Weak institutional capacity, fluid political environment and limited political representation, limited human capital and confidence, geographic remoteness and weak rule of law coupled with sluggish economic growth and unequal distribution of economic resources made the economy more vulnerable, according to the United Nations Development Assistance Framework (2013-2017).
Lack of employment, or alternative livelihood opportunities, is a major root cause for vulnerability, the report said, adding that it is particularly so for groups that do not have economic resources like land, of their own.
Declining returns on agricultural production and a stagnating manufacturing sector are severely impacting groups that have traditionally depended on agriculture, as well as those who have moved to urban areas in search of better opportunities, it added.
A diversified and vibrant economy that can absorb current labour force, including youth, people with low human capital and those from rural areas, is urgently needed, it said, adding that a failure to create this will further drain Nepal of its biggest asset, its people.
Above 500,000 Nepalis migrated in the last fiscal year due to lack of employment opportunity in the country.
Limited human capital and confidence is a significant recurring theme influencing the economic, social and political aspects of vulnerability, according to the UNDAF, which concludes that human capital is important because education, skills and awareness of one’s rights are required in order to perform well in all aspects of life and for all segments of society. "Skills and specialised abilities are needed to actively and meaningfully participate in the economy of a country and education and general awareness are needed to participate in the polity and society, and to understand one’s own position in the overall system of governance, social custom and traditions."
It influences how people relate to one another in society and how effectively individuals can seek protection from the state, if and when their rights are violated, it added.
Due to a combination of factors including ongoing political instability, poor infrastructure and low levels of investment in most sectors of the economy including agriculture, energy and industry, the country is not in a position to provide sufficient levels of economic opportunities to significantly improve the livelihoods of a population of 26.6 million, a quarter of which — nearly 6.7 million — live below the national poverty line.While most people of working age have work, they either do not have enough working hours or are not paid enough to lift themselves and their families out of poverty, the five year strategy said. "In this context, creating an enabling environment for increasing access to, and the creation of, more and better quality jobs — access to economic opportunities — while addressing short-term needs and objectives — like economic empowerment and adequate social protection — are critical elements for the sustainable and long-term development of Nepal’s economy and society.