Steering The Transformation Of Nepalese Economy 

Dr. Meena Acharya

Last December I had the opportunity of hearing one of the world renowned scholars, the special advisor to the UN Secretary General on Sustainable Development, Professor Jeffrey Sachs. Besides highlighting the importance of the Sustainable Development Goals 2030, with the main slogan of equitable and environmentally sustainable development, he also outlined the main strategies as to how Nepal could achieve them. A number of strategies were proposed by him, which included: (a) development of power sector targeting South Asia (b) increasing collaborative efforts with India and China, targeting their markets, (c) development of agriculture and agro-industries – labor intensive, and (d) development of infrastructure, information and communication technology and others. He also emphasized on improving the investment climate for FDI for the development of mega projects. As an economist, I must appreciate those recommendations of the Professor. In the long run these strategies could yield positive results for Nepal. But as a political economist working in Nepal for the last 50-60 years, I must raise several issues.

First of all, it does not seem possible for Nepal to ensure the South Asian market for the Nepali electricity unless Nepal agrees to Indian monopoly in the sector.  We have been shown the mirage of the South Asian market for the last 60 years, but we are importing electricity from India currently; and the blame is placed entirely on the rigidity of Nepal's policies and political instability. A basic fact is that Nepal cannot agree to lose its sovereignty over the water resources for free access to Indian market or transit route for export to other countries. 

On the other hand, foreign capital will be attracted to Nepal's mega hydro-electric projects only if the Indian market is ensured. So where is the opportunity? We must keep on trying but cannot depend on that. Moreover, India intervenes in our projects even when we try to develop water resources for our internal market. 

Second strategy recommended is increasing collaborative efforts with India and China, targeting their markets. Yes, there is a big opportunity if India agrees. But India is not willing to cooperate. Nepal's geopolitical situation is turning into a hindrance to Nepal's development rather than an asset.      

In the past, Nepal had no option to look beyond India. Therefore, a series of economic policies taken by Nepal to transcend her geopolitical limits were mostly reactive to Indian policies and markets, and most of them failed to achieve their objectives of trade diversification or development of local raw materials or Nepali labour- and skill-based industries in the long run. As soon as India started to open up, gains in trade diversification evaporated. Nepal returned to its excessive dependency on India for imports and access to export markets as deeply as ever.

The Chinese One Belt One Road (OBOR) proposal, together with an agreement to grant transit rights to Nepal and the offer to develop road/rail infrastructure in Nepal to connect this country directly to OBOR, seems to offer new avenues for Nepal to free its economy from Indian dominance. It is no doubt that China will expect much political gain from this initiative, but it will be in Nepal's interest also to go with the Chinese initiative at this point of history. We have to start thinking in what ways we can benefit from this OBOR and the trade and transit opportunities offered by our northern neighbour. Nepal has always lagged behind in foreseeing and exploiting the new opportunities in the fast-changing world. We cannot be latecomers any more like in the past.

My third disagreement is about depending on labour intensive technology for agricultural development in Nepal. Development of agriculture and agro industries – yes that should have been and must be our priority. But Nepali agriculture cannot be developed any more on the basis of labour intensive outdated technology. The technology must be high productivity and high return to attract the Nepali labour; to induce the Nepali youths to stay in Nepal's rural areas, given the opportunity to migrate for work in higher paying job markets in Gulf countries and beyond. We have been emphasizing on labour intensive technology and starving agriculture of investment for long. Right now Nepali agriculture is suffering from shortage of labour.

The main issue is to keep our youth within the country with adequate training and adequately profitable agriculture and agro or other industrial development. More importantly, they must be equipped with technical skills and knowledge to be employed in higher paying jobs. Our education system is not geared to the demands of the ever changing job market, at home and abroad. Nepal has never had a unified plan of development of human resource in a national perspective. Nepal has concentrated in stimulating exports but without analyzing the backward linkages and likely demand for workers and a plan to train such workers. Often the demand has been fulfilled by imported labour. We even do not know how many Nepalese workers are working in foreign countries, nor do we have any information on how many foreign workers are working in Nepal. Any attempt to regulate our labour market has been a matter of concern to India. As reported in the papers, India has again raised the issue of equal treatment to Indian citizens in Nepal, but we do not even know how many such workers are in Nepal.

It is clear that India wants a firm grip on Nepal's main resource - water, together with an open border for free movement of labour so as to influence our political life. From the history of the last 70 years of Nepal's efforts to promote growth and employment in Nepal, it is clear that this system is not in Nepal’s interest. Now China is offering us a way out and we have to avail of it.

To exploit the new opportunities opened by OBOR, we must prepare our workers.  The basic premise behind a country to benefit from an open economic policy is that the process generates employment for a larger number of people; that its labour market is practically not closed and that other countries also follow the rules of an open economy.

In summary, the "OBOR' is offering us alternative ways to transform our economy. We have to start working early to explore the likely new opportunities and exploit them. We as economists and our private sector should block the ways for our politicians to erode these opportunities in the name of friendship with the southern neighbor, for their own political benefits.

Pay more attention to integrating employment policies with promotion of growth, and develop an integrated human resource development plan on the basis of a comprehensive labour market study and likely changes in the structure of production and implement it consistently, equipping our youth with better education and technical skill. 

This is not all new, but not followed consistently and not planned in an integrated way. We must start now.  



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