Alarming Trade Deficit/
Nepal is a country located between two economic powerhouses of the world – India and China - which have been growing by leaps and bounds. The trade between the two countries amounts to over US$ 60 billion. And leaders of all the political parties and government minister and officials never get tired of saying that Nepal is an ideal location for large investments from these and other countries across the world. Ironically, Nepal has not been unable to draw foreign direct invest as anticipated and augment its trade with these neighboring countries and other nations. In fact, Nepal’s export has been shrinking has been shrinking over the years while the import is growing like anything; the situation has becoming so alarming that in the first six months of the current fiscal year alone the country incurred a trade deficit to the tune of Rs. 500 billion. Take the case of trade with China: the total imports amounted to nearly Rs. 68 billion while the value of goods exported was a meager Rs. 1.58 billion. Vice President Nanda Bahadur Pun the other day expressed disappointment over the widening trade deficit and urged the concerned bodies to take steps to increase export from the country. This is, however, easier said than done.
Why is Nepal’s export shrinking over the years rather than increasing? There are several reasons, protracted political transition and the ensuring instability in the country being the main. Obviously, unless there is political stability and, neither the domestic nor foreign investors are ready to put in money in business. This political instability is reflected in policy inconsistency; industrial and business policies tend to change with each change of government which obviously mars the business environment. Thirdly, there is extreme level of red tape and corruption in the system that discourages the potential investors. There are numerous cases in which such investors have abandoned their plans after facing harassments form the concerned authorities. Fourthly, the labour law is not adequately friendly for business; trade unions rule the roost and sporadic strikes affect the business environment negatively. Over and above all these, there are often other barriers imposed from the southern side.
Now that the country has successfully concluded three-tier elections as per the new constitution, the country is in all likelihood likely to get a stable government in the centre as well as the provinces. The government to emerge in a few weeks’ time has the onus to reform policies making them business friendly and ensure that the potential investors don’t get discouraged due to the red tape; it should enforce the provision of ‘one window policy’ effectively. It should also reform the labour law so as to rid the business sector from the militancy of trade unions. Otherwise, the trade deficit will continue to bulge, pouring cold water on people’s long-cherished dreams of prosperity and happiness.