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Nov 12, 2011

Youth Employment: Prospects in Nepali Scenario

Yesterday, I presented a paper on "Youth Employment: Prospects in Nepali Scenario" in a program organized by YUWA. Below is the abstract of the paper and the download link to the PDF file.


Like every other developing countries of the world, high youth unemployment rates pose a serious threat to stability and economic growth of Nepal. Underemployment is more severe a problem than unemployment in Nepal’s scenario. Due to lack of growth in the country, majority of youth are seeking foreign employment opportunities which has resulted in a significant reduction of absolute poverty rates of the nation and a major source of foreign exchange. The trend, although beneficial in the short run poses a serious threat to long term development of Nepal. Agriculture, tourism, small and cottage industries, information technology and outsourcing and foreign employment itself are the major sectors that have potential to solve the youth unemployment problem. This paper highlights the present situation of these sectors and highlights the growth potential of these sectors to absorb the unemployed mass of youth. The paper concludes by arguing that, if we are serious about solving youth unemployment problem of Nepal, we should focus more on the major sectors of the economy and their growth rather than trying to solve youth unemployment problem through direct government intervention.

Download link: http://bit.ly/vLFq0R

Do let me know if you have any feedback and comments!

Nov 7, 2011

केही लिबेर्टेरियन भनाइहरु -७

  1. केन्द्रिक्रित शक्ती जहिले पनि स्वतन्त्रताको शत्रु हुँदै आएको छ ।  -Ronald Reagan
  2. स्वतन्त्रता बिनाको जीवन आत्मा बिनाको शरीर जस्तै हुन्छ । - Khalil Gibran
  3. कानूनव्यवस्था बिनाको स्वतन्त्रता र स्वतन्त्रता बिनाको कानूनव्यवस्था दुवै उत्तिकै घातक हुन्छन ।  -Theodore Roosevelt
  4. आर्थिक स्वतन्त्रता बिना साँच्चैको स्वतन्त्रता सम्भव छैन । - Margaret Thatcher
  5. कुनै पनि सरकारको मुख्य उदेश्य देशको आत्मारक्षा हो , साम्राज्य बनाउनु होइन । -Joseph Sobran
  6. पूँजीवादको अन्तर्निहित  खराब पक्ष भनेको धनको असमान बितरण हो । तेसै गरी समाजवादको अन्तर्निहित असल पक्ष भनेको गरीबीको समान बितरण हो । -Winston Churchill
  7. अर्थतन्त्रप्रतिको सरकारको धारणालाई केही वाक्यमा समेट्न सकिन्छ : चलिराखेको छ भने कर लगाउ , अझै चलिराख्यो भने नियमन गर । अनी जब चल्न छोड्छ अनुदान दिन थाल । - Ronald Reagan
  8. हामीलाई सरकार चाहिन्छ तर सधैं बाजले सरह तेस्लाई निरिक्षण गरिराख्नु पर्छ । -Millicent Fenwick
  9. जहाँ नैतीकता हुन्छ , त्यहाँ कानून को आवश्यकता नै पर्दैन, जहाँ नैतीकता हुँदैन, त्यहाँ कानून बनाएर पनि काम लाग्दैन ।  -Anonymous
  10. समाजवादीहरु तेस्ता व्यक्ती हुन जो आफुलाई अरु मानिसहरुको ऋणी सम्झन्छन र त्यो ऋण चै सरकारले अर्काको पैसा बाट तिरिदेओस भन्ने चाहन्छन । -Gordon Liddy

Nov 6, 2011

Nepal's Economic Reforms- are there any stakeholders left?

Image Source: http://prarthanag.umwblogs.org
Initiating and sustaining the economic reform process is one of the major challenges being faced by the least developed countries around the world. With globalization permeating every corner of the world, no country can remain impervious to the global trends which change too frequently to be conducive for economic reforms. As evidenced by the experience many countries attempting reforms, reforms rarely enjoy broad public support. Economic reforms are generally initiated by crisis, driven by pressures and sustained by the support of few committed politicians or bureaucrats who feel a stake in the reforms. And it's no wonder that some of the major transformations of economies in the world have been under some forms of dictatorship. From Deng's China to Pinochet's Chile to Thatcher's Britain, economic reforms had to be carried out with an iron fist or as in New Zealand where major political parties has a consensus regarding the reforms. Added to this, political instability and communist uprisings in least developed countries like Nepal push economic reforms to almost impossibility. 

Nepal's brief flirting with liberalization and other economic reforms were thwarted by the Maoist uprising and political infighting within the then ruling party -Nepali Congress which not only undermined the benefits of liberalization but also helped smear the process itself. Post 2006 era has been even more depressing for Nepal's economic reform process. Political agendas have pushed back economic agendas further behind. Political bargaining have pervaded every national issues and economic perspectives on issues are missing. Besides political parties, other supposed stakeholders of the reforms such as private sector, bureaucracy, civil society and even the general public are also too busy in their own affairs to care about them. In this context, it would be interesting to analyze what are these stakeholders doing regarding the process and if there is any real stakeholder left?

Private Sector
As economic reforms bolster private sector through more freedom as well as competition, private sectors have a stake in the economic reforms. Nepal's private sector, however, except for paying lip-service, has contributed very little in pushing economic reforms forward. The anti-competitive practices present across all the sectors of the economy such as syndicates, cartels, collusive agreements not only undermine people's support for private sector but also generates hostility towards governments attempts to allow private sector a greater role in the economy. Nepalese private sector currently too divided and too engaged in crony capitalism, to be excited or supportive about the economic reform process. Status quo ensures the survival and profit of the major actors in private sector which translates into lukewarm, if any, support to economic reform process.

Political Parties
Nepal is yet to see a political party that truly advocates free markets and economic freedom out of principle. Most of the political parties see supporting some aspects of economic freedom as a compromise rather than political agendas. Giving leeway to private sector is seen as a compromise on party principles and generates criticisms from within and outside the party. A look at the top five major political parties of Nepal would present this miserable state. Two of the largest political parties are principally against liberalization and other economic reforms, another two thrive on purely ethnic agendas and haven't yet shown any clear stand or interest on national economic issues. Another one doesn't seem so much happy about the economic reforms it initiated and has once again brought forward  anti-market agendas in its political principles. Nepalese political parties seem to be on a “populist” race where everyone is trying to be more popular at the expense of the economy.

The Bureaucracy
A country's bureaucracy plays a vital role in directing and sustaining the economic reforms as seen by the economic reforms of Indonesia and Singapore. In case like ours where the political leadership doesn't seem to have any stake in economic reforms, bureaucracy's role becomes even more important. Nepalese bureaucracy, however, seems too busy in finding avenues for short-term gains and instant gratifications to have a stake in economic reforms. Very few bureaucrats intend to live in Nepal after their retirements and those who do are either disorganized or busy consulting the development industry.  The higher level bureaucracy which can have a serious impact in the national policies,  is either already too well-off or get so by the time of retirement  and has less incentive to push for the economic reforms.

Civil Society
In the post 2006 era, like every other sector, civil society too has fallen victim  to excessive politicization. Excessive politicization and political affiliations erode the very essence of independent civil society in a country. Our civil society is found carrying the same agendas the political parties are pushing forward and hence provide little or no contribution in pushing the economic reforms forward. An independent civil society is essential to the success of the reform process because it can actively promote equal access of every sector and class of the society to the benefit of the reforms. However, our civil society, due to its politicization is failing to act as a uniting force. Agendas picked up by civil society currently are less of national priorities than ideological agendas.

The General Public
Source: http://www.nepalmountainnews.com
Poor and middle classes of the society are another major stakeholders in the economic reform process. As seen in countries like India and China, liberalization and increased access to economic activities reduce absolute poverty rates significantly. Since they consist the majority of voters, they also can exert pressures on political parties to initiate reforms in the country. Benefited by the limited liberalization o the early 1990s, this segment of population is overwhelmingly engaged in foreign employment and improving living standards through remittance income. In fact there has been significant reduction in absolute poverty rates in the country , whose credit, in large part, goes to foreign employment and remittance incomes. This has encouraged even more people to opt for foreign employment. Nepal's over-dependence in remittance has begun showing the signs of what has been termed “Dutch Disease” in which a country goes through vicious cycle of running economy through remittance incomes which in turn lifts off the pressure to make economic reforms, which results in poor investment environment and little economic opportunities. Little economic opportunities force even more people to opt for foreign employment and brings in more remittances to run the economy. The findings of recent Nepal Living Standard Survey report suggests amid the political chaos and instability, poor are lifting themselves out of poverty. Poor are hence, slowing having less stake at the economic reforms.

In this context, any attempts at economic reform process, should take into consideration the question, if there are any stakeholders left for such reforms and who exactly is the stakeholder. Measures to hold all these actors for the reform is another necessary step that needs to be taken for a long term development of Nepal. Free, fair and regular elections would be very useful in making the political parties feel more stake in economic reforms whereas better mechanisms to curb corruption and devising a mechanism to tie up bureaucracy's remuneration with nation's economic performance could be an option for bureaucracy's stake in the reforms. More aware and demanding consumers could pressurize private sector to be more responsible and supportive of economic reforms. Meanwhile, emergence of an strong independent, non-political civil society could be the major milestone in energizing all these actors for economic reforms.

-Surath Giri
(Published in The Himalayan Times- Perspectives of November 6, 2011)

Nov 4, 2011

10 Reasons to Invest in Nepal

Source: http://business.gather.com
Today I found a promotional promotional booklet FNCCI (Federation of Nepalese Chambers of Commerce and Industries) has prepared to promote foreign direct investment in Nepal. It has a section called "Why Invest in Nepal?" where following 10 reasons have been outlined. Accompanying the reasons are my comments.

1. Located in between two emerging economic giants, India and China, and preferential access to their market: That's a huge advantage for us but it is also necessary to consider the question: If two emerging economic giants are our neighbors, why should an investor invest in Nepal? What additional incentives can we offer them to make us more appealing than our neighbors?

2. Huge potential of growth and untapped natural resources: I would say that's a prime reason why investors should be interested in Nepal. The potential for growth and amount of natural resources we have is amazing!

3. Liberal rules for investment including foreign investment: Well, not exactly. In the Index of Economic Freedom, which ranks countries around the world based on their friendliness to entrepreneurs and economic activities, Nepal scores 5 out of 100 in the Investment Freedom criteria.

Here is what Heritage Foundation has to say about it:
Most new foreign investment must be approved by the government. Bureaucracy and regulatory administration are burdensome, non-transparent, inconsistently implemented, and inefficient. Political instability, pervasive corruption, and inadequate infrastructure and administrative capacity also inhibit investment. Residents may hold foreign exchange accounts in specific instances; most non-residents also may hold such accounts. Convertibility is difficult and not guaranteed. Most payments and transfers require prior approval by the government. There are restrictions on most capital transactions, and real estate transactions are subject to controls. Foreign investors may acquire real estate only for business use.
4. Ease in repatriation of foreign exchange

5. Comparatively lower tax rates especially for industries: That's an advantage we can capitalize on. But despite the low taxes, the cost of doing business in Nepal is relatively high due to militant labor unions, lack of infrastructures, small scale market, corruption etc. This factor has to be considered as well.

6. One Window Policy: Well, it could be encouraging to the investors. However, this policy is not new to Nepal. In theory, one window policy has existed in Nepal since the Panchayat Era but we are yet to see its effective implementation. 

7. Relatively small and accessible government: Although our leaders have very little, if any, interest towards national economic issues, they are relatively accessible , at least for the foreign investors and that's another advantage we could capitalize on.

8. Open and liberal export/import rules: Compared to India, maybe. But there is too huge a room for improvement in this area before it can really work to our advantage.

9. Hardworking people: Really?? What about our militant labor unions who are slowly but steadily destroying whatever little industries we have? What about the excessive politics that goes on with these unions? 

10. Many sector-specific incentives

So what do you think about these reasons? Are these the right reasons for investing in Nepal? Are there any additional reasons? Share your views below!