The Vicious Poverty Trap
While the country in this post-national elections situation is set to get a new elected government most probably one that will last for a full term of five years for the first time in Nepal’s modern history, a report about poverty in the country has been published. And the report published on December 20 on the multi-dimensional poverty shows that almost one third of Nepalis live in poverty. Compared to the official record of 25.2 per cent poverty rate in 2010, this new finding is alarming as it indicates poverty rate is increasing in Nepal. The MPI survey report prepared by the National Planning Commission and the Oxford Poverty and Human Development Initiative should be an eye opener for the political leadership, particularly in the context that billions of rupees has been spent for years in the name of poverty reduction.
Although poverty measurement depends on the process and indicators taken into account for the purpose, for instance the MPI took three dimensions of health, education and living standard along with 10 indicators for the analysis, poverty rate varies as per the tools of the survey. For example, according to a UNDP report in 2015, Nepal’s poverty rate was 21.6 per cent in 2015, which termed “Nepal has made successful strides in reducing poverty.” However, most poverty studies have shown that poverty prevalence in Nepal is about 25 per cent. Among other things, this recent finding that 28.6 per cent of Nepal’s populations suffers from multi-dimensional poverty should be taken as a challenge for the new government. This is a big challenge also in the national target to elevate the nation to a middle incoming country by 2030 by achieving the Sustainable Development Goals (SDGs) and ending all forms of poverty.
Economic development is something the political leadership has talked most in recent years. Leaders of all parties have highlighted to bring about economic revolution as soon as implementation of the constitution or institutionalising the political revolution. Now, with the elections to the House of Representatives and provincial assemblies, the process to institutionalise political revolution or implementation of the constitution is almost over, and it is time to spearhead economic revolution. But, given different facts and existing backgrounds, the revolution is unlikely to happen so soon.
Nepal’s economy has remained remittance-driven for nearly two decades. As the energetic young people have been abroad for employment, much of arable land has remained fallow and the country is importing food grains of billions of rupees. Remittance has, of course, contributed to raising health, education and living standard of the people. But, the improved situation is not sustainable as the standard will fall back once the remittance stops flowing in. And this is sure to happen within a decade. In the lack of industrialisation, when the Nepali migrant workers presently working in the Gulf and other countries return home, they are unlikely to find jobs here. According to a report of the Central Bureau of Statics, presently around 56 per cent households in Nepal receive remittances which were as low as 32 percent in 2003/04 and 23.4 percent in 1995/96.
Similarly, decrease in remittance inflow will reduce government revenue as it is heavily dependent on import duties and taxes. Once remittance inflow drops, import will also fall and so will be the government income, which inevitably affect government’s efforts for poverty reduction. Even at present, urban poverty is said to be miserable, and when remittance stops, it will be terrible. No doubt, the country has missed a golden opportunity to utilise remittance for economic development in the country. Nepal receives around 7 billion USD as remittance and an equal amount of money is spent for imports. Nepal’s export is meager, less than one tenths of import. This simply means hard-earned foreign currencies by those working abroad have been spent for importing both daily essentials and luxury goods.
Poverty is definitely related to health, education and awareness. In the recently held federal and provincial elections, over a million cast votes were invalid. Almost an equal number of votes were found to be invalid in the local level election. Over 20 billion rupees was spent for these two elections and slightly over 10 million voters cast their votes. The percentage of invalid votes was almost 10 per cent. This calculates that almost a billion rupees of votes was wasted and that all because of lack of awareness on the part of the voters about how to cast vote properly. This in other way is the result of poverty.
In addition to government agencies, different non-government organisations funded by different donor countries have also been working in education, health, environment for poverty reduction. Thus, for years, billions of rupees have been spent in the name of poverty. But situation has not changed much. Poverty prevalence or not much improvement in poverty percentage is a big question mark on the effectiveness of all such programmes.
Trade liberation in Nepal was introduced in 1990 to speed up industrialization and economic development. Presently, Nepal’s GDP is about 21 billion USD. Back in 1965, it was 735 million USD and contribution of agriculture was more than 65 per cent, while industries contributed around 11 per cent and service sector contributed around 23 per cent. In 1990, the figures changed, agriculture contributed 52 per cent, service sector 32 per cent and manufacturing sector 16 per cent in Nepal’s USD 3.6 billion GDP. But, despite efforts for industrialisation and trade liberation, agriculture is still makes about 30 per cent contribution to GDP and almost two-third Nepalis are occupied in this sector, according to the budget speech in this year.
Rapid industrialisation to substitute imports or increase export is the only option to increase job opportunities and thus reduce poverty. But, due to the lack of transport network, sufficient energy, this will take time as the government will have to first make massive improvement in transport and energy sector. Similarly, financial sector needs to be oriented to industrialisation. Otherwise, Nepal will remain as a country of Lahure, migrant workers, for decades to come and poverty will be our national image in the global map.