Undoubtedly, Nepal is least developed nation having both economic and social discrepancies. In recent decades, the social aspect has progressed by far if we have to compare economic aspect, i.e. poverty rate, Gini-coefficient rate, human development index (HDI), child mortality rate, etc.
Why so? Why we as a country are not proactive? What we lack? How we can catch-up world economies? These are the common questions normally spans our head. For this we Nepalese have our own generations by generations old answer- bad politics and corruption. Somewhat true but certainly incomplete answer. Our economic structure and focus is to blame than any.
In 2004 AD Nepal tool membership of WTO, SAFTA and BIMSTEC at different date. Trade diversification and reduction of trade deficit was two major motive of participation. In 2003 AD (before membership in these forums) our trade to GDP ratio was only 20% but today it is more or less to 40%.
The remittance contribution is indispensable to Nepalese economic growth. It is about 23% of our GDP. But, this is also reason of the high import in country. We save 10% and rest goes for consumption. New investments avenues can only motivate to people consume less and save more. This incentive gives relief the burning import pressure.
With economic structure our social our social system/values is also responsible for our lower economic status. "Newar bigriyo bhoj le, gurung bireyo moj le" this is famous saying in Nepal. Bank deposits and share market is only oligopolistic investment avenue in Nepal. Investment in real estate is also in rise that has forced in increased cost of living.
The cost structure, i.e. rate of interest and inflation is very high in Nepal. The increased rate of interest increases cost of capital, decreases profit level subsequently and finally production level decreases. Again, the inflation has made our product expensive to compete in international market.
Former oli government and now deuwa led coalition government had investment summits. But, due to legal hurdles concerning profit repatriation, lengthy approval process, limit on foreign borrowing, etc. our foreign direct investment inflow is stagnated. FITTA, 2075 failed to catch investor's sentiments and remained as hurdle to economic progress. On top, we rarely consider economic diplomacy.
Our export and import elasticity shows national capacity. Export is less than unity or equal to zero. This means our production can't match the demand. We have lower production capacity. When it comes to petroleum product and other basic needs import, our import is less than unity or equal to zero. We export raw materials and import capital goods as well as finished goods. This has widen our trade deficit.
Our governments' effort is not enough. The capital expenditure is hardly around 40% out of total allocation every year we see. This has made our infrastructure very weak. Most of development projects are brain child of political campaigning. Too many national pride as well as revolutionary projects. It has forced Nepal to take loan to finance economic resource is by default problem of LDCs.
Twin deficit, i.e. budget deficit and trade deficit is common to Nepal. If they continue to grow and revenue inflow starts to fall no god can saves us to taking path of Sri lanka. Without stable government, reliable political environment, proper market mechanism, sufficient energy, skilled labor, etc even agreements like BIPPA, DTAA gets failed.
Getting political in every sphere of human lives has ruined our economic and social ecosystem. This needs to be corrected. Overall road connectivity, lower cost structure, minimum support price to farmers for their production, getting own population at job, scientific land reform, regular capital expenditure, etc can only have potential to change our economic landscape. Getting economy to shore needs strong will and determination.
HAPPY READING!
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