Report nails hurdles to Nepal's growth

Nepal's efforts to accelerate economic growth and reduce poverty are being hampered by political instability, poor infrastructure and other critical obstacles, a study has revealed.
The study -- Nepal: Critical Development Constraints -- is a collaborative effort by the Asian Development Bank (ADB), the UK Department for International Development (DFID) and International Labour Organization (ILO), that examines the main factors holding back Nepal's development and progress. It notes that the unstable political environment, infrastructure shortcomings, labour market rigidities, industrial relations problem and inequitable access to opportunities have undermined growth and poverty reduction.
Launching the report, finance secretary Rameshwor Khanal said that Nepal has been successful in maintaining a macroeconomic stability. But the growth target could not be achieved, he said adding that only policy reforms cannot accelerate growth. "The massive civil disobedience like frequent bandhs and strikes are bottlenecks in growth," Khanal added. "Eeven small vested interest groups can derail good policies if there is no public awareness."
There is a widening gap between the rural-urban populace and rich-poor that needs to be addressed with long-term, medium-term and short-term plans, the report has suggested.
It has also suggested stronger governance, accelerated infrastructure development, particularly in the power sector, road and irrigation sectors, labour market reforms and greater efforts to ensure that all sectors of society have access to productive assets, education and other key social services to help address these obstacles. At the same time, the report has cautioned the international community not to burden the government with excessive demands as it resources are limited and especially at a time when the country is going through the phase of political transition. It also noted that priorities for reform must be determined by the government and the Nepali people themselves.
"Nepal needs accelerated inclusive growth to create jobs and maintain stability in the long term, but its difficulties are mainly to do with internal, structural issues and it can address these issues if the desire and political will is there," said Ehsan Khan, ADB senior economist and the report's lead author.
While Nepal has made solid progress in cutting poverty over the past decade, its growth performance has sharply lagged behind that of its South Asian neighbours, with development constrained by an internal conflict that began in 1996.
"To put Nepal on the path to inclusive and sustainable growth, the report makes a series of recommendations," said Barry J Hitchcock, Country Director, ADB.
Sarah Sanyahumbi, office head of DFID Nepal, said that the report is expected to start a debate on what's needed to accelerate inclusive growth in Nepal.
The study highlights the need for an improvement in the country's industrial environment, pointing out that labour strikes, transport strikes, unauthorised levies on businesses and other constraints have led to frequent disruptions in production and exports, under-utilization of capacity, higher costs, a loss of competitiveness and the closure of factories.
"The priority of the ILO's Decent Work Country Programme for Nepal is to generate productive employment for building sustained peace through labour market reform, and this research will no doubt accelerate the process of the ILO's ongoing reforms which encourage investment, as well as stressing the importance of social protection of workers," said Shengjie Li, director of ILO for Nepal.