My Vision for Nepal | Economic growth and socio-economic development

Economic growth and socio-economic development

Three ways to realize the vision:

1) Invest in agriculture, manufacturing, infrastructure and human-resource development.
2) Strengthen institutional capacity at all levels of government.
3) Enforce the rule of law for strong, effective and fair public administration and good governance.

After decades of political turmoil, Nepal entered a new political era with the promulgation of a new constitution in 2015. The constitution prepared by the elected representatives provides extensive fundamental rights reflecting popular aspirations and envisages an egalitarian and just society by adopting a federal system with three tiers of government. Now that we have a system accepted by all, the focus should be the constitution implementation and meeting of our development goals.

Nepal, which is currently categorized as a ‘least developed country’ (LDC), aims to attain the ‘developing country’ status up to 2026 and the ‘middle-income country’ status by 2030. We have also pledged to achieve 17 UN Sustainable Development Goals (SDGs) by 2030. We were able to meet the Millennium Development Goals within the 2015 deadline. We also expect to meet the SDGs and elevate the country from the LDC status on time while honestly implementing the constitution.

While implementing it, we should also be making prudent investments to spur economic growth. Agriculture is our crucial sector where we need to invest to boost production and lower our agro-import bills. Nepal must invest in new farm technologies to raise productivity and introduce high-yielding and high-value crops to increase national production and income. We can substitute and reduce imports by raising our export capacity with cereal crops, vegetables, fruits and herbs.

Our investment should focus on agriculture, manufacturing, infrastructure and human development. We should also welcome and encourage foreign investment and development assistance in these sectors. Nepal’s poor transport and energy infrastructure has resulted in high transport cost and low electricity consumption. We should come up with ways to address these problems and thus contribute to developing agriculture, industry, tourism and human development sectors.

We can, for example, substitute fossil fuel imports with clean energy for internal consumption and export. Nepal has the potential to be a clean energy powerhouse of South Asia. More investment in clean energy and agriculture could raise our export capacity and minimize the high annual foreign trade deficit, which at present is almost one-third of our GDP.

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Nepal should also strengthen the institutional capacity with administrative reforms at all levels, particularly at subnational governments so that they can successfully carry out their responsibilities. There is a need to reduce recurrent expenditure and raise capital expenditure, resulting in greater productivity and national income and improved institutions.

We have had a high fiscal deficit with increased recurrent expenditure in recent years. This has led to big internal public debt  equivalent to about five to six percent of the country’s GDP annually. But capital expenditure is low even at the federal central level: only around 10 percent of the total public expenditure in the first six months of the current fiscal year 2021-22. We need public financial management reforms to address these problems.

Sustainable, sound and prudent fiscal management is necessary to ensure austerity in administrative spending and to plan budget and execute development programs. Reforms are required in public financial management with improvement in planning, formulation and executive phases, including the medium term expenditure framework and accountability at each level of government, if we are to effectively deal with under-spending of capital and poor expenditure productivity. 

Growth differences among countries often depend on nationwide factor productivity. Productivity growth in turn depends on technology, infrastructure quality, manpower capacity and business climate. So there is a need for expansion of manufacturing and agriculture sectors and generation of more skilled human resources. Skills training for domestic workers is required to create jobs in domestic agriculture, industry and construction sectors in order to substitute large-scale foreign laborers in these sectors. 

Nepal also needs to improve the quality of governance. For this, the country should have strong, efficient and well-functioning public institutions to enforce the rule of law and raise productivity. Administrative institutions should not suffer from favoritism based on partisan prejudices. Selection of managers and staff members should be strictly based on merit and professional competence.

The emphasis should be on sustainable development rather than populist approach for short-term political gains. It is vital to have strong, effective and fair public administration to enforce the rule of law, and upgrade governance quality and management ability to ensure optimal use of public resources. This in turn will help us in our quest for economic development and social justice.

Liberal economy not against socialism

Nepal’s constitution envisions a socialism-oriented country. There are some misinterpreted rumors calling liberal economy an antithesis to socialism. But liberal economy is also a path to socialism, and it helps create jobs, increase national income and reduce poverty.

Even pro-communist nations like Russia and China have adopted liberal economic policies, encouraging private investment and privatizing state-owned industries to increase growth rate, revenues and overall development. Ever since we adopted liberal economy, the lifestyle of Nepalis has improved. To date, every government of Nepal has generally accepted this economic model. It is the implementation part where we have been lagging.a