TAKING STOCK: The barriers to wealth


It is a foregone conclusion that Nepal will one day be rich, rich beyond the wildest imagination of those of us alive today. It is just a matter of time. “How much time will it take?” That would depend directly upon the economic policies which Nepal chooses to pursue.

Even with things as they stand today, life is getting better. Slowly but surely. There has been economic growth in most years of the last few decades. So, when will an average Nepali enjoy the annual income of $35,000 that an average Swiss earns today? Even if Nepal showed a minimal growth of one per cent annually in its present per capita GNP of $240, Nepal would still get there. It would just entail a wait of 500 years! So even the worst case scenario will allow Nepalis - given sufficient centuries to pass - to become extremely wealthy. However, is it pre-destined that most of us will live and die in poverty, and, wealth will perhaps come, but, only for our great, great, … grandchildren and that too in the later half of this millennium?

No, it does not have to be that way. What if Nepal could boost its growth rates? What would be the result, and how much shorter would it be to achieve the wealth of the Swiss? If the growth rates are boosted to six per cent, the time taken would be cut by over 80 per cent. In a mere 85 years, within the life time of our grandchildren, an average Nepali would earn the $35,000 per annum, the Swiss earn today.

However the story gets even better. If we were to somehow achieve a per capita GNP growth rate of 10 per cent, the time required to achieve the wealth of the Swiss would be a mere 52 years - within our children’s lifetime, if not within ours.

There is nothing difficult in getting to a 10 per cent growth rate. Many countries have done it in the past.

Singapore, Hong Kong, Japan, Taiwan and South Korea have all achieved it. China and India too have achieved nearly as much in the recent past.

Nepal can do it too. In fact Nepal can do better, if it allows for economic freedom. If Nepal were to pursue complete free market policies, it could achieve growth rates of 16 per cent and above. By growing at an average of 16 percent every year Nepalis would be as prosperous as the Swiss in a mere 34 years - perhaps within the lifetime of most of us.

What is holding back Nepal? Imagine a dam which holds back billions of tonnes of water from flowing downstream. A dam like this is made of millions of tonnes of concrete and reinforced with steel. The same is the situation with Nepal.

This country has constructed around it and within it similar dam like structures, designed to keep wealth from flowing in. It is as if the government has invested in billions of tonnes of concrete and steel to shield the people of this nation from wealth and prosperity.

This dam which blocks riches is composed not of steel and concrete, but of myriad rules, regulations, laws, taxes, and tariffs. This wealth-blocking edifice is strengthened by lack of adequate property rights and a weak judicial system.

Let the government break down this wall. All it has to do is to abolish tariffs, repeal VAT, eliminate or at least reduce the income tax to 10 per cent, end all controls on foreign currency, free business from red tape, licensing and most other regulations, protect property rights, improve the courts to dispense speedier justice, and Nepal’s economy would take-off.

It is not even a question of all or nothing. If only a part of the reforms are carried out, even then growth rates would zoom. In such a scenario, I would give up writing articles and concentrate all my energies on making money for opportunities would abound and I would not have much left to talk about.

(The writer can be contacted at: everest@mos.com.np)