Bottom of the pyramid
It is not surprising that the Asian Development Bank (ADB), in its “Asian Development Outlook 2007” survey, has revised downwards Nepal’s economic growth rate target for the current fiscal year, which will end in less than four months. The reduction to 2.8 per cent for the next two years, 2007 and 2008, is nearly half the government’s original budgetary growth estimate of 5 per cent. This ADB forecast is also 1 per cent less than the government’s recently downscaled projection of 3.8 per cent for the current Nepali fiscal year, which will extend halfway into 2007. This stands in sharp contrast to the projections for Asia and
South Asia. The developing countries in Asia are predicted to grow at 7.6 per cent and 7.7 per cent in the next two years, fuelled by rapid growth in India and China. The figures for South Asia are 7.7 per cent and 7.8 per cent. Nepal falls way below any of the SAARC members, including Afghanistan.
The country’s continued poor economic performance has been attributed mainly to a legacy of quasi-feudal political structure, political instability and deteriorating industrial relations. As Paolo Spantigati, acting chief of ADB’s Nepal resident
mission, said on Tuesday, the remedy for lifting Nepal’s growth to its “potential level depends crucially on sustaining peace”, including, of course, the scheduled elections to the constituent assembly. However, things could start looking up if peace returned according to plan, leading to a revision of the present assessment even in six months, according to the multilateral donor. As things stand now, when signs of capital flight are coming up, there is not much scope for new foreign investment, even domestic, given the frequent disturbances, strikes, bandhs and violence hitting the country. However, according to the bank, the outlook beyond would depend on the pace of the new government in introducing structural reforms, good governance, and macro-economic stability.
Nepal, which was ahead of Bhutan in per capita terms till a few years ago, has fallen way behind it on this count, as well as in the rate of economic growth. Bhutan’s growth rate for 2007 stands at a spectacular 18 per cent and in 2008 it will still be 10 per cent, forecasts the bank. Nepal’s growth projections stress the need to put in extra effort to avoid falling behind further compared to its neighbours. Though there is no denying that peace is central to the whole process, the play of vested interests in delaying the peace process has sown doubts in the minds of the public about whether the country will return to the path of peace, stability and prosperity anytime soon. The main challenge lies in defeating narrow sectarian, partisan and extraneous interests along the way.
At the same time, the dim economic scenario also raises questions about whether the SPA government, in its nearly one year of existence, has done enough within its capacity to improve the national economic outlook by creating growth-friendly conditions.
Return of peace is necessary to take growth to its heights, but the country cannot afford to wait indefinitely for permanent peace to move seriously ahead on the economic path.