The govt needs to assure the investors that the  will not change despite change in the administration

Political stability plays an important role in driving the economy forward. Any kind of disturbance from within the country or outside — either associated with a pandemic like COVID-19 or political turmoil — is sure to jeopardise the investment climate.

The Year 2020 was not good for the country and the entire world because of the coronavirus that has claimed the lives of millions of people worldwide.

Nepal is no exception. Till date, more than 1,800 people have died of the disease while as many as 255,979 have been infected with the virus. Although the recovery rate is also very high compared to a few months ago, people are still scared of it as the death rate has remained steady. No sooner had the people started resuming normal econoFood crisismic activities than political turmoil has gripped the nation following the abrupt dissolution of the House of Representatives (HoR). The Nepse stock exchange, which was gaining momentum recently after a hiatus of seven months of lockdown, has started tumbling due to the political uncertainty, which will continue for some time until the apex court gives its verdict on the HoR dissolution.

People had expected the country’s economy to move forward following the general election three years ago. It did move forward for the last two years.

But there was a sudden break on the economic activities after COVID-19 struck the nation, compelling the government to impose a lockdown to control the virus. The private sector, which creates more jobs than the government, is especially worried about the unfolding political uncertainty.

Issuing a joint press statement the other day, the three private sector associations — Federation of Nepalese Chambers of Commerce and Industry, Nepal Chamber of Commerce and Confederation of Nepalese Industries — expressed serious concern over the latest political development, which, they say, will adversely affect the investment climate, leading to policy instability that will not create a conducive environment in setting up new industries.

They have warned that the latest political development could become more complicated unless it is settled amicably.

What is even worse is that investment in the productive sectors, especially in the energy sector, has sharply declined this fiscal compared to the previous fiscal. According to the Department of Industry, only 13 hydel projects were registered in the last five months of this fiscal whereas the number of hydel projects registered for power generation had reached 22 during the same period of the previous year. Most of the hydel projects registered this fiscal are of 10 MW or less. It shows the confidence level of the investors in the energy sector has gone down as a result of the pandemic. The investors will continue to hold their money back until the pandemic is brought under control and the political situation improves for the better — either through fresh elections or the reinstatement of the dissolved HoR. Till then, more and more people will already have lost their jobs that might lead to further social tension. What the government needs to do is to instill confidence in the investors that the investment policy will not change despite the change in government.

Food crisis

The remote areas of mid-west Nepal are prone to food shortages due to low productivity and minimal land for cultivation. And the problem this year could be aggravated by the prolonged drought that has set in the northern parts of Bajura, Bajhang, Humla, Jumla, Mugu and Kalikot districts. Due to lack of irrigation facilities, the locals depend on the rains to grow food. As a result, the area looks barren, resembling more of a desert. Uncultivated land means the farmers must depend on the expensive food sold in the local market, where the high cost of transportation pushes up the prices of everything, including foodstuffs.

Until roads were constructed in recent years, food, mostly rice, was transported to these districts by plane. But this proved no solution to the problem as people often had to walk for days to buy a few kilos of rice at subsidised rate at the district headquarters.

Since food security in this region of Nepal is subject to a large extent to the vagaries of the weather, there is little option other than to build small irrigation canals to feed water to the land there and introduce drought-resistant crops that can grow in arid conditions.