Nepal – A Stagnating Economy Sleepwalking towards Global Irrelevance

Dr. Omkar Shrestha

Research Associate, Institute of Southeast Asian Studies – Yusof Ishak Institute (ISEAS)

Adjunct Faculty, Economics Department, National University of Singapore (NUS)

@ NEA Talk on August-5, 2016  

It was an enlightening talk with Dr. Omkar Shrestha on “Nepal – A Stagnating Economy Sleepwalking towards Global Irrelevance” in NEA on Friday, August-5, 2016. On the talk, he shared the synopsis of global economy, Structure of Nepalese Economy, shifting of Global/Regional Economic Blocs, Irrelevance Indicators w.r.t. to global context and pragmatic suggestions for Reviving the Economy and Gaining Global Relevance. Our situations, according to Dr. Shrestha are really alarming, He urged to start some new initiatives to restore the Nepal Brand as well as utilise the natural beauties, resources, diversities, heritages and cultures to reclaim the Global Relevance.The talk was concluded with the profound remarks by Dr. Bindu Nath Lohani, Former Vice President of Asian Development Bank.

The useful information and important suggestions from the talk are:

Global economic centre of gravity shifting to Asia :                  

u  China overtaking France in 2005, United Kingdom in 2006, Germany in 2008 and Japan in 2010; Goldman Sachs study shows China overtaking the US in 2026 (instead of earlier forecast 2041);

u  The same report shows India overtaking Japan by 2032; China and India overtaking the US economy two times by 2050;

u  Nearly 50% of global GDP growth between 2010 and 2025 will come from 400 cities in emerging markets; 95% of them being small and medium sized cities, the West may never have ever heard of;

u  Trade and investment among the emerging countries doubled over the past decade;

u  Goldman and Sachs concludes its report with a question – “Are You Ready?”

Nepal – Structure of Nepalese Economy:

u  Consumption share of GDP – 94% (Fuelled by remittances, a single driving factor, highly risky

u  Investment (Domestic and Foreign) insignificant;

u  Government’s capital expenditures are small & constrained by implementation capacity;

u  Export/Import ratio – 1:11;  Trade Deficit to GDP Ratio – 32%

u  Total Imports – Rs 685 billion ;  Total Exports – Rs 61 billion;  Total Trade Deficit – Rs 624 billion (during 11 months of FY 2015/16);

Nepal – Global Irrelevance Indicators

u  Nepali Passport among the worst passport -  fifth from the bottom with Afghanistan, Iraq, Syria, Libya and Somalia below Nepal according to Henley and Partners Visa Restriction Index, 2016;

u  A Nepali candidate gets selected in internationally-contested job but the second ranked candidate is given the job offer simply because the job requires frequent travel which is not possible under Nepali  passport;

u  General perception that Nepali Passport can easily fall in wrong hands; Rampant cases of passport losses; perception of violation to visa rules/obligations;

u  Tendency of Kathmandu-based foreign missions and embassies to look at  Nepal from the lens of Southern neighbouring country; Decreasing number of foreign misson;

u  Poor degree of connectedness to the world outside (by land and air); National flag carrier is barred from flying the sky over US and Europe under Class III category; Air connectedness influenced mostly by remittance-related factors;

u  Nepal delinked from the regional and global value chain (GVC)

u  Political instability resulting from wanton changes in Government with each regime’s shelf life reduced to one year or less since 2008; No global public support during five month border trade disruptions in support of Nepal;

u  Country’s poor ranking in various global indexes like Corruption Perception Index, Pinkerton Country Risk Index, Human Development Index, Ease of Doing Business Index etc;

u  Unimpressive economic achievement; Nepal overtaken by countries like Laos & Cambodia;

u  No foreign dignitaries’ visit to Nepal for a long time

Reviving the Economy and Gaining Global Relevance :

u  Place Human economic rights ahead of human political rights;

u  Address political mess because poor economic performance more due to over politicisation  e.g. politicisation of labour, students and even civil service; Over political protection to small formal labour group at home and under protection to large labour group abroad;

u  Address software bottlenecks (lack of law and order, Breakdown of moral discipline, rampant corruption, People’s mistrust in government services, and general mind set of aversion to responsibilities etc) because they are even more urgent than physical infrastructural bottlenecks.

u  Remittance earnings as a single driving force to growth is neither sustainable nor prudent; Foreign employment cannot be answer to domestic unemployment problem.

u  Government itself can never create adequate jobs  (In total, 376,860 individuals on Nepal, Government salary); but it should always create and maintain most attractive environment for domestic and foreign investment;

u  It is time to treat water resources beyond energy, as important as it is; Treat water as consumption product – industrial consumption, agriculture consumption, human consumption; (India’s  $168 billion River Linking Project that could have bearing on Nepal water resources)

u  Redefining Tourism (Tourism sector’s direct contribution to GDP is embarrassingly low 2%);

u  Proactive promotion of “Silver Industry”, a massively expanding industry of $8 trillion in 2008 projected at over $20 trillion over the next decade;

u  “Inevitability” of Nepal as a “Trade Gate” between Asia’s two major economic houses, It is time not to keep ourselves mind-locked that  Nepal is landlocked;

u  “Gravity of Proximity” is weakening in goods as well as services

u  Education as the great leveller; “Knowledge products” or the “idea products” like the 3-D manufacturing and other high-tech products as the exit door to Nepal’s geographical bottleneck;

Restoring Nepal Brand and Reclaiming Global Relevance:

u  Reassert Good Governance by eliminating prevailing Trust Deficit between people and political leaders, between people and police, between people and professionals in various fields;

u  Stress Human Responsibilities – not just  human rights; Accountabilities not just authorities, and discipline, law and order not just democratic rights;

u  Consider setting up “The Kathmandu Dialogue” –Invite world class thought leaders for deliberation on current issues of country-concern; Make their voice the country’s voice; Make them act as the country’s “Good Will Ambassadors”;

u  Join as many regional bodies like Singapore does; smaller nations get their voice heard only through regional bodies; bilaterally they are too small to be taken seriously.

u  For smaller nations, global relevance is not something to be taken for granted; It is like an artefact that is to be created and earned;

Nepal – Our Land: Our Nation

u  Nepal – This is a rich country being made poor and miserably dependent on remittances; This is a rich country inhabited by poor in an environment of ethical collapse and ill governance led by leadership deprived of long -term vision;

u  This was a country with the image of Shangri La now tarnished to the image of a land of migrant workers; It is a country with rich tapestry of multiple cultures now being reduced to ethnic or geography-based identities rather than ”Nepali” as its first identity;

u  This was a country once provided with easy visa access to a number of counties but now reduced to among the world’s worst passports, fifth from the bottom with only Afghanistan, Iraq, Syria, Libya and Somalia  under it;

u  This is a country with overwhelming potential and underwhelming performance; It is a land of resilience and unending hope as seen after the major earth quake in 2015;

u  We have so much contents & substance to convince the larger world – nature’s gifts, ancestors’ heritages; people’s bright resilience, the optimistic attitude, the likeability and the contagious smiles;

u  “It is among the mother earth’s most photogenic country” National Geographic

u  Kathmandu - Most dense in the world  in terms of cultural heritages: UNESCO

u  Nepal – From flat land of Lord Buddha’s Birthplace Lumbini to Mt. Everest, the world’s roof

u  Home to near-extinct multiple birds and flowers;

u  Water stressed Asia’s home of 6,000 rivers and over 200 majestic lakes and ponds;

……

Who in Nepal will win if Nepal fails? Who in Nepal will fail if Nepal wins?

ARE WE READY?