Globalisation In Nepal Assessment Of Achievements And The Way Forward



Rupesh Raj Khanal


Broadly, globalisation is a tendency of business, technology or philosophy to spread throughout the world. In economics, it is a process of interdependence, integration and interactions among economies driven by increased international trade and investment and facilitated by the fast growth in information communication technology and multinational corporations. It upholds the spirit of a ‘Global Village’, ‘World sans Borders’ or ‘Global Neighbourhood’.

Globalisation got a real boost with the General Agreement on Tariff and Trade (GATT) in the 1940s. The modern agents of globalisation are the World Bank (WB) and International Monetary Fund (IMF) through the Structural Adjustment Programmes (SAP) and liberalisation and privatisation policy recommendations. Similarly, the World Trade Organisation (WTO), known as the 3rd pillar of the Brettonwoods System, established in 1995 has been the major architect of globalisation encouraging open global trade.

Initially seen as Westernisation, it has now spread like wild fire across the globe as the triumph of Classicism of Adam Smith and the victory of democracy, liberalisation and capitalism over all other ideologies and statecraft. However, globalisation is an ever evolving and cross-cutting issue. It may come in multidimensional forms - economic, political, cultural or environmental.

As globalisation is a two-edged sword, it possesses both benefits and costs. Theoretically, the major benefits of globalisation include expansion of the market, consumer benefits, increased competition, greater inflows of FDI, transfer of technology along with managerial and entrepreneurial skills, expansion of the economy through linkage effects and global partnerships. On the other, its major possible costs are displacement effects, price effects, job insecurity, widening income inequality, possibility of capital flight, high dependency and socio-cultural disruption.


Globalisation in Nepal

Nepal formally adopted the policy of liberalisation, privatisation and globalisation after the restoration of multiparty democracy in the early 1990s as the forerunner of globalisation in the South Asian region. The accession of Nepal to the WTO in 2004 accelerated the process of globalisation. However, in the past two decades or so, Nepal has experienced a few success stories as well as cases of failure and frustrated expectations, which clearly highlight the need to assess the whole process of globalisation.

Nepal has gained some genuine benefits and opportunities from globalisation, but in small areas and amounts. As economic reports and indicators reveal, the per capita GNI increased from $185 in 1990 to $721 in 2015 and the size of the GDP has expanded manifold since then. Furthermore, the extent of absolute poverty has reduced from 49 per cent to 23.8 per cent during that period. Though many factors may be responsible behind the historical transformation of Nepali economy, it would be prudent to analyse this phenomenon vis-a-vis globalisation.

First, globalisation has greatly contributed to the modernisation of the Nepali economy. Nepal has been transformed into an open and service-based economy by lowering the share of agriculture in the GDP to 33%. Second, Nepal has expanded its market to the global level. Consequently, the country’s total exports have been increasing, though gradually, and the trade with the outside world has been diversified to some extent.

Third, Nepal has witnessed increased inflow of FDI. A number of multi-national companies such as Standard Chartered, Ncell and UniLever are operating in the country. The FDI in the field of ICT, tourism, education and financial sectors is noteworthy, which has facilitated the transfer of modern technology and helped improve the balance of payments of the country.

Fourth, the consumers have benefited by way of increased quality at cheaper price due to global competition. A wide range of global brands such as iPhone, Samsung, KFC, JohnPlayers, Facebook, Youtube have come within easy reach of Nepali customers. Fifth, globalisation has provided access to global financial institutions such as the World Bank, IMF, and the Asian Development Bank, which has facilitated the country’s development efforts by greater volume of foreign assistance.

Sixth, globalisation opened up the international labour market to Nepali workers. The share of remittance has reached nearly 30% of GDP which has helped to reduce unemployment and poverty to a great extent as well as rescue the economy in the hardest of times. Finally, globalisation has promoted socio-cultural transformation of the country through cultural exchange, tourism activities and expansion of knowledge. Besides, it has raised concerns over environmental issues of the day, such as climate change, global warming, and pollutions of various forms.


Cases of Failures

Nepal marched on the path of globalisation with much zeal and expectations at the outset. Over the decades, however, the country has gained little, and the expectations have grossly turned into disappointments mainly due to its own peculiarities.

First, the structural change of the economy in the aftermath of globalisation has caused imbalanced development, fueling widening income inequality and putting self reliance into question. Second, the liberal trade policy has ended the age of trade concessions, displacing many domestic industries. Moreover, the long standing transit problem and the recent blockade by India have clearly undermined the fundamental principle of globalisation, which calls for free movement of goods and services.

Third, globalisation has aggravated the privatisation drive in the country, causing heavy losses to the national coffer. This has resulted in dominance of the MNCs and capital flight. Haphazard privatisation has worsened off social welfare due to setbacks in public goods delivery. Fourth, globalisation has increased the import of consumer items, raising fears of dumping of low quality goods in the country. Besides, it has pushed up the trade deficit annually at such an alarming rate that the total exports of the country cannot buy even a single item - petroleum products.

Fifth, as globalisation took motion, Nepal slowly plunged into aid dependency. This has put excessive pressure of the donors on development efforts, and the autonomy of the economy is in peril. Sixth, rising foreign employment has triggered a brain drain of the active labour force of the country, which has given rise to the remittance economy. However, doubts are still there over the sustainability of the current inflow of remittances.

Finally, globalisation has induced Westernisation, eroding the local values, culture and identity. Besides, emergence of organised crimes such as human trafficking, cyber crimes, money laundering, fake currency, fraud, prostitution and growing environmental degradation are the side-effects of globalisation.


The Way Forward

Globalisation has no human face and heart. For maximising the benefits, stable macro-economic policies, sound infrastructure and good governance are essential. In brief, the following are the key areas to consider:

  • Formulating policies and programmes with long-term vision to build up the basic infrastructure to adjust the structural changes in the economy.
  • Focusing on trade diversification and product differentiation, enhancing capacity and competitiveness of local businesses by identifying specific areas of comparative advantage to reap maximum benefits from the global market.
  • Introducing social security schemes and Corporate Social Responsibility to raise social welfare and Special Economic Zones and economic diplomacy to attract more FDI.
  • Promoting local products and setting up a mechanism to control quality of goods in the market to prevent the dumping of goods in the economy.
  • Prioritising the key areas of foreign assistance and strengthening the absorption capacity through good governance.
  • Imparting vocational education to hone the skills of labourers to cater to the demands of the national and international market, making a policy to channelise the remittance to productive sectors and making labour agreements with various countries through diplomacy.
  • Strengthening the capacity of the security agencies to curb social crimes, raising civic awareness and focusing on Sustainable Development Goals and strict law enforcement to safeguard bio-diversity, genetics and farmers’ rights.

Globalisation is not a grand panacea of all the ills of an economy. As no country in the world can remain isolated from the wave of globalisation these days, it will be wise to make it an effective tool to eliminate the common problems of today and the future through enhanced global co-operation and unity among the least developed countries. Realising that the benefits of globalisation do not come automatically, a grand economic package offering special facilities to the areas of comparative advantage, especially hydropower, tourism and agro-farming is the urgent need of the hour to keep the economy safe from possible recession ushered by globalisation.

(The writer is with the Ministry of Education and can be reached at: [email protected])



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