Nepal | December 11, 2018

EDITORIAL: It’s broken, fix it

High logistics cost of trade and high lending rates have caused ‘systemic inefficiency’, which has put private sector players on tenterhooks

In 2001-02, the share of manufacturing in the country’s gross domestic product (GDP) stood at 9.2 per cent. But the sector’s share in the country’s economy has slid over the years. The Central Bureau of Statistics (CBS) economic forecast for the ongoing fiscal year 2017-18 has put the share of manufacturing in the GDP at 5.4 per cent. This does not paint a rosy picture. Despite having potential for economic growth, Nepal has failed to achieve the desired results, largely due to what the private sector has termed “systemic inefficiency”. While the decade-long Maoist insurgency dealt a deadly blow to economy, post 2006 peace agreement, the country was mired in political instability, which gave rise to frequent government changes — one government every nine months on an average. High logistics cost of trade, lack of infrastructure, high interest rate of banks and financial institutions (BFIs), frequent strikes, labour unrest and crippling power shortages have put private sector players on the tenterhooks.

The private sector players’ call to the government to fix the systemic inefficiency to make industrial production competitive is very much justifiable – and of course timely. The elections last year for the three tiers of government – federal, provincial and local – have now ensured political stability. We have a strong government at the centre, which is expected to govern for a full five-year term, something we have not seen in the last 27 years. Similarly, governments at provinces and local levels also have taken shape. This means governments at all levels are in a comfortable position to fix the broken systems — or introduce new and effective systems — and bring robust policies to ensure a favourable environment for investment and give a fillip to the country’s economy.

To achieve economic growth and sustain it, there is an urgent need to focus on primary (agriculture, forestry, fishery and mines) and secondary sub-sectors (construction, industry, electricity, water and gas) sectors. The CBS forecast of contributions of the primary sector and secondary sub-sectors to the economy at 28 per cent and 14 per cent, respectively, is not that encouraging. Despite Nepal being an agricultural country, with the agriculture sector contributing 27.1 per cent to the GDP (CBS forecast for this fiscal), farming still remains the most neglected sector. On the other hand, small and medium enterprises (SMEs) have failed to get as much attention as they need. Similarly, the country has also failed to protect domestic industries through policy incentives. The products that have competitive edge should be given priority. While the agriculture sector should get due attention, the government needs to lay emphasis on industrialisation to create more jobs. In terms of ease of doing business, Nepal, according to the World Bank’s 2017 report, slipped to third position in ranking among the South Asian economies. This is also a cause for concern. One of the major setbacks for the productive sector has been lending rates. Businesses are forced to shell out more money for debt servicing. The government through strong policies and the central bank through an appropriate monetary policy must create favourable investment climate for private sector players to boost the country’s economy.


Give them options

The act of occupying roadsides and streets in the market areas of the Kathmandu Metropolitan City (KMC) by street vendors has been one of the major problems KMC and pedestrians face every day. Due to lack of designated spaces for the vendors to run businesses, they mostly occupy the roadsides and narrow streets causing much difficulty to the pedestrians and motorists. This problem should be resolved permanently so that the vendors will no longer occupy the streets and they also get fixed spaces to do petty businesses to eke out their living.

The KMC has recently decided to take action against the vendors encroaching upon the pavements and blocking people’s movement. The footpaths are not meant for doing any businesses. The KMC has decided that the goods seized from the vendors will be auctioned. It has also said no other space will be made available to them to do business. However, the KMC must keep in mind that a lot of people are earning their living by selling small amount of goods in the streets. It would be better to provide them space where they can sell goods for certain hours fixed by the KMC.

 


A version of this article appears in print on May 09, 2018 of The Himalayan Times.


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