KATHMANDU: The government cannot contain the price hike as claimed in the budget speech, said Dr Shanker Sharma, former vice-chairman of the National Planning Commission (NPC) — the national think-tank — launching the Least Developed Countries Report 2009 here today.

Inspite of spending on popular programmes, it should build its spending capacity, he suggested. “Capital formation is very low and has not increased,” he said adding that it was 21 per cent of gross domestic product (GDP) in 1992 and the rate has not increased.

The country might suffer from ‘Dutch Desease’ as the government has not focused on economic reforms and development. “The money is coming anyway as remmittance and foreign exchange reserve is swelling,” he said adding that the government is in comfortable situation and has not increased spending on agriculture and infrastructure to fuel the growth.

“The spending on infrastructure is at 12.8 per cent and on agriculture the government spending has gone down to 50 per cent from 1992.”

The donors have also shifted their focus to health and education from infrastructure and agriculture due to the government’s inability.

“Massive irrigation to ioncrease the productivity and promoting the domestic industries based on local raw materials that has comparitive advantages are the solutions,” Sharma prescribed.

Agriculture has 32.9 per cent contribution in the total GDP.

Despite being a agricultural country, Nepal is also a food importing countries like other Least Developed Countries (LDCs) as the investment on agriculture has gone down in comparison to the global investment.

“Assembling Industries are the new global phenomenon,” the former vice-chairman of the national think-tank said adding that Nepal can take advantage of being in the middle of two growing economic powers and start accessories industries — that manufactures parts and components — for their industries instead of focusing on final products.

Currently, there are 49 LDCs, according to this March’s revised list of UNCTAD. Every three years the UNCTAD revises the list of the LDCs, which has three criterion; low income criteria, human weakness criteria and economic vulnerability criteria.