Inefficiency, red tape hit economy hard

Inefficiency and red tape are hurting the economy, according to experts.
“The economy has been dogged by inefficiency and corruption,” said Prof Dr Madan Kumar Dahal in an interaction on ‘Global Economic and Financial Market Developments and Outlook-Implications for Nepal’, organised by Federation of Nepalese Chambers of Commerce and Industry (FNCCI) here in the Valley today.
“Higher dependency on agriculture has to be reduced and agriculture labour should be shifted to other productive sectors to propel economic growth,” he prescribed, adding that Nepal also needs to bring changes in the revenue structure to make the country more competitive.
“Otherwise, Nepal could take economic benefits from neither China nor India as the present world is all about market not ideology,” Dahal added.
The country’s trade deficit has been increasing with both China and India in recent years, former governor Deependra Bahadur Chhetri, said, adding that Nepal needs to exploit the opportunities from both the rising economic giants.
The rising consumerism is not helping Nepal increase domestic production due to lack of proper connectivity with the market place, he added.
However, former finance secretary Rameshwor Prasad Khanal opined that rise in consumption should also be looked at from positive perspective also as it sets the ground for rise in domestic production.
“Policies should, therefore, be targetted towards productive sectors and not try and tame consumption,” he said, adding that power outage and politically-instigated labour trouble have been the key reasons of lower productivity in industrial and service sector.
Similarly, agriculture productivity is low mainly because of infrastructure bottlenecks like irrigation, rural roads, market connectivity and not because of what is widely believed as lower subsidies like cheap chemical fertilizer or seeds. “It cannot help produce more as it’s very costly to take the produce to the market.”
However, revisiting in policy is required to increase the production of industries and should be focused on minerals and agro-based industries, the former bureaucrat said, adding that increasing agricultural productivity will help ease pressure on prices. “Thus Monetary Policy needs to be cautious but doing away with supply chain bottlenecks and allowing industries to operate at their full capacity can only bring respite from ever-rising prices.”
He also urged correction in the current budget tendency during the middle of fiscal year as it would bring macro-economic instability.Similarly, overhauling of the internal control system of the banks and financial institutions, improving corporate governance and merger and consolidation will increase the risk-bearing capacity; and banks and financial should themselves also regulate internally for the financial sector stability, he suggested.
On the occasion, representative of International Monetary Fund (IMF) to India and Nepal Dr Sanjaya Panth suggested strong supervision and enforcement of prudential regulations to safeguard the heath of financial sector.
“Expansionary budget will bring macro economic instability,” he said, adding that manufacturing sector is shrinking and consumption — not the investment — has been driving Nepali economy. “The remittance and consumption fuelled the economy, but productivity lagged behind leading to loss of competitiveness of domestic industries hurting the economic growth,” he added.