Nepali Times
Economic Sense
A decade lost



This Beed vividly remembers conversations with friends trying to go to Nagarkot on the eve of 1st January 2000. Everyone around the world was concerned about Y2K, and what the 21st century would be like. India discovered its IT back office potential and its economy boomed. In Nepal, though, it seems the clock stood still despite the political upheavals of the period 1990-2000.

Of course, we saw the liberalisation of the telecom sector, a boom in the real estate and financial sectors fed by speculative and unregulated investments, the surge in remittances as more people left, the increase in FM radio stations and television channels, and the rise of private education firms and educational consulting services. But despite all this, GDP growth has been lower than inflation.

Hotels are in worse shape than they were a decade ago. While tourist arrivals have inched up, Thamel's once wholesome night life is now overrun by dance bars and prostitution. Tourist taxis haven't changed, and Nepalis still can't ride the comfortable Greenline buses.

As the number of loadshedding hours has climbed and most households have gotten generators, NEA has been reduced to a backup power source. The same people pen op-eds and speak at hydropower seminars, which remain venues for effusive promise making, even as Nepal has dropped to the bottom five in terms of electricity consumption.

While the world has moved on to televisions on mobile phones and through satellite dishes, we still have the same set of operators who can't even deliver with generators despite signing 24 hour delivery contracts with their customers. The fact that no customer complains speaks volumes about the apathy of people towards service delivery.

Similarly there has been no addition to the stock of petroleum products for the valley and the lead stock has dwindled to just five days. Gas stations keep on making money by either hoarding or selling adulterated stuff. Most haven't even bothered to change their old analogue dispensing pumps.

While flights have increased, the airport remains the same, there are fewer luggage carts per passenger today than ten years ago and still only two queues to get through security. The national flag carrier continues to operate with one-and-a-half aircrafts (two aircrafts with three engines) and the airport buses are the same as well, with Indian Airlines buses still sporting West Bengal number plates. Indeed, the airport exemplifies just how little has been achieved this past decade.

Private sector businessmen have gone from courting political leaders, to flattering the King when he took control, to fighting with one another on planes to sit next to Pushpa Kamal Dahal. They still believe that proximity to power rather than professionalism leads to success.

If there was anything that boomed it was the development sector. A swarm of development consultants rushed into Kathmandu as NGOs mushroomed, keeping hotels abuzz with seminars, workshops and conferences. Compared to 2000, surely we have more per capita reports! We have now more people talking about transparency and governance, while their own organisations don't have either. We have more junkets organised, more bhatta (per diem) expended and as one nationalist asked the Beed: why do more and more expatriate development workers choose to have babies in Nepal?

But this Beed has sincere hopes and expectations that the column on 27 December 2019 will have a different take. And not just because it is necessary to live up to the dreams outlined in my book Unleashing Nepal, but because of the strong conviction that people now feel thatpolitics needn't hinder economic development, so long as the youth step up to the plate.

1. gaule hero
First a correction then comments. Nepal's nominal GDP growth has been HIGHER than inflation during 2000-09. According to the IMF, Nepal's economy by the end of 2009 will be 38% larger than in 2000 in "real terms"; comparable to growth rates of 1980-89 (35% larger) and 1990-99 (53% larger) but the lowest in seven SAARC countries. Bhutan's economy will be more than 2x larger and even the giant India will almost double in size. I'd say Nepal's economic performance was laudable given the myriad of headwinds it faced. I would not label it as "the lost decade" but the underpinning of Nepal's economy is very fragile. Remittance, export of labor instead of good and services, has come to dominate the economy so much so that the country has become one legged; the challenge comes when that leg breaks or is amputated. We are already seeing the ramifications (a) country's politics and economy diverge; normally political stability is needed for economy to mushroom but that's not the case anymore(b) when money pours into the country from abroad in the forms of remittance & foreign aid we don't need to sell stuff to other countries to make a living. There is less pressure on policymakers to make Nepal internationally competitive; load shedding, militant labor, crumbling infrastructure and poor customer service are taken less seriously than ought to be (c) country becomes a consumer society. There is great demand for every kind of goods and services including prostitution (d) money that is not consumed is invested in hard assets like real estate and gold creating bubble in those assets. I AM NOT SURE WHAT MR BEED WROTE IN "UNLEASING NEPAL" BUT I HOPE ONE OF HIS RECOMMENDATIONS WAS TO DIVERSIY THE ECONOMIC BASE TO MAKE IT MORE SUSTAINABLE.

2. Satya Nepali
Gaule hero, nice comment. I'm skeptical of the IMF statistic you quote though. Are you sure there was no footnote/fine print you missed? It's tough to believe that an economy that's nearly 40% larger than in 2000 feels the way it currently does. Besides, the average growth rate for this decade is widely quoted as being about 2% (in real terms). If an economy grows at 2% for 10 years, it should have increased by about 22% by the end of it. 38%, therefore, seems like quite a stretch! Moreover, I think the most telling stat is our comparative performance i.e. comparative to our neighbors. I would not be surprised if this decade is the one where, compared to all other decades since the 50s, we've under-performed wrt all our neighbors. To call this a 'laudable' economic performance, forgive me, is laughable. There were conflicts in Sri Lanka, Bangladesh and Pakistan too. Yet they charged ahead, growing and building their domestic economic bases. We were kept alive by foreign remittances, while what little we'd built of domestic economic infrastructure withered away. This remittance economy you now rail against is after all a result of the 'headwinds' we faced during the decade. In other words, even if we are to believe the 38% figure you quote and pat ourselves on the back for attaining it in the face of the 'headwinds', we have now become 'one-legged' (to use your own metaphor) as a result. If we have lost a whole leg during this decade then what do you cal such a decade if not "lost"?

3. Basket Case
By the looks of it, the coming decade is set to be a "lost decade" too if things keep progressing the way they are. There is no reason to be sanguine that things will turn out better during the decade of 2010-2020. After all a basic framework of rules and regulations and a minimum level of governance is needed if the economy is to take off. But seeing how the so called stewards of our nation are dallying with the creation of even the BASIC law of the land, how can we expect other more progressive economic policies that will facilitate economic growth to be introduced anytime soon? Alas, by the time we get our act together, the world will have moved far ahead and we will still be eeking out a medieval existence. Even the immediate neighborhood--India, Bangladesh, Bhutan-- will then have been transformed. In such a scenario, if even the "safety valve" of the unrestricted migration of labor to India vis-a-vis the treaty with India is scrapped, then Nepal may just implode because of seething frustration and resentment within the country. People know what is going on around the world. They will compare the situation (high economic growth leads to higher standard of living) in nation across the world with their lot and will understand how badly the policy makers and politicians failed them. Yet the "leaders" of our nation, morally bankrupt and completely devoid of vision, almost seem to be wishing that the nation never take off economically and forever be mired in conflict. After all, as the saying goes, it is easier to fish in muddy waters, the "Haakim-Saabs" and the "Neta Jees" seem find things to their liking, to put it euphemistically, if a state of chaos forever reigns over the nation, even if it means risking another lost decade. The present hullabaloo over the constitution and federalism is not about what it should be --enshrining and ensuring the rights of ordinary people, but a negotiation of the vested power elite over the privileges that will accrue. Rationality has gone out of the window. Sadly, economic growth is privy to rational policy making and implementation.

(11 JAN 2013 - 17 JAN 2013)