Liberalisation stifles non-agriculture sector

Kathmandu, November 11:

Nepali non-agriculture sector’s growth has been sluggish in post economic liberalisation period.

A research study entitled ‘Linkages between Trade, Development and Poverty Reduction’, has stated that growth of non-agriculture sector has not been able to pick up after mid-nineties. Though the growth trend was found to be positive during the early nineties, when Nepal braced up for opening its closed economy.

The non-agriculture sector’s growth has slowed down mainly due to the lack of effective implementation of reform measures, which were supposed to be executed along with economic liberalisation, reports the study prepared by CUTS- Centre for International Trade, Economics and Environment (CUTS-CITEE) along with Pro Public and South Asia Watch on Trade, Economics and Environment (SAWTEE).

Findings of the report were made public today at a programme. Commenting on the occasion, lead researcher and former member, NPC Dr Yubraj Khatiwada said that overall economic growth was satisfactory during early nineties because of growth in agriculture sector.

“The agriculture sector posted remarkable growth during the early phase of economic liberalisation, which helped attain a satisfactory GDP growth,” said Dr Khatiwada.

Though liberalisation brought in some positive changes for the economy, policy changes led to increased discrimination in the distribution of income, which widened the gap between rich and poor, he said. “This phenomenon now has become one of the major hurdles in poverty alleviation efforts,” noted Dr Khatiwada.

The trade policy potentially affects poverty through its effects on economic growth and income distribution. Since poverty reduction is sensitive to income distribution, a pro-poor growth policy has greater impact on reducing poverty, than growth per se. “If the opportunities generated by liberalisation were properly utilised, we could have achieved remarkable benefits in trade and poverty reduction,” says the report. The economic growth and liberalisation has such a strong bond that a prosperous economy is almost inevitable in a liberalised state of economy.

Noting the present trade and investment regime, the report further states that an open and simple trade policy can foster some external discipline, reduce distortions on domestic markets and narrow the scope for wrong or unbalanced policies in other areas.

Although ‘Nepal Living Standard Survey’ has stated that the level of poverty has decreased by about 11 per cent in the last decade, gap between rich and poor has widened significantly during the period. “If we were able to control the widening gap, the poverty incidence could have decreased by 24 per cent,” says the report.

According to the report, both exports and imports decreased in 2005 compared to 1990. Wages of farm labourers have not increased significantly during this period, while trade in services also witnessed a downward trend.

Commerce secretary Bharat Bahadur Thapa, meanwhile, stressed on the need of building linkage between trade and agriculture, keeping in mind that trade and investment liberalisation work for the poor.

Dr Champak Pokharel, member of NPC and Navin Dahal, executive director of SAWTEE also expressed their views on the occasion.