Nepali Times
Guest Column
It's the economy



During my 16 months here, I have been continually surprised how little public debate and discussion there is about Nepal's economic challenges. I have met with dozens of senior political leaders during my time in Nepal Ė from prime ministers to local party cadres Ė and invariably the discussion focuses on the peace process, the constitution, and, more often than not, their party's plans to retain or gain control of the levers of political power.

Gaining control of power, however, is a mixed blessing if you are not prepared to exercise that power on behalf of the people and on building a democratic, prosperous and stable nation. Thus my surprise, and at times dismay, that so many of those who aspire to lead the nation appear to have not devoted the same degree of attention to the nation's development strategy, the strengthening of the economy, and the creation of jobs, as they have to their political agenda.

I believe that Nepal's toughest challenge is not concluding the peace process or drafting the constitution, but rather building an economic future for the young people of Nepal. Today, when we look at a Nepal where 73 per cent of the population is under 35 years of age and 50 per cent is under 18, we have to ask: do they feel invested in their nation? Do they see opportunities? Do they see a bright future for themselves in their homeland?

Nepal is situated between India and China, two of the fastest growing economies in the world. That's an enviable location. Just the spillover effects from these two economies should create thousands of jobs and expand trade. But, in reality, Nepal's economy will likely grow this year by an anemic 3.5 per cent, one of the lowest growth rates in Asia. Investors are scared off by the political instability, labour problems, and power shortages.

At the same time, Nepal's own business houses are focused only on short-term profits. Many seek to avoid paying taxes and maneuver to sneak their money out of the country. Many state-owned enterprises, which often are staffed through political favoritism rather than as a result of merit, are badly managed, draining resources from state coffers while failing to provide services.

Surya Nepal, one of the few companies that remain competitive in Nepal's readymade garment sector, has closed down its operations due to labor problems. More than 2,000 people, mainly women, employed directly or indirectly through Surya's operation, have lost their jobs. The closure was a setback for the country's economic development and diminishes our efforts to convince foreign investors that Nepal is open for business.

Equally troubling, some political leaders seem to view businesses as sources of funding for their parties, or even worse, as targets to be exploited for their personal gain. The private sector accepts the status quo as the price of doing business in Nepal. Both the exploitation and the acquiescence undermine Nepal's long-term economic prospects and ultimately democracy.

Against this backdrop, young Nepalis look abroad for their future and for hope. The most privileged of them never imagine staying in Nepal for their education. Every day I see hundreds outside my embassy seeking to study in the United States. Thousands of less privileged youths flee the country each month to work in the Middle East or Malaysia. Remittances may currently be the lifeblood of Nepal's economy but those who suggest that remittances are positive for Nepal in the long run fundamentally misunderstand economic realities.

Nonetheless, despite the many challenges, there are reasons to be optimistic about Nepal's economic future. IT outsourcing is one industry ready to take off, and Nepal has only begun to tap the massive potential of the tourism sector. And if just a tiny fraction of the tourists from neighboring China and India started coming to Nepal, the effect on the economy would be massive.

The failure to develop hydropower is a story of failed potential that undermines economic growth. I applaud the government's efforts to enact coherent, rational policies to develop hydropower. The recent selection of a technocratic head of the Nepal Electricity Authority (NEA) through open competition sends a positive signal about the commitment to reform. Agriculture is another sector with huge opportunities if the right policies are put in place: a rational seed policy, contract farming, and efficient fertiliser distribution systems.

We are committed to do our part to promote trade and investment. We recently hosted the high-level trade delegation from the American Chamber of Commerce which left intrigued and impressed. The United States and Nepal recently signed a Trade and Investment Framework Agreement (TIFA) to facilitate trade and investment and resolve disputes. We are working to prepare for the second TIFA council meeting in the coming months in Kathmandu.

Our USAID program is focused on growing the economy. No longer content just to be involved in community-based programs, our Nepal Economic, Agriculture and Trade program is working to reform outdated trade and agriculture policies, improve the business and investment climate, increase access to finance, and build export markets in the region for products where Nepal has a distinct advantage.

Not only is growth good for the country, its good politics. The smart politician will focus on the economy and advocate for policies to create growth. I am confident that the leader who figures this out Ė whatever the party Ė will reap massive political rewards.

We know that some of the needed policy reforms are not easy. We also know that the Nepali context is complex. Growth must be equitable and inclusive. But government alone cannot redress these inequities. Generating strong growth through the private sector and foreign investment must form the cornerstone of any coherent economic plan.

Policies that would seek to limit the role of the private sector are fundamentally misguided. Only an open, liberal economy can spawn economic growth. It is the private sector, in partnership with government that must create jobs. At a time when India and even communist China have learned this lesson, it would indeed be ironic and self-destructive for Nepal to move in the other direction.

Excerpt from an address last week to the Society of Economic Journalists of Nepal (SEJON).
For full transcript of speech:

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1. Lucas
Take care nepali people, americans always are looking for a way to make developing countries dependent of their economy.

2. villager
It's no wonder there is no debate or discussion on economics of this cursed country because:
1. We have leaders like Ram Saran Mahat, a great evangelist of free economy, that he did enough for our economy 15 years ago.
2. We do not need any planning and policy making as they come in "buy-one-get-one-free scheme" with IMF, WB funding and loans.
At last I would like to request Your Excellency to go through the history of economic development of your Great Nation and preach us.

3. Shristi

Definitely, it's the econnomy. And the key word is balance. Nepal not only happens to be in between two largest economy but contries of two different political ideas that has achieved progress through different routes, which had it's own drawback. It not only has opportunity to trap the trickled honey from largest growoing economies but if educated likes of Dr. Baburam Battarai who happened to study in India and propogate communism can truly evalulate the pros and cons of both philophies and create a balance Nepal walking towards economic progress. The whole idea behind the armed revolution if I understand right was instigated by economic centralization. It got buy in the villages in Nepal not becuase they understood the political ideas but because of the empty stomach and inequality. I personally believe in equal opportunity. We have love hate relationship with our indian neighbours because we understand their language, their culture and economy of rich and the poor but rich and poor exists even in China. The thought that scares me is Dr Bhattarai was said to have been elected though he was not elected from general election.  I think he is the best man to lead right now based on his prinicples and patriotism as portrayed in the media. His ideas have been amazing from the articles he published while underground, his speech in Havard, his decsion to return the stipend while on foreign visit, his decision to ride car manufactured in Nepal. He can be a good role model. But equally worrying are the dreadful stories during armed revolution, the bombing, the killilg, the chopping of hands, the abduction, the uncertainty, the loots that happened under his watch when armed revolution was taking place and crimes that increased in nepal after the armed reovlution. Change is required but every government should be given fair chance of four to five year after being elected in fair election, there should be opposition but their role should not be to topple exisitng government but fight for the ideas within the parilament (or whatever it is going to be termed after constituion assembly). Nepal is a unique country and needs unique solution. Even the labors should do the math they are better off getting 10% less pay year round then being out of job for 10 days due to revolts. Companies are better off paying 10 % more than losing 10% profit due to strikes. In Nepal, we don't want to hear the other side. We are all know alls but we are not making individual decison, the mere fact that the we live together requires us to listen to others. Our discontent when our strong beliefs are disregarded is same as the other persons discontent when their opinion is not given enough credibility. Again the key word for Nepal is balance. Nepal was voted one the coolest in the world in a survey done and it listed the liadback as the problem itself. Nepal needs roads (jobs), assembly lines - definitely more cars can be assembled in Nepal (jobs), Strong Network and networking lawas (IT and other jobs), Research Labs and on campus hires (paid research even for students, student more involved in research and pocket money generating activities than on political activism primarily in goverment colleges). Nepal needs is economic balance and leaders who are willing to lead nepal to eqqul opportunity for prosperity like the chinese adage goes "If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people". I know it's cliched but make people educated to make informed decsion. Bhattrai can make better decision than others from his village or people will listen to him because he is educated so main focus of Nepal should be education, education and education which is not limited to classes but that plants new ideas, innovative ideas that drives them for grown and  has practical implementation and positive econmoic results.

4. Krishna Sharma

Yes, Mr. Ambassador, it is economy.  ACTUALLY, IT GOES LIKE THIS,  ITS THE ECONOMY - STUPID.  I really wish that you would knock some sense in the Nepali thick skulls that without the economy, everything is downhill, its kaput, its nada, its the end. So in your parleys with Nepalis, please hammer this point to him.

5. Hari Basnet
The American ambassador seems to have understood what Kathmandu is really like. But Kathmandu is only Kathmandu, not Nepal. If the ambassador is showing such understanding, how will he go forward.  People in Kathmandu may not know how things are in DC, you know things in DC are even worse than Kathmandu. Its a grid lock. Americans are sick in the stomach about the corrupt american politicians of both party, Democrats and Republican who dominate the lives of every american. We need a THIRD PARTY IN AMERICA, NOW. I wish that NYC mayor Bloomberg would run for President. So, anyway, of course Nepal has many many problems, being a under devloped country, but what about America.... food for thought Mr. Ambassador.      

(11 JAN 2013 - 17 JAN 2013)