Prolonged uncertainty hits Nepal's prosperity ranking

Low score in entrepreneurship and opportunities, personal capital, and weak governance system of the country, has pulled Nepal down to the 108th position in 2012, from a year ago's 93rd position, according to the Global Prosperity Index (GPI) published by London-based think tank, Legatum Institute, today.

Legatum’s prosperity index has ranked Nepal 115th in entrepreneurship and opportunities, and 116th in personal capital. Similarly, the governance system of the country has also weakened to 110th position among the 142 countries examined for their prosperity strength.

Prosperity index of Nepal had suffered since last couple of years, though Constituent Assembly election had given a glimpse of a better future from the years-long instability and prolonged economic uncertainties that were propelled by political instability pulling Nepal's ranking down.

Likewise, South Asian economies have also witnessed a sharp fall in making wealth following problems in economies and politics — from governance to personal freedom including safety and security. Most South Asian economies have scored seven to eight points less in the index of 2012.

According to the report, Sri Lanka is the only economy that gained prosperity in 2012. The country has secured 58th position among the 142 countries studied to rank prosperity through eight different parameters — economy, entrepreneurship and opportunities, governance, education, health, safety and security, personal freedom, and social capital.

Sri Lanka has climbed five steps to secure top position among South Asian countries in the last one year, the report said, adding that it was in the 63rd position a year ago.

Prosperity of South Asian economic giant, India, has also dropped from 91st position to 101st position in a year. Weakening safety and security and governance have caused the slide of the Indian economy that is, however, still in the 57th position in the globe.

Pakistan, which ranked 132nd in the index, has shown poor performances in all the eight parameters. The country has been ranked 138th in safety and security, followed by personal freedom (139th) safety and security (115th), entrepreneurship and opportunities (115th). It also has a poor record of governance at 103rd position.

Bangladesh was in a better position than Pakistan with a rank of 103, according to the sixth edition of Legatum Prosperity Index that has studied of wealth and wellbeing in 142 countries.

The ranking has placed Norway top for the overall prosperity index, whereas Switzerland is number one for economy, Denmark has scored the highest for entrepreneurship and opportunity, Switzerland tops in governance, Luxembourg ranks number one for health, Iceland ranks highest for safety and security, Canada scores highest for personal freedom, and Norway ranks highest for social capital sub-categories in the 2012 report.

Covering 96 per cent of the world’s population, the index is an attempt to broaden measurement of a nation’s economic health beyond indicators like gross domestic product. The Legatum Institute is a public policy research arm of the Legatum Group, a Dubai-based private investment group, founded in 2006 by New Zealand billionaire Christopher Chandler.

 

South Asian ranking

Country - 2009 - 2010 - 2011 - 2012

Sri Lanka - 68 - 59 - 63 - 58

India - 78 - 88 -91 -101

Bangladesh - 95 - 96 - 95 - 103

Nepal - 88 - 91 - 93 - 108

Pakistan - 107 - 109 - 107 - 132

Afghanistan - - - 140

(Source: Global Prosperity Index 2009-12, Legatum Institute)

 

South Asian ranking in key categories

Economy - E&O - Governance - S&S - Personal Freedom

Afghanistan - 130 - 121 - 141 - 140 - 135

Bangladesh - 73 - 104 - 98 - 118 - 32

India - 57 - 99 - 49 - 114 - 67

Nepal - 97 - 115 - 110 - 83 - 116

Pakistan - 115 - 103 - 115 - 139 - 132

Sri Lanka - 71 - 86 - 51 - 122 - 58

(E&O= Entrepreneurship and Opportunities, S&S= Safety and Security)

Elusive consensus makes budget uncertain

A prolonged power tussle between opposition and government has made the fate of full-fledged budget still uncertain.

The sacred-word 'consensus' that has been eluding caretaker government led by UCPN-Maoist chief ideologue Dr Baburam Bhattarai and opposition might make people hit due to lack of full-fledged budget.

"In absence of Parliament — that could check and balance government anarchy — the President alone cannot approve the budget brought by a caretaker government," said former finance minister Dr Prakash Chandra Lohani.

"The budget is not only an economic document but also a political vision of a ruling party," he said, adding that a budget is, normally, approved by the President only after Parliament passes it.

However, in the absence of Parliament, consensus among the political parties can only make the passage for the full-fledged budget, he said, after meeting with the President Dr Ram Baran Yadav, who is under pressure by the opposition parties not to approve full-flegded budget brought by the care taker government.

The caretaker government had brought a special budget of Rs 161.24 billion for the four months — as an interim public expenditure arrangement — in mid-July through the ordinance due to absence of Parliament.

As the four months is coming to an end by mid-November, the President is under tremendous pressure. On one hand the ruling party leaders are challenging to bring a full-fledged budget and on the other, the opposition is pressuring not to approve it.

The President — as the custodian of the Constitution — cannot approve any document that a caretaker government brings," he said, adding that the President will make his move according to the Constitution.

The Constitution states that the government will rule in consensus in an absence of Parliament, Lohani said, adding that the government alone cannot bring full-fledged budget without consensus.

Likewise, the private sector is also exerting pressure to bring a full-fledged budget on consensus as soon as possible.

"A full-fledged budget has to come as a consensus economic policy document," said Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Suraj Vaidya.

The government is the largest producer, consumer and investor, and the budget is the lifeline of economy, he said, adding that lack of budget will hit the confidence of investors, both domestic and foreign.

Urging the political parties to forge consensus as soon as possible to bring the full-fledged budget to save the country from being a failed state, the private sector chieftain added.

Likewise, economists have also been divided on full-fledged budget. Some claim it is unconstitutional, while others want a package deal along with political consensus, leaving a few who support a full-fledged budget 'but with pre-conditions' from the President.

EU revises GSP facility

The European Union (EU) has revised import preference scheme — popularly known as the Generalised System of Preferences (GSP) — for developing countries including Nepal with effect from January 1, 2014.

"Nepal will enjoy more opportunities to export as competitors exit the scheme," the EU said, adding that the new scheme will be focused on fewer beneficiaries — only 89 countries –– 49 LDCs in the 'Everything But Arms' scheme including Nepal, and 40 other low and lower-middle income partners — to ensure more impact on countries most in need.

Some 10 countries in Asia — Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives (until end 2013 as they have exited the UN Least Developed Country list), Myanmar (preferences currently withdrawn), Nepal, Timor-Leste, Yemen — will get the facility.

"Due to GSP facility, EU has become one of Nepal's key export destinations in recent years," said Garment Association-Nepal's president Uday Raj Pandey. "The GSP facility has helped garment, carpet, pashmina and handicrafts sector to survive," he said, adding that Nepal has, however, not been able to take the maximum advantage of the facility.

Following an agreement with the Council of the European Union and European Parliament on Thursday, the scheme contains specific tariff preferences granted under GSP in the form of reduced or zero tariff rates and the final criteria for which developing countries will benefit.

By providing preferential access to the EU market, the scheme should assist developing countries in their efforts to reduce poverty and promote good governance and sustainable development by helping them generate additional revenue through international trade, which can then be reinvested for the benefit of their own development and, in addition, to diversify their economies, the EU added.

"The scheme’s tariff preferences should focus on helping developing countries having greater development, trade and financial needs."

Private sector seeks full-fledged budget

The private sector has asked the political parties to forge consensus and bring a full-fledged budget as soon as possible.

"A full-fledged budget has to come as a consensus economic policy document," said Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Suraj Vaidya.

Anywhere in the world, the government is the largest producer, consumer and investor, and the budget is a lifeline of the economy, he said, adding that the umbrella organisation of the domestic private sector has since long been lobbying for a fixed date — in the Constitution — for the budget, irrespective of which party is in the government.

"There is no option to political consensus, but the current fluid political situation has hurt the economy hard due to the lack of a full-fledged budget," he added.

The prolonged political uncertainty has made doing business unpredictable, leading the country towards a failed nation, said Vaidya, urging the political parties to save the country from being a failed state.

"Let politics take its own course, but the lack of a budget has been hindering the economic growth of the country," he added.

Private sector representatives also met caretaker prime minister Dr Baburam Bhattarai to request him for an early settlement to the political uncertainty.

However, the two major opposition parties — Nepali Congress and CPN-UML — have been opposing the caretaker government's bid to bring a full-fledged budget without political consensus.

Economists have also been divided on the fate of a full fledged budget. Some claim it is unconstitutional, while others want a package deal along with political consensus, leaving a few who support a full-fledged budget 'but with pre-conditions' from the President.

The caretaker government, led by UCPN-Maoist ideologue Bhattarai, had brought a special budget of Rs 161.25 billion — as an interim public expenditure arrangement for four months — in mid-July through an ordinance due to the absence of a parliament.

Frequent changes in the government due to the political deadlock since the election of the Constituent Assembly some four years back, has forced successive governments to bring special budgets.