Energy shortage needs urgent response: Survey

A UN agency has suggested Nepal to urgently respond to the severe energy shortages to boost growth.
"Severe energy shortages require urgent response and widespread poverty continues to remain a major long-term development challenge in South Asia including Nepal," according to Economic and Social Survey of Asia and the Pacific 2012 of the UN's Economic and Social Commission for Asia and the Pacific (ESCAP).
"Regarding physical infrastructure, several countries in the subregion, like Nepal, Bangladesh and Pakistan, are facing severe electricity shortages," it said, suggesting the establishment of viable new power projects, minimising transmission and distribution losses including theft of electricity, increasing exploration of natural gas, crude oil and coal, tapping of regional markets and setting up infrastructure for energy imports and incentivising the development of renewable energy resources.
"The private sector's involvement should be encouraged along with the public-private-partnerships approach due to limited public resources," said the flagship publication of ESCAP — the regional arm of the UN — providing policy options for the government to overcome challenges and maintain the pursuit of inclusive and sustainable development.
It has also prescribed the implementation of economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population to fight against poverty.
"To promote more inclusive growth, the provision of basic services like health care and education should remain the principal priorities in the policy agendas," it said, adding that generating ample employment opportunities is key for the poor to earn a livelihood.
However, inflation remains stubbornly high in Nepal as it is closely linked to inflation in India because of the fixed exchange rates between the currencies of the two neighbours as well as the close economic ties between them, it said, adding that inflation remained close to a double digit, 9.6 per cent in 2010-11. "Weak supply of food items kept inflation high while at the same time, the cost of production of both agricultural and industrial products rose due to severe electricity shortages and rising labour wages stemming from the overseas migration of Nepali workers."
It has, however, expected higher GDP growth in 2012. "Slow growth in Nepal in recent years has largely been due to political instability, frequent strikes, persistent labour problems and severe electricity shortages," it pointed out, adding that GDP growth slowed to 3.5 per cent in fiscal year 2010-11 as compared to four per cent in fiscal year 2009-10. "The country's agriculture performance improved due to favourable weather conditions but its industrial and services sectors recorded lower growth rates."
However, the survey projected GDP growth to be about 4.5 per cent in fiscal year 2011-12. "Economic revival in the country largely hinges on improved law and order, as poor security and political instability limit the government's capacity to spend money and boost rural income," it noted,
Growing tax revenue in Nepal led to an improvement in the country's tax-to-GDP ratio, which was higher than 14 per cent in 2010-11, according to the survey. Similarly, current account deficit also narrowed in fiscal year 2010-11. But remittance from Nepali migrant workers played a major and positive role in keeping the economy afloat.
"Despite, large merchandise trade deficit, remittance helped cushion the shock," it concluded, estimating that the establishment of South Asian Migration Commission could help formulate the framework for a coherent and comprehensive response.