Political ideology and instability cannot stop a country from developing itself, if the political parties have a common minimum understanding on economic agendas.
The rising economic giants China and India should be models for Nepal, as Economic Freedom can only make a country sovereign. The government has projected economic growth at 3.5 per cent for the current fiscal year, which is the lowest in the last three fiscal years. It should ring an alarm to the political parties that the economic activities are shrinking due to prolonged political tug-of-war. It is also a warning that political parties should be more serious and concentrate on economic issues.
When the country elected the Constituent Assembly (CA), there was hope that the country would now move forward with a new vigor with priority on the economic agenda. However, politics pushed the economic agendas on the back burner, even posing a threat to post-1990 achievements.
The failure of the successive governments in pushing and helping the CA draft the constitution has made the younger and energetic manpower lose faith on the governance, and forced to opt for foreign jobs. Over 354,000 left the country in the fiscal year 2010-11 in search for greener pasture due to the government’s failure in creating jobs. In fact, the frequent labor trouble fuelled by the political parties has hurt the industries, to the extent of closures and seeing more youths jobless.
The rising energy crisis, politically-backed labor disputes, insecurity and political instability are limiting the opportunities for business and economic activities, pulling the economic growth to below four per cent.
The only hope is remittance – the life line of the economy that is in tune of government’s revenue target – sent by Nepali migrant workers. If it starts falling, no one can rescue the country from being a failed state, as the remittance-fuelled consumerism has failed to increase domestic industrial and agricultural production. It has only led to imports rising six-fold to that of exports.
Due to the lack of manpower, not only the fertile lands are barren but also the industries lack skilled labour cutting their production capacity.
The fall in manufacturing has led to a dramatic drop in country’s export as Nepal witnessed only Rs 58 billion worth of exports in the first 11 months of the fiscal year 2010-11. In the fiscal year 2008-09, the country had exports worth Rs 68.59 billion. Political change that promises stability and liberal market policies could encourage the economic activities in the country. But, since the CA polls, the regular change of government and unstable policy coupled with the successive governments’ market-distorting decisions have disappointed the private sector, the propeller of economic growth.
This fiscal year, the government brought the budget on time, but it could not boost the morale of the private sector. Due to lack of more investment opportunities, not only the domestic but also the foreign investors are shying away. The government failed in guaranteeing the Economic Freedom – one of the key indicators – that the post-1990 government guaranteed, and proved that the country can only prosper in the liberal economic regime.
Nepal’s economic freedom score is 50.1, making it the 146th economy in the 2011 Economic Freedom Index. Its score is 2.6 points lower than a year ago, reflecting declines in eight of the 10 economic freedoms. The country is ranked 33rd out of 41 countries in the Asia–Pacific region and recorded the sixth largest score decline in the 2011 Index. The economy lacks the entrepreneurial dynamism that would propel economic growth and long-term economic development.
Overall, weak reform efforts have failed to stimulate broad-based economic growth. The state continues to hamper private-sector development, and political instability further weakens the country’s capacity to implement economic reform or create a stable environment for development. The statist approach to economic management and development in Nepal has been a serious drag on business activity. Lack of transparency, corruption, and a burdensome approval process impede much-needed expansion of private investment and production. Property rights are undermined by the inefficient judicial system, which is subject to substantial corruption and political influence, according to the report. The distributive budget that has focused more on cooperatives instead of strengthening the private sector is a reminder of the closed economy of the Panchayat era.
The political parties should be pragmatic on economic issues, and work to complete the peace process and finalize the new constitution as soon as possible. The longer the transition period, the harder it is for the investors. It’s high time for the government to create conducive investment environment, with improved security and boost the private sector’s confidence to put the economy back on track. Otherwise, the derailed economy will make the future of the country bleak.