Industrialisation has failed to take off in Nepal

Kathmandu, May 11:

Even after seven decades since Biratnagar Jute Mills, the first industry to be established in Nepal in 1993 BS, industrialisation has gone nowhere in Nepal. This is the primary posit in Nepalma Audyogikaranka Samasya (Challenges of industrialisation in Nepal) written by Bharat Mohan Adhikari, former finance minister and standing committee member of the Nepal Communist party, United Marxist-Leninist (CPN-UML).

One of the main causes behind the lack of industrialisation in Nepal is the private sector’s indifference towards industrialisation. Private sector’s involvement in manufacturing has been negligible, he writes. “Those, who were interested in industry, could also not sustain in the long run. They were infected by the ‘Open by day and fly by night’ syndrome,” claims Adhikari. He, however, fails to give adequate reasons behind this accusation.

The book begins with a run on of the Five-year Plans, from the first Five-year Plan (2013-2018 BS) to the current tenth Five-year Plan and their focus on industrialisation.

He writes, “In the fifth Five-year Plan (2032- 2037 BS), industrial production has recorded an increment by 6.5 per cent and in the sixth Five-year Plan (2037- 2042 BS) it recorded a 10 to 30 per cent increment.” However, the growth trend did not continue.

The reason behind the growth in industrial production during those years might have been state protectionism. “From the second to seventh Five-year Plan, the industrial policy was more protectionist. After the movement in 2046 BS, Nepal embraced the open market economic policy,” Adhikari writes.

“However, the open market policy could not drive the growth of manufacturing industries upwards,” Adhikari adds, “Though it helped industries like education and health, and the financial sector including banking, financial institutes and transport to grow.”

In the ninth Five-year Plan (2054-2059 BS), the production of export-oriented industries declined. “From the industrialisation point of view, the ninth five-year plan was a complete failure,” writes the author.

The book describes how once Nepal was almost self-sufficient in sugar. But now, 30 per cent of the total sugar demand is being met by imports. The author tries to explore the reasons behind the many failures of the privatisation process in Nepal.

Almost all privatised companies are either on the verge of collapse or have already collapsed, further fuelling unemployment. There is an urgent need for individual case-studies of privatised companies, if privatisation has to be continued successfully.

The book emphasises on small scale industries instead of big industries. “The best thing Nepal can do and should do is commercialisation of agriculture and promotion of industries like tea, coffee, jute, sugar, cigarette, dairy, leather-based, herbs. Building competitiveness in these sectors can increase export and displace import,” the author suggests.

Adhikari has given due space to industrialists’ complaints also in the book. In some places he sounds more like an industrialist than an economist.

Lack of basic infrastructures like road network and communication has impeded growth. High cost of electricity, red-tape, government policies, lack of market diversification and regular bandhs are some of the hurdles that have hit industrialisation in Nepal, he claims.

There is no doubt that the book could be a good source material for scholars. “If it could encourage students, I will be more than happy,” the author himself claims.

The book further delves into the emerging relations between industrialisation in Nepal and global and regional trade organisations like WTO, SAFTA, BIMSTEC.

Nepal has to follow the current global trend of industrialisation, but not blindly, Adhikari suggest.

He says, “Economic diplomacy is an important tool in today’s open, global market. Unless a country is economically independent, it cannot survive as a sovereign country. Sooner or later we have to come to a national consensus on industrialisation and the economic agenda. And there is no better time than today,” he says.