Nepal | July 08, 2020

EDITORIAL: Develop export plans

The Himalayan Times
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Nepal must explore new areas of investment that can help boost our exports and create job opportunities here

Nepal cannot expect robust economic growth unless it can enhance its dismal exports. Nepal exported goods worth Rs 97.1 billion last fiscal whereas its imports were a whooping Rs 1,418 billion, of which food constituted 20 per cent of all imports. This clearly shows that there is a huge gap between export and import. Many performing Asian economies attained economic growth of an average 7 per cent per annum largely through their export drive over the last three decades or so. Nepal has set a target of achieving an average of 9.6 per cent growth rate in the next five years, and a similar growth rate till 2030 so as to become a middle-income economy. But this is going to be easier said than done without a strong export base. A look at Nepal’s export-to-GDP ratio shows that it slumped to 2.8 in fiscal year 2019, which ended in mid-July, whereas it used to be 5.4 in fiscal year 1975 when Nepal Rastra Bank started keeping records of trade data. It means that out of every Rs 100 worth of goods and services produced in the country, goods worth Rs 5.4 were exported that year. It is not that Nepal does not have the potential to see more exports than what it is doing at the moment. According to the latest World Bank report, Nepal has a potential to export goods 15 times more than what the country has been exporting so far. But this will require focussing in select areas where we have a competitive edge and channeling foreign investment in them.

Nepal’s export-to-GDP ratio had reached an all time high of 13.1 in FY 2000 because of exports in ready-made garments, woolen carpets and pashmina to overseas markets. But export of these goods went down once the duty-free, quota-free agreement was abolished and fierce competition from other countries. Their contribution to GDP came down to 5.6 per cent in FY 2019 from 9 per cent in 2001. Nepal has so far identified nine potential goods, including cardamom, ginger, tea and coffee, that the country could have a competitive edge over other countries.

As of now, the only sector that has sustained Nepal for many years is the export of unskilled labour to Malaysia, the Gulf and other countries, from where they send billions of rupees every year to keep the country’s economy afloat. However, the remittances sent by the unskilled workers are spent in unproductive sectors. With the rise in the disposable income of the Nepalis, it has also pushed up the cost of labour, property price and production cost. In order to achieve the sustainable economic growth of average 9.6 per cent and also to boost the country’s export, Nepal must explore sectors that produce low-volume and high-value goods, such as diamonds and precious stones, that can fetch a good price in international markets. No country can achieve high economic growth without making huge investments in agro-based industries and the manufacturing sector. We also need to produce goods on a large scale so that we can sell them at cheaper competitive prices. This requires huge foreign direct investment, which will come only when the country creates an investment-friendly climate. Modern agriculture farming coupled with agro-based industries can lead the country towards prosperity. The government must work out a long-term plan to make good use of remittances in the productive sector to create many job opportunities within the country.

Dashain booking

The Dashain festival begins in about a month’s time, and it is that time of the year when people long to visit their homes to receive tika and blessings from their elders. The only mode of travel for most of the people is the bus, so they are required to book their tickets in advance to secure a berth in the vehicle. So the government has proposed to the transport entrepreneurs to open the booking season from September 11, but the latter is in a wait and see game.

The transport entrepreneurs have always used the festival season to bargain with the government for a revision of the fares, citing the rising cost of operating buses. Since the people are always at the receiving end, such intimidating tactics, as used in the past by the entrepreneurs, only makes them anxious on the eve of Nepal’s biggest festival. If the demands of the entrepreneurs are indeed genuine, then the government should give a sympathetic look to them. But in doing so, it must see to it that any revision will not pinch the pocket of the passengers, who will be travelling with the whole family.


A version of this article appears in print on September 04, 2019 of The Himalayan Times.

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