world should be thankful to him. His writings and contributions have meant a lot to me as well. 

Following is my entry for the 'What Milton Means to Me", a video competition being organized to celebrate the 100th birthday of Milton Friedman.

Number of views, comments and likes covers half the score for the contest. Please help me win the contest by watching the video, providing your feedback and sharing it! :)

Jun 13, 2012

Book Review: Innovation and Entrepreneurship

Realizing that since I have been working on promoting the ideas of entrepreneurship, especially among youth I also need to have some knowledge of theoretical aspects of entrepreneurship I had been looking around for some books on the subject when I bumped into management guru Peter F. Drucker's classic work Innovation and Entrepreneurship: Practice and Principles. I just completed reading the book and I must say despite being almost 3 decades old, the book is very interesting and pretty much relevant in current scenario. I was able to get some new insights about entrepreneurship which have refined my understanding about entrepreneurship.

The confusion between entrepreneurship and business is prevalent in our society and I think with the increasing use of the words 'entrepreneurs' and 'entrepreneurship' to refer to any business venture-small or large, innovative or non-innovative, the distinction is getting even more vague which is unfortunate. Entrepreneurship is more about innovation than just a business. Innovation doesn't necessarily mean finding a new product or technology only, innovation is, in fact in most cases, about finding new ways of doing the same thing more effectively, recognizing the incongruity between the perception of consumers and producers, recognizing the changes in industry and market structure and adjusting products and services accordingly, planning and producing products and services according to the demographic structures of the society etc. 

For example, Ray Kroc, the founder of McDonald's, didn't invent the hamburger; he established a new system of clean, reliable, fast food delivery that created a whole new industry. Similarly, Henry Ford didn't invent the automobile and J. P. Morgan didn't invent banking; but they applied their imaginations to the systems by which cars were produced and money was exchanged. 

The author has distinguished between invention and innovation and has tried his best to dispel the  "flash of inspiration' myth about entrepreneurs. With enough evidences and arguments he has asserted rather than the 'flash of inspiration' tremendous amount of hard work goes into every successful new enterprise. According to him, the process of entrepreneurship can be systematized and any company large or small can practice entrepreneurship. Although generally entrepreneurial working style shuns management because of the control and pre-defined framework required by the management, the author believes entrepreneurship can be and should be managed. In today's rapidly changing business environment and cut-throat competition, no company how big it is or how pervasive it is in the market can rest on its laurels. Every company should be continually looking around for innovation and improvements.

Drucker proposes that there are seven sources of innovative opportunity:  
  • unexpected events,
  • incongruities between the expected and the actual,
  • new process requirements,
  • unanticipated changes in industry or market structure,
  • demographic changes,
  • changes in perception, mood, or meaning, and
  • new knowledge.
And as per him, contrary to the popular notion, the last entry in this list, new knowledge, is the least reliable and least predictable of them all.

According to him principles of innovation are:
  • Begin with an analysis of all the opportunities
  • Go out to look, ask, listen for consumers perspectives and find the incongruities
  • An innovation must be simple and focused on a specific need.
  • Effective innovations start small
  • Entrepreneurship aims at leadership in the market not at being the biggest player
Towards the end of the book, he has also outlined some entrepreneurial strategies that are generally used by very innovative ventures to keep leading the market.

I found the book very insightful and a must read for anyone wishing to understand the process and principles of entrepreneurship. By the way, scribd.com hosts a free copy of the book at this link. If you are interested grab it before it gets deleted!!

Jun 12, 2012

Pirates and Proletariats

I still remember the graduation ceremony of political economy course I had taken in Hong Kong in July 2010. As a keynote speaker we had a North Korean party official who had fled to South Korea and had been raising voices against human rights abuse in North Korea. In his speech, he described how the life had been like in the 'hermit kingdom' and why he , despite being a well-to-do party official had fled the country risking his and his family's life. "The day I arrived in South Korea I realized my whole life had been lived in a lie. Seeing South Korea's roads packed with cars of different colors and models, I thought maybe today's some special day here.In North Korea we were told South Koreans were extremely poor and they didn't have enough to eat. So, I thought maybe it's some special day to have so many cars on the road like we used to in North Korea. To my utter disbelief, I came to know that almost everyone has a car in South Korea and I had been living in an illusion", he said.

Hearing this from a well-to-do party official from North Korea had given me an inkling of how brainwashed the North Korean society is. Fed with an alternative version of reality in order for it to be manipulated and controlled, one can only feel sorry for these 30 million unfortunate people.

However, reading this news recently has made me more hopeful for these people and increased my respect to some extent for the file sharing pirates. According this news developments in technology are giving citizens of North Korea new access to information and insights into life beyond their borders.

The report, titled A Quiet Opening surveyed North Korean refugees and those who managed to travel outside the country. What it shows is that increasing numbers are gaining access to pirated media from outside the hermit nation, with potentially life-changing consequences.

While devices such as standard radios and televisions are manufactured so that citizens (at least those who can afford them) can only listen to state-run radio stations, imported devices are able to pick up signals from South Korea, China and beyond, although receiving these broadcasts is a crime.

With Internet unavailable to all but a tiny percentage of the elite, citizens of North Korea are obtaining their information through other means, notably file-sharing devices such as DVDs, MP3 and MP4 players, and USB drives.

Through these means they are being increasingly exposed to pirated TV shows and pop music leaking from neighboring South Korea. What they gain from these files is an alternative take on the world which challenges the propaganda of their leaders.

My best wishes and salute to these people. These people are indeed courageous given the fact that:

In North Korea possession of unauthorized TV shows or music is a very dangerous affair. Depending on how the offense is viewed, punishments can range from 3 months unpaid labor to 5 years in a prison camp if the media originates from South Korea.

Note: The full report of A Quiet Opening can be downloaded from this link.

May 23, 2012

केही लिबर्टेरियन भनाइहरु - १०

१) तपाईंले राजनितिमा चाख लिनु भएन भन्दैमा राजनिती ले तपाईंमा चाख नलिने होईन ।  -Pericles (430 BC)

२) यदी हामी आफुलाई मन नपर्ने मान्छेको 'अभिव्यक्ती स्वन्तन्त्रता'मा बिश्वास गर्दैनौ भने, हामी खुद  'अभिव्यक्ती स्वतन्त्रता' माथी नै बिश्वास गर्दैनौ । - Noam Chomsky

३) सरकार एउटा कुरामा अत्यन्त माहिर हुन्छ - पहिले तपाईंको खुट्टा भाँच्न , अनि त्यसपछी तपाईंलाई बैशाखी थमाएर - हेरत यदी सरकार नभएको भए तिमी हिंड्नै सक्ने थिएनौ भन्नमा ।  -Harry Browne

४) जब एउटै व्यक्ती वा एउटी व्यक्तिको समूहले तरवार र पैसाको थैली नियन्त्रणमा लिन्छन्, तब स्वतन्त्रताको अन्त्य हुन्छ ।  - George Mason

५) सरकारको बिरुद्धमा आफ्नो देशलाई समर्थन गर्नु देशद्रोह होईन तर आफ्नो देश को बिरुद्धमा सरकारलाई समर्थन गर्नु चाही देशद्रोह हो ।  - Stephen T. Byington

६) देशभक्ती भनेको आफ्नो देशलाई माया गर्नु हो, आफ्नो सरकारलाई माया गर्नु होईन ।  -Michael Cloud

७) स्वतन्त्रता भनेको समानताको अवस्था होईन , असमानता को अवस्था हो । यसले प्रकृती को यो तथ्यलाई स्विकार्छ- मानिस हरुमा रहेको अन्तर्निहित क्षमता, चारित्र,स्वभावको भिन्नता - र यसलाई सम्मान पनि गर्छ । हामी एक अर्का उस्तै उस्तै हुँदैनौ र कुनै पनि कानून्ले तेसो बनाउन पनि सक्दैन । - Frank Chodorov

८) राज्यवाद सामाजिकिकरण गरिएको बेईमानी बाहेक केहि होईन । यो अर्काको अर्काको पखेटा खोसेर आफ्नो गुँड राम्रो पार्ने खेल मात्र हो । नैतिकताको कसीमा पाकेट मार्नु र प्रगतिशील कर प्रणाली लागु गर्नुमा कुनै भिन्नता छैन ।  -Leonard Read

९) राजनितिज्ञहरु सधैं मानिस हरुमा चाख लिन्छन । तर यो सद्गुण भने होईन । उपियाँ पनि त सधै कुकुरप्रती आकर्षित हुन्छन ।   -P.J. O'Rourke

१०) सबैको मालिक बन्नका लागी राजनितिज्ञहरु आफु जनताको सेवक भएको ढोगं रच्छन ।   -Charles de Gaulle

May 20, 2012

In defence of liberalisation

In the political and economic discourse of Nepal, liberalisation might sound like a popular word but it is also one of the most derided. From the critics who blame it for everything that has and can go wrong to the apologists, liberalisation rarely finds a voice in its support. For politicians and planners, it is the perfect scapegoat for their own wrongdoings, whereas for left leaning intellectuals it is the thing to bash when-ever they have an urge to pour out their frustration and hatred. Many also hold a mythical notion that liberalisation is a panacea to every economic evil.

This was well reflected when a prominent economist of Nepal recently wrote an opinion piece saying, “Despite liberalisation, more than 50 per cent of children are unable to attain secondary level of education and 15 districts are yet to be connected by roads.” Unfortunately, liberalisation in itself does not do these things. It just allows a platform for all of these things to be done by the individuals in a free society. It would be beneficial for any rational economic discourse to analyse if Nepal has truly liberalised its economy and if liberalisation has any contribution in keeping the poverty levels where it is.

The myth about liberalisation

One of the greatest myths regarding liberalisation in Nepal is that after reforms of 1990s, Nepal is a fully liberalised free-market economy and an epitome of free-wheeling capitalism. Critics love to assert that despite all attempts, the promised utopia of liberalisation not only seems elusive but unattainable. However, nothing can be further from the truth.

Liberalisation in its essence means an economy free of interference from the government (or politics for that matter). Though government has done so in paper, it is not in practice. From agriculture to transport and health, every sector reeks from the heavy hand of government control or sponsored distortions. The best example is the government approved cartels in the transport sector which have wrecked havoc on the overall economy through monopoly.Energy, one important prerequisite for economic growth, is still in the grips

of the government. Nepal Electricity Authority, the sole authority on electricity in Nepal fails to provide power even for 12 hours a day and has negative net worth. Petroleum products are also in the government’s grip. Frequent disruptions in fuel supply have become common now.

Infrastructure is also mostly controlled by the government. Although concepts of Public Private Partnership and Build-Own-Operate-Transfer have been discussed for a while, we are yet to see any significant progress in implementation. The fact that 15 district headquarters are not yet connected by roads, begs a deeper question: Whose fault is it? If we expect liberalisation to work miracles, should we not first free the sector from state’s monopoly?

Labour market is miles away from liberalisation. Politically backed militant trade unions have monopolised the labour market but slapped any liberalisation attempts in Nepal. State-owned enterprises whose losses and quality of service are inversely proportional, such as Janakpur Cigarette Factory, Nepal Airlines Corporation and Nepal Oil Corporation are a drain on the economy.  Liberalisation has been unable to spread to these darkest corners of the state.

The myth of failure of liberalisation 

In this context, it is imperative to rethink Nepal’s liberalisation reforms or even call it a liberal market-oriented economy. Shifting the blame for underachieved development on liberalisation suggests that policy-makers are cynical and lack commitment to take reform efforts to conclusion. Liberalisation, in its limited form, has worked wonders, if not miracles. A common farmer in the remotest part of the country using a cell phone symbolises the success of liberalisation, wherever it has been done.

The thriving and vibrant media sector of Nepal is another example. The critics of liberalisation should consider that absolute poverty, a major problem of Nepal which decades of planning and government action could not solve, is being rapidly alleviated by a simple move towards liberalisation. Liberalisation in making passport has allowed mill-ions of poor Nepalis to find jobs abroad and raise their living standards. Critics are quick to point dependence on remittance is not desirable for the economy. But, are there any realistic and better alternatives? Relying on the government to fulfil the Nepali dream of prosperity is being naive.

Nepal’s liberalisation, despite many discussions, has remained a will-o-wisp till date. It is true that liberalisation has not been able to deliver to its fullest so far, but liberalisation itself is the last thing to be blamed for it.

-Surath Giri

(Published in The Himalayan Times - Perspectives of May 20, 2012)

Apr 28, 2012

Libertarian Wallpapers - I

A couple of months back, I was searching for some libertarian wallpapers to decorate my desktop with. I Googled to see if I could find any. To my disappointment, there were very few and most of them with low resolutions only. Next thing that bothered me was that most of them had quotes based on American context which made little or no sense to people from other parts of the world. So, I have compiled a handful of libertarian wallpapers with quotes about liberty and freedom in general. Since, I have already gone through pains of translating dozens of libertarian quotes into Nepali, I have used the Nepali version of the quotes. Please feel free to download, use and distribute them. Let me know if you have any feedback or comments or ideas about them.

Available Resolutions:

Available Resolutions:

Available Resolutions:

Available Resolutions:

Available Resolutions:

Available Resolutions:

Lastly, I would like to thank Govinda Siwakoti for providing me the photographs and Lokesh Karna for helping me design the wallpapers.