The present global economic synthesis is tilted towards pro-liberalisation for the development of a dynamic global integration. Therefore, no country in such a context could prosper without accepting the global norms of politico-economic freedom in a non-controlled regime. It is a fact that the Nepali economy, at large, has been sustaining with sympathetic motivation of donors’ cooperation. But Nepal has no room to backtrack since it has committed to further liberalisation by becoming a member of the WTO.

In this backdrop, Nepal cannot back on the mere mercy of the donors. It has to invigorate its economic development efforts with self-initiation and move towards creating a sound and dynamic backup of domestic environment conducive for comparative advantage and competitiveness. The sustainable economic growth with minimum distributional gap could be imagined only in the context of socio-political stability with the nationally agreed development road-map with strong government and constructive opposition. One can take the example of higher economic growth as recorded during the first three years after the restoration of democracy in 1990.

Obviously, the parliament and the local governments are better mechanisms for priority setting and catching the local aspirations. But, internally and externally, Nepal has faced unprecedented problems of lack of confidence, economic slowdown and heightened internal conflict. There is a consensus that the economy has seriously been affected by non-economic factors than economic ones. Such conditions remained the destabilising factors for local development and in fulfilling the aspirations of the people. Moreover, uncontrolled security expenses, which are not only unproductive but also difficult to sustain, remains a threat for socio-economic development.

The economic growth during the 1990s, on an average, posted a record of 4.7 per cent though the second-half of the period witnessed relatively unstable political situation. However, the economic growth was not much affected as during the last five years. The GDP, on an average, has remained at about 2 per cent during 2001/02 to 2005/06 including the Asian Development Bank’s projection for the current fiscal year. Looking at the average population growth of 2.3 per cent for the same period, an excess of population growth over GDP growth resulted in a decline of per capita income of the poor. As such, the government no doubt is in a tight-rope to manage its regular/recurrent expenditure with its revenue type non-debt creating resources. The external assistance is in a crucial condition. The galloping inflation with a floor level of economic growth followed by the first ever record of current account deficit after the adjustment of remittances in the balance of payments account is pressing the situation in a more difficult trap. Looking at the internal conflict and external passive mood, if the situation lingers, the government employees, including the security forces, will be the first victims of non-payment/underpayment of salary and wages.

The reconstruction and rehabilitation caused by the massive destruction of the physical facilities and infrastructure by the Maoist rebels and also a massive recruitment of the security forces, which for the normal situation is not necessary, is creating a long-term unproductive financial liability, which will indeed be burdensome. Looking at the adventurous movement of the people for the development of a peaceful and social justice, which essentially requires a transparent environment, the time has come to move forward in mobilising the financial resources. To start with, we could solicit foreign countries or banking institutions to explore and seize the illegal money/property holdings abroad by the so-called elite Nepalis, as has been disclosed by foreign media. If the disclosed expectation comes to be true, it will help a lot in launching massive development projects.

The future socio-economic roadmap should be based on the rural-centric model, which is doubly justified in view of the development of rural areas and in controlling the unplanned growth development of the so-called urban sector for the environmentally sustainable and hygienic dwellings. In other words, the future development should be focused on the green growth of the economy, which can be sustainable environmentally.

Also, in the future, the piecemeal approach to development with the exception of short-term benefit may not be sufficient enough to meet the growing aspirations of the people. For this, mega projects even with the leasing contract in the more feasible sectors like hydropower, tourism, IT, mountaineering and trekking, Golf centres, etc., may be better alternatives for comparative advantage. This, no doubt, needs a permanent peace and socio-political stability to minimise all sorts of risks to attract foreign investors.

Dr Paudel is ex-economic advisor, NRB