The White Paper presented by the finance minister in the parliament recently has exposed Nepal’s appalling economic condition. The minister has thus sought aid from the international donor agencies.

In response, the donors are demanding viable proposals from the government. But traditional type of socio-economic development projects alone cannot bring about the desired results. Real growth and development can take place only when the country’s GDP grows. The agricultural sector in particular has a predominant share of the GDP. However, it is rural-based, small-scale, subsistence-oriented and dependent upon the environment and landscape with the limitation of landslides, nutrient depletion and low irrigation facilities. Hence, modernisation of agriculture is the urgent need of the hour. Agriculture needs to be complemented by the growth of agro-based industries. For this, the country must be industrialised. But the current scenario of the industries reveals a poor picture. Almost all the industries are terminal consumer-product industries of the big industries of the neighbouring and developed countries. They are just market extensions. Also, the industries are dependent upon import of chemical raw materials. Therefore, industrialisation based on available natural resources and supported by a viable chemical industry is required.

It is unfortunate that Nepal has not been able to develop an independent chemical industry. The inorganic chemicals are converted into intermediate and fine chemicals, which are used in pharmaceuticals, pesticides, dyes, photography and electronic appliances. Mining is another industry dependent on chemical processing. Similarly, the production of special chemicals for supporting the electronics and food processing industries is of immense importance. Almost all consumer goods industries have to use the inorganic chemicals such as acids, bases, alkalize, salts and others.

According to the Department of Customs’ Foreign Trade Statistics 1980-81, Nepal imported over Rs. 1.38 billion worth of chemical products, comprising 28 per cent of the total import volume. Currently, the import volume of chemical products and allied chemical industries has grown even further. Thus, Nepal has to be transformed from a commodity-based economy into a manufacturing-based one. This transformation can be achieved only through macro-economic and structural adjustment policies and strategies of the government that can contribute to the inflow of FDI leading to rapid growth of the manufacturing sector.

For this, an Industrial Master Plan (IMP) based on development of the chemical industry must be drawn up. The IMP should focus on increasing competitiveness through strengthening industrial linkages, enhancing value-added activities and increasing the productivity of the manufacturing sector. It should overtake the agricultural sector as the engine of growth and become the backbone of Nepali economy having a significant bearing on macro-economic performance.