Ramp up investment in human capital development: ADB to Nepal

Kathmandu, March 30

Nepal must ramp up investment in human capital development so as to churn out quality human resources required for sustained economic development of the country, the Asian Development Bank (ADB) says.

The call comes at a time when questions are being raised about quality of human capital stock in the country despite achievement of many global social indicator targets.

“Despite substantial achievement of Millennium Development Goals related to education, Nepal’s human capital base remains very weak, with only 14 per cent of 16-year-olds earning school completion certificates,” says the ADB’s Asian Development Outlook 2016 made public today. “The country cannot afford to be complacent and needs to substantially improve its delivery of education services in primary schools, technical education and vocational training centres, and universities.”

Countries have often relied on quality human resources to make their economies robust. Countries like Japan, South Korea and Singapore received competitive edge, despite lack of natural resources, because of human capital development.

But in Nepal, even college graduates do not seem to have relevant skills and competency, which raises question on quality of education provided by schools and colleges.

This calls for acceleration in reforms to improve the quality of education and learning outcomes through the early enactment of the proposed Education Act, restructuring of school and examination systems, improvement of teacher management and development, and establishment of strong mechanisms to guide the reform process, says the ADB report.

Yet, human capital development is not the only condition for sustained economic development.

“This effort to build human capital needs to be accompanied by economic and sector reform as announced in budget of this fiscal,” ADB report says, adding, “Reform can engender an enabling environment to attract private sector investments into country’s competitive industries, like high-value agriculture and agro-processing, hydropower, labour-intensive and other competitive manufacturing, and high-value services, such as tourism and information and communication technology.”

Nepal introduced a slew of economic reform measures in early 1990s, which helped the country attain higher economic growth rates. But most of the legal and policy frameworks introduced at that time have become obsolete, causing the economy to virtually stagnate.

In the last fiscal year, for instance, Nepal’s economy grew by 3.1 per cent as against 5.2 per cent in the previous year.

The growth rate is expected to fall further to 1.5 per cent this fiscal year, as per the forecast made by the ADB. This growth estimate is below the government’s forecast of two per cent. Economic growth is likely to decelerate this fiscal because of delay in implementation of reconstruction programmes, trade and transit disruption, and the unfavourable monsoon, the ADB report says.

While economic growth is expected to taper this fiscal year, consumer prices, as per the ADB, are likely to shoot up by a whopping 10.5 per cent.

Inflation is projected to moderate to 8.2 per cent in the next fiscal year on condition there is a normal harvest, fuel and other commodity supplies returning to normal, and global prices of oil and other commodities remain lower, ADB report adds.

Also, ADB expects economic growth rate to rebound to 4.8 per cent in next fiscal. “But this assumes a normal monsoon, the National Reconstruction Authority becoming fully operational and accelerating reconstruction, normal cross-border trade, and progress in resolving domestic political tensions.”