Nepal cannot afford to wait till it straightens out its politics to rescue the economy
Just to change the subject from endlessly pontificating from this pulpit with unsolicited advice to politicians, this week we take a look at the country’s dire economic straits.
If you think our politics is a mess, you should take a look at our economy. The two are, of course, interconnected. But it has now got to the point where Nepal cannot afford to wait till it straightens out its politics to rescue the economy. We can no more use the excuse of
‘political transition’, ‘constitution’ or ‘election’ to attract much-needed trade and investments. Businesses have much greener pastures in Vietnam, Burma or even Sikkim or Himachal.
Some figures: 450,000 young Nepalis join the labour force every year, but no new jobs were created in manufacturing or construction last year because there was virtually no investment. At any given time, 18 per cent of our population is working abroad. And since most of them are young men, it means up to 60 per cent of men in their productive age are in India, the Gulf or Malaysia. Nepal’s trade deficit with India grew to NPR 316 billion in the last fiscal year: our exports to India grew by only 0.4 per cent, but imports grew 25 per cent. Petroleum imports from India alone doubled in three years, and now constitues 40 per cent of imports from India due mainly to demand from generators.
Nepali migrant workers overseas sent home an estimated $4 billion. We like to say that this is propping up the economy. Actually, those dollars sent home go to pay mainly for third-country imports of electronic consumer goods, cars or gold bullion. What is actually keeping the Nepali economy afloat is the INR sent home by the estimated 2 million Nepalis who work in India as seasonal migrants at any time. It is clear that Nepal’s widening trade gap with India is unsustainable.
Nepal has to either export more to India, or it needs to earn more INR to pay for growing imports from India. Yet, look at the way we maintain relations with our biggest trading, investment and business partner: there hasn’t been a Nepali ambassador in New Delhi for nearly three years now, and Nepal’s national airline which used to have 14 flights a week to four Indian destinations at one time now doesn’t fly to anywhere in India. Despite lip service, we have done nearly nothing to lure even a small fraction of the huge outbound Indian tourism market next door.
At a Nepal-India Business Conclave organised on 26 July by the Nepal India Chamber of Commerce and Industry (NICCI) in Kathmandu, government officials, academics, Indian and Nepali investors spoke about ways to redress some of the problems in bilateral trade, investment and tourism. One of the speakers, Srikanth Srinivasamadhavan of Unilever Nepal listed eight steps that Nepal can take right away without waiting for a resolution of the political uncertainties.
Actually we know what the problems are, we also have the solutions. But we just can’t seem to get over the lethargy and inertia even on cooperation we have already agreed on like the cross-border petroleum pipeline, streamlining trade across the Siliguri corridor, or the use of Vizag port.
The formula for economic revival and to push GDP growth is quite clear: massive investment in transportation, energy and irrigation infrastructure to generate jobs so that even more jobs are created by downstream industries when those projects are completed.
If by then there is surplus power, we can always export it to India for premium peak hour prices. But the aim should be to generate cheap hydro-energy so that domestic manufacturing is competitive and foreign investors set up shop here to generate even more jobs.
We Nepalis have such low self-esteem we say we are a small and poor country. The 40th most populous country in the world is not small, it is just small compared to our giant neighbours. And we are not poor, just poorly governed.
Read also:
Believing in Nepal