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Aug 1, 2021

Reframing Our Youth Employment Problem

August 01, 2021 Surath Giri

As the nation grapples with the second wave of the COVID-19 pandemic, its ramifications go beyond its immediate public health impact. Health restrictions inevitable to mitigate the spread of COVID-19 have been detrimental to the economy, and are likely to have exacerbated Nepal’s seemingly perennial youth employment problem.

Youth account for about 40 percent of the 20.7 million working age population, and have an unemployment rate higher than the national average of 11.4 percent. Unpacking segments within youth shows us that the 15-24 segment faces specific problems, with the highest rate of unemployment, and informal employment compared to other groups. Perhaps more worryingly, 35.3 percent of 15–24-year-olds were at the risk of social exclusion. The picture changes slightly as we move out from 15-24 to the 25-39 age bracket, which reports one of the highest underemployment rates across segments. This is not surprising given that majority of jobs created over the last decade (2008-2018) were casual or short term work. The ongoing youth employment challenges have led to outcomes including, among others things, labour migration out of the country. According to the Department of Foreign Employment, labour approvals in FY 2019/19 stood at 236,208, with the volume to India conservatively expected a few times more than this number.

The COVID-19 pandemic is expected to make things worse. Around 1.6 million jobs were disrupted in just the first phase of the pandemic, with the young casual and informal workers predominately bearing the brunt of the unemployment impact. The crux of the COVID-19 employment impact lies in underemployment, which globally has contributed more to estimated job losses (in work hours) than unemployment and whose impact is potentially longer term. Given our pre-existing problem of underemployment, especially among youth in the 25-39 age group, this represents an unprecedented employment challenge considering that we are right in the middle of our demographic dividend. The current challenge will unlikely be overcome by our economy in its current state, as we know businesses even in May 2021 were still not operating at pre-COVID-19 levels with important sectors like tourism and hospitality not expected to return to normalcy anytime soon.

Government response to the youth employment challenge has largely been programmatic in the years leading up to and during the COVID-19 pandemic. The Youth Self-Employment Fund, for instance, has been able to create around 78,000 self-employed youths in its total 12 years of existence (around 6,500 annually). While commendable, it barely makes a dent when an estimated 400,000 enter the labor force each year. In any case, programs like these, although beneficial, are not an adequate response to a youth employment challenge that has been exacerbated by COVID-19.

With this impending crisis in mind, it is imperative that we start to address structural barriers to improve the enabling environment for decent job creation. Systemic change is a difficult matter with various components that need to be addressed in parallel, however in our view the following two areas might offer a good starting point.

First of all, there is no comparable alternative to entrepreneurship for job creation and economic growth. Encouraging entrepreneurship has been a government priority with commendable measures even in the recent budget, for example, to promote startups. The gap lies in the approach, which has largely been piecemeal, rather we need a coherent holistic approach for enterprise promotion if we are to achieve systems change for domestic youth employment that we desire.

A holistic approach entails allowing the conceptual space for innovative firms and business models to develop, and grow. A case in point are ride-sharing businesses whose development in Nepal was hampered by regulatory hurdles, and who remain in limbo even after years. However, policy incentives and entrepreneurship support must be delivered in a manner that employment created is ‘decent’. Without this, it seems likely that the predominance of casual employment, and its resultant decent work deficits, will continue onwards into the next decade as well.

Linked to the idea of holistic approach is the need for mindset change. The prevalent narrative seems to equate entrepreneurship largely with youth. However, in a job supply starved economy like ours, we should aim to promote entrepreneurship from every segment of the population. Globally, successful youth entrepreneurs seem to be an exception rather than the norm, with the average age of successful entrepreneurs being 45. That does not mean that we undermine the importance of youth entrepreneurship, especially given their accepted importance in building startups that fuel innovation. What it does entail is promoting entrepreneurship from all ages as an important source of wage employment creation, which can then chip away at our overall youth employment challenge.

Secondly, an issue that almost always comes up with any discussions of the private sector or the policymakers on employment is the mismatch between the available labor and the employment opportunities. Youth often complain about the lack of employment opportunities, while employers often complain that they are unable to find the right employees for vacant jobs. Large scale regularly updated labour market data is the key to better linking labour demand to supply.

Public agencies are an ideal mechanism to collect this data, which has actually been envisioned but not yet put into practice by the Prime Minister’s Employment Programme (PMEP). Once the data starts to flow in, big data analysis can allow for matching demand and supply at the granular level. What this means is that we can go deeper to say look at what specific competencies offered by job seekers are in higher demand among employers across Nepal. This in turn can help better identify targeted measures for particular segments, for example women and youth from disadvantaged groups that suffer additional barriers to formal employment.

The following regular projections on new employment opportunities and remuneration levels can then be used to help students and the academia better plan for entry into the labour market. It can be used to also make vocational training more demand oriented, which could in turn ease school to work transition and movement to formal employment for the 15-24 age group.

These suggested ideas ultimately require a sustained national commitment to establishing a technically competent public employment system. This can further be supported by the coherent integrated policy measures we have talked about above, especially if we are to incentivize our youth to move from their existing concentration on low skilled segments to the demand of medium and higher skilled segments.

The COVID-19 pandemic has given us an opportunity to rethink our perennial problem and make significant strides towards solving it. It would be a precious opportunity wasted if we consider it business as usual.

-Surath Giri & Saurabh Shah

The authors are associated with Global Shapers Kathmandu Hub, a part of Global Shapers Community initiated by the World Economic Forum.

(Originally published on Republica daily on July 15, 2021)

Articles / Economic Growth / Entrepreneurship / Unemployment

May 30, 2021

Policy Reforms for Startups in Nepal

May 30, 2021 Surath Giri

Photo courtesy: Helena Lopes (Pexels)

Startups have not only piqued the interest of the policymakers but have also captured the imagination of the Nepali youth. They are, however, fraught with risks and more often than not, fail. For example, in the USA, studies have found that over 90% of startups eventually fail. Around 21.5% of the startups fail within their first year. By the fifth year, half of all the startups are gone. The numbers are likely to be similar in Nepal.

In Nepal, in addition to the usual risks and uncertainties, startups also face severe regulatory hurdles that make their battle for survival even more precarious. Although creating a favorable environment for startups and entrepreneurship, in general, is a continuous and never-ending process, there are certain steps the government can take immediately to make life easier for novice entrepreneurs.

First, the policymakers need to change their perception that startups are only for well-educated and privileged people. This perception seems to have arisen partly because generally startups are associated with the information technology sector. If startups are to bring about a broader and more equitable economic change, then they must be accessible to the man in the street. What may seem like a very easy regulatory requirement for a person with access may actually be an insurmountable or a very costly obligation. For instance, spending around two weeks and tens of thousands of rupees for company registration may not mean much to a city resident belonging to the middle class or upper class. The same provision may be highly discouraging to an aspiring entrepreneur without the means and the access.

Therefore, our policymakers must work towards streamlining the regulatory obligations during the registration, operation, and closure of the startups. After having to overcome huge red tapes while registering their business or having to pay thousands of rupees to a lawyer, the entrepreneurs tend to think that they are done with the regulatory obligations and now can focus on their energy on their business. This has led to many startups to default on the various regulatory obligations they are supposed to perform after starting the operation of their venture. They end up paying tens of thousands or even hundreds of thousands of rupees as fines to the Office of the Company Registrar. One can hardly meet a first-time entrepreneur who has not paid such fines, sometimes even to the detriment of their venture. The initial days of the startups are so full of uncertainty and the entrepreneurs are so occupied with ensuring their venture's survival that it is unreasonable to expect them to be making rounds of government offices rather than focusing on their venture.

The hoops startups are made to jump through while registering their businesses are, however, plain sailing compared to the hoops they have to jump through while shutting down the venture if it fails. If the startups follow the legal provisions to the letter, they can expect to spend years and tens of thousands of rupees just to shut down their company. This not only drains the energy of the entrepreneur, keeping her stuck and preventing her from engaging in a better idea or venture, but it also discourages entrepreneurs from actually starting companies. A difficult exit also means that the assets remain stuck in unproductive sectors rather than swiftly being transferred to more efficient sectors.

The government should streamline the exit process for the startups, more so for the startups that did not commence their commercial operations or whose operations got terminated early. Only about one-third of the total registered companies are estimated to be in operation currently. The need for a more streamlined exit process is currently more than ever as lots of startups and even well-established ventures are shutting down due to the COVID-19 pandemic. The government was headed in the right direction with the Companies (First Amendment) Act, 2074 (2017) which had made a provision allowing companies that have been inoperative for years to shut down after paying a fee equivalent to 0.5 percent of their paid-up capital to the government. The provision was, however, made available only for two years since the commencement of the amended Act and made available to only companies that have not commenced business. The provision should be made available for an indefinite period and be extended to all companies.

For startups that succeed to survive and grow, the regulatory hurdle comes in the form of restrictions on foreign direct investment. The minimum floor of half a million dollars set by the government for foreign direct investment (FDI) has proved to be a huge obstacle for growth-oriented startups who are seeking not just the money but also the international networks and technology. Although Nepali startups are well-ready to take international investments and explore the international markets, the minimum floor of half a million dollars has meant that only a very few, if any, startups have been able to exploit the opportunity. All the investments below half a million dollars that could have helped the startups realize their national and international potential are simply denied to them. FDI is not just about money, it is also about the international networks and technologies. Because of this provision, the startups are having to rely on established Nepali investors with whom many of the startups are actually competing against which has the unintended consequence of enabling the same old faces, same old investors to control their would-be competitors and thereby making the economy the hostage of the same old business houses and investors. The often-cited reason for the minimum floor on FDI is to prevent the misuse of business visas by some foreigners who use FDI to get the visa and then engage in unwanted or outright illegal activities. This is, however, more a security issue rather than an issue of FDI. The government could simply remove the provision or come up with other monitoring and security measures to control such activities.

For innovative startups, the sword of "lack of policy/regulation framework" keeps hanging over their head. It is not just in Nepal where the policymakers and the regulations are trying to catch up with the rapid changes in the business models and technologies. However, Nepal is among the few places where such lack of policy framework is being used to kill the startups or at least prevent them from growing and keeping them in limbo. For instance, even after a huge controversy over ride-sharing services, all the government has done is a makeshift arrangement without actually providing the legal framework even after years. This has kept promising startups like Tootle/Pathao in constant uncertainty about their future. It is anyone's guess when the policy framework will be developed or when this issue will be the priority of our lawmakers. The government should develop a separate entity or legal framework governing such innovative startups before it is too late, and we lag too far behind the world which we already are to some extent.

-Surath Giri

Articles / Entrepreneurship / Policies

Oct 10, 2020

साम्यवाद किन असफल भयो ?

October 10, 2020 Surath Giri

(My Nepali translation of the article "Why Communism Failed" by Bettina Bien Greaves)

रुसी क्रान्तिको तीन वर्षपश्चात् एकजना अस्ट्रियाली अर्थशास्त्री लुडविग भन मिसेसले साम्यवाद असफल हुने तर्क गरेका थिए र त्यसको कारण पनि व्याख्या गरेका थिए । सन् १९२० मा मिसेसले लेखेका थिए, साम्यवाद वा समाजवाद सफल हुन सक्दैन किनभने यसले स्वतन्त्र बजारलाई उन्मूलन गर्दछ जसले गर्दा बजार मूल्य हुँदैन र अधिकारीहरूलाई उत्पादनसम्बन्धी योजना बनाउँदा मार्गदर्शन गर्ने केही पनि हुँदैन । यो विवादास्पद भविष्यवाणी गर्दा मिसेस खासै चिर-परिचित थिएनन् तर पछि गएर अर्थशास्त्रको अष्ट्रीयाली (स्वतन्त्र बजार) विचारधाराको प्रमुख पैरवीकर्ताको रूपमा उनी चर्चित भए । सन् १९७३मा उनको मृत्यु भएपछि उनको सिद्धान्तका नयाँ अनुयायीहरू थपिए जसमध्ये केही पूर्वी यूरोपबाट समेत थिए ।

सोभियत संघ निकै उच्च आशाका साथ प्रारम्भ गरिएको थियो । केन्द्रीय समितिले योजना बनाउने र सबैको लागि यथेष्ट भएको सुनिश्चित गर्ने सोच थियो । कालान्तरमा राज्य विलय भएर जाने भन्ने थियो । तर सोचेको जस्तो भएन । सोभियत राज्य छिट्टै नै निकै शक्तिशाली हुन गयो र संसारकै सबैभन्दा बढी दमनकारी मध्येको बन्न गयो । १९२० र ३० को दशकमा लाखौं रुसी जनता भोकमरीले बिते ।

Photo by: Steve Harvey/Unsplash

मिसेसले औल्याए जस्तै, समाजवादी उत्पादनमा प्रयोग हुने कच्चापदार्थ, श्रम, औजार, तथा यन्त्रहरू बजारभन्दा बाहिर हुन्छन् । तिनीहरू सरकारको स्वामित्वमा हुन्छन् र सरकारी योजनाकारद्वारा नियन्त्रित हुन्छन् । कसैले पनि तिनलाई किन्न वा बेच्न सक्दैन । तिनीहरूको बजार मूल्य उत्पन्न हुँदैन किनभने तिनीहरूको विनिमय हुँदैन ।

आधुनिक उत्पादन अत्यन्त समय लाग्ने र जटिल हुन्छ । उत्पादकहरूले के उत्पादन गर्ने भन्ने निर्णय गर्दा विकल्पहरूलाई पनि ध्यान दिनुपर्ने हुन्छ । र उनीहरूले कसरी उत्पादन गर्ने भन्ने निर्णय गर्दा उत्पादनका विभिन्न माध्यममाथि विचार पुर्याउनुपर्ने हुन्छ । कच्चापदार्थ, औजार, तथा यन्त्रहरूलाई सबैभन्दा अत्यावश्यक परियोजनाको लागि छुट्याउनुपर्ने हुन्छ र कम आवश्यक परियोजनामा खेर फाल्नु हुँदैन ।

उदाहरणको लागि, एउटा नयाँ रेलमार्गको नियोजनलाई हेरौं । के यो बनाइनुपर्छ ? यदि पर्छ भने कहाँ ? र कसरी ? के रेलमार्ग बनाउनु एउटा पुल बनाउनु, विद्युत उत्पादनको लागि बाँध बनाउनु, तेल खानीको विकास गर्नु वा थप जमिनमा खेती गर्नुभन्दा बढी महत्वपूर्ण छ ? कुनै पनि केन्द्रीय योजनाकारले यी असंख्य सम्भवनाहरूलाई मध्यनजर गर्न सक्दैन भलै उसले तथ्यांकशास्त्रीहरू कर्मचारी राखेको किन नहोस् ! श्रमको सट्टा केही हदसम्म यन्त्र प्रयोग गर्न सकिएला, फलामको सट्टामा काठ, अलमुनियम, वा नयाँ सिन्थेटिक सामग्री प्रयोग गर्न सकिएला । तर योजनाकारले कसरी निर्णय गर्छन् ?

यी निर्णयहरू गर्नका लागि योजनाकारलाई यसमा संलग्न असंख्य उत्पादन कारकहरूको सापेक्षिक मूल्य – विनिमय अनुपात वा बजार मूल्य - थाहा हुन जरूरी छ । तर जब यी कारकहरू सरकारी स्वामित्वमा हुन्छन्, तिनीहरूको कारोबार हुँदैन जसले गर्दा बजार मूल्य हुँदैन । बजार मूल्यविना, योजनाकारहरूलाई फलाम, अलुमिनियम, काठ, नयाँ सिन्थेटिक वा रेलमार्ग, तेल खानी, कृषियोग्य जमिन, ऊर्जा केन्द्र, पुल, वा आवासको सापेक्षिक मूल्य थाहा हुँदैन । उत्पादनका कारकहरूको बजार मूल्यविना योजनाकारहरूले उपभोक्ताको सबैभन्दा बढी महत्वपूर्ण आवश्यकताहरूलाई सम्बोधन गर्नका लागि कसरी उत्पादनलाई समन्वय र दिशानिर्देश गर्ने भन्नेमा अन्योलमा हुन्छन् ।

Photo by: Jonas Jovaisis/Unsplash

रुसी क्रान्ति भएको ७० वर्ष बितिसक्यो र दोस्रो विश्वयुद्ध सकिएको पनि ४५ वर्ष बितिसक्यो । तर पनि किन रुसी जनताले आजसम्म पर्याप्त आवास वा दैनिक प्रयोगका सामानहरू पाएका छैनन् त ? किन फसल काट्ने र ढुवानी गर्ने उपकरणको अभावमा कृषि उत्पादनहरू खेतमानै कुहिइरहेका छन् त ? कारखाना तथा तेल खानीहरूको किन राम्रो मर्मतसम्भार हुने सकेको छैन जसले गर्दा उत्पादनमा गिरावट आइरहेको छ ? किनभने कच्चापदार्थ, औजार, यन्त्र, कारखाना, तथा खेतहरू निजी स्वामित्वमा छैनन् । निजी मालिकहरूले गर्ने मोलमोलाईविना तिनीहरूको सापेक्षिक बजार मूल्य प्रतिविम्बित हुने मूल्यहरू विकास हुन पाउँदैनन् । र बजार मूल्यविना, उपभोक्तालाई आवश्यक पर्ने वस्तु तथा सेवा उपलब्ध गराउने गरि उत्पादनका क्रियाकलापहरू समन्वय गर्न असम्भव हुन्छ । यसले गर्दा साम्यवाद असफल हुन्छ ।

एउटा प्रतिस्पर्धात्मक अर्थतन्त्रमा, जहाँ उत्पादनका कारकहरू निजी स्वामित्वमा हुन्छन्, यी समस्याहरू दैनिक रूपमा समाधान हुन्छन् जब मालिकहरूले विभिन्न कारकहरूको मौद्रिक मूल्य गणना गर्दछन् र त्यसपछि इच्छाअनुसार किन्ने, बेच्ने, वा सट्टापट्टा गर्ने गर्दछन् । मिसेसले सन् १९२० मा लेखेको जस्तै, "हामीले उत्पादनका कारकहरूको निजी स्वामित्व र पैसाको प्रयोगबाट जति कदम टाढा चाल्छौं, हामी तर्कसंगत अर्थशास्त्रबाट त्यति नै टाढा पुगिराखेका हुन्छौं ।"

आज, साम्यवादीहरूले समेत मिसेस सही रहेको स्वीकार्छन् । सोभियत संघ, निजी सम्पति तथा मौद्रिक गणनाविनाको एउटा समाजवादी समाज, "आर्थिक गणनाको कम्पासविना सम्भावित तथा कल्पनीय आर्थिक सम्मिश्रणहरूको सागरमा हराउनेछ" मिसेसले भविष्यवाणी गरेका थिए सन् १९२० मा । र उनी सही ठहरिए !

Articles / Communism / Mises / Nepali / Translated

Jul 2, 2019

Entrepreneurship and Emotional Resilience in Nepal

July 02, 2019 Surath Giri

By Surath Giri & Saurabh Shah

Entrepreneurship and innovation have become the agenda of the world. The rapid development in information and communication technology has not only reduced the traditional barriers to starting a business and therefore, enabling even people with lack of huge capital and resources to venture out, but also helped create hubs and communities around the idea of entrepreneurship. According to the Global Entrepreneurship Monitor, an estimated 582 million people, around eight percent of the global population, are engaged in entrepreneurship. Nepal has not remained an exception. Entrepreneurship which until a decade ago was seen as a vocation of a selected few is now becoming a popular career choice and noble aspiration among youth and young graduates. Entrepreneurship is being seen as a solution to our economic underdevelopment and high rates of unemployment.

Untold stories

Entrepreneurship, however, is not just glitter and gold. When people hear the word ‘entrepreneur’, they usually think about confident risk takers who innovate their way out of problems to success. Elon Musk, Mark Zuckerberg and our very own Binod Chaudhary are some whose stories may inspire us. What the current narrative leaves out is the mental health cost that entrepreneurs pay. Like every other overhyped issue, the gap between the popular image and the stark reality in entrepreneurship is huge. Contrary to the popular portrayal of the entrepreneurial journey as a journey full of wealth, resources, fame, and extravagance, it has its fair share of struggles, sleepless nights, anxieties, ruins, and devastations. But these aspects are rarely highlighted in discussions of entrepreneurship. There is no shortage of setbacks an aspiring entrepreneur can run into. This is more so in case of Nepal where the entrepreneurial ecosystem is at its nascent stage, the negative perception toward entrepreneurs and entrepreneurship is yet to change, the political situation and the regulatory environment is precluding. Combination of this presents a unique set of challenges that could baffle and discourage even the most seasoned entrepreneurs. Most entrepreneurs in Nepal are struggling to survive and scaling up and building a world-class business is a far cry for many of them.

This had led to a surge in a mental health crisis in the entrepreneurial community. According to a study by the University of San Francisco researcher Michael A Freeman, approximately one half (49 percent) of entrepreneurs suffer from at least one form of mental health condition during their lifetimes. As per the study, entrepreneurs are twice as likely to suffer from depression, six times more likely to suffer from attention-deficit /hyperactivity disorder (ADHD), ten times more likely to suffer from bipolar disorder, and twice as likely to have suicidal thoughts. Although concrete studies are yet to be carried out, one could argue that the condition is as bad, if not worse, in the context of Nepal where challenges to success are far more than in the developed economies.

What we found

A few weeks back, when Global Shapers Kathmandu Hub, an initiative of the World Economic Forum, in partnership with Nepal Leadership Academy, a signature component of the Daayitwa Abhiyaan that aims to inculcate mindset and behavior change through the understanding and exercise of adaptive leadership, facilitated a meeting of early-stage entrepreneurs to discuss the wellbeing of entrepreneurs and the importance of emotional resilience, young Nepali entrepreneurs expressed a plethora of challenges affecting not only their businesses but also their mental wellbeing.

From making their parents understand the rationale behind their choosing entrepreneurship as a career to navigating the regulatory hurdles, most entrepreneurs seemed to have faced it all. Almost all of them expressed their challenges of keeping their business afloat and having their bills and employees’ salaries paid in an uncertain environment like that of Nepal. Many of the entrepreneurs also expressed that their entrepreneurial endeavor has consumed them and the status of their enterprises played a vital role in determining their state of mental wellbeing.

Many women entrepreneurs also faced additional challenges like having to take care of the family as well as their enterprises. Several of them said that their leadership and ability to succeed were doubted by the older generation, especially the men. The predicament of many entrepreneurs has been made more precarious by the fact that failure is highly stigmatized in our society. Nepali society abhors failure as much as it deifies success. Many Nepali entrepreneurs, therefore, feel compelled to succeed at any cost or risk being ostracized for being a failure. The legal and regulatory environment of Nepal also exacerbates this predicament as the entrepreneur who has failed is required to go their myriads of hoops to restart her entrepreneurial endeavors. Additionally, poor intellectual property protection, lack of enforcement of contracts, ineffective protection of domestic industries and unavailability of adequate human resources were the other issues that added to stress for the Nepali entrepreneurs.

The internal struggles faced by entrepreneurs and the mental crisis they go through has neither been acknowledged nor addressed in Nepal. There is a dire need for the entrepreneurs to be more open about the challenges they face and the internal struggles they go through. There is a need for Nepali entrepreneurs to think of their identities and roles beyond their enterprises. Most of all, there is a need to create a platform where entrepreneurs can help each other become emotionally resilient in their entrepreneurial journey. Only with a resilient state of mind can entrepreneurs succeed, especially in a challenging environment like that of Nepal.

The authors are associated with the Global Shapers Kathmandu Hub, an initiative of the World Economic Forum

(Originally published as "Scaling up entrepreneurship" in Republica national daily on 26 June 2019.)

Articles / Emotional Resilience / Entrepreneurship / Nepal

Oct 31, 2014

Out of Country but Out of Poverty

October 31, 2014 Surath Giri

I have recently started writing for The Global Entrepreneur which is Sweden based online magazine that focuses on issues related to globalization and entrepreneurship. As the first write-up for The Global Entrepreneur, I wrote about the migration for foreign employment trend in Nepal. Well, that is not exactly a novel topic in our case, is it? However, in the article, I have tried to explain how foreign employment is helping Nepal and why it is not that bad to be dependent on foreign employment and the remittances it brings. My argument is what else can a rational person do when the rulers and government have created an environment where a person cannot hope to flourish through hard work and enterprise.

Below is an excerpt from the article:

Image Source: http://www.nepalmountainnews.com

Every day more than 1,500 able-bodied Nepalese citizens leave their abodes, seeking better lives and better opportunities in foreign countries. Many of them end up in the Middle East as construction workers, building stadiums for the World Cup in Qatar, and infrastructure in other gulf countries.

If Qatar hosts the FIFA World Cup in 2022 successfully, Nepal will be among the nations it will have to be thankful to.

Some of the workers have to be content with working menial jobs in different industries. Uddhab Danuwar, 28, is one of them. A native of Panchkhal Village of Kavrepalanchok District, he first migrated to Kathmandu and worked for a pashmina manufacturer for a few years. Uddhab was employed in the coloring and dying process there, and earned Rs. 15,000 a month (USD 154). Last October, he flew to Saudi Arabia for an employment opportunity at a hotel where he currently earns 1,200 Saudi Riyals (USD 320) a month.

“With my meager income back home, I and my family could hardly survive. Here, not only have I been able to cover my expenses, but also save some money to send back to my family,” Danuwar tells The Global Entrepreneur.

“The work is very tough here. I still find it difficult to adjust with the culture and climate, and I miss my family a lot, but I think it’s worth the struggle.”

Paradoxically, their sacrifices didn’t come in the form of sweat and labor alone; in the last year alone, 862 Nepalese lost their lives while being engaged in employment abroad, many of who were building the skyscrapers and stadiums.

As immigrant workers, they are not treated properly as domestic workers would have been. The horrible working environments these migrant workers have had to face in the host countries have made headlines in international media. Some reports have gone to the extent of alleging that foreign workers in Qatar are being treated like cattle.

Yet, the line of emigrant workers waiting for their flights at Nepal’s only international airport keeps getting longer and longer. Care to wonder why?

Read the full article in The Global Entrepreneur by clicking here.

Articles / Economic Growth / Economic Reforms / Foreign Employment / Remittance

Sep 14, 2014

Promoting Entrepreneurship in Nepal

September 14, 2014 Surath Giri

Click on the image to view full size!

Lately entrepreneurship has become a buzzword in Nepal. Entrepreneurship development seems to have caught the attention of the non-profit sector as well as the private sector, even the government to some extent for better or worse. Non Government Organizations (NGOs) and International Non-government Organizations (INGOs) are trying to incorporate entrepreneurship component in their areas of work, private sector has started experimenting venture capitalism and the government has come up with plans to dole out money in the name of entrepreneurship. Increased interest in entrepreneurship among the various actors in the society is appreciable. Entrepreneurship is the ladder delivering economic growth and development in any society regardless of its current economic status. Hence, recognition of entrepreneurship as an important issue for the society can be considered a step in the right direction. Better late than never.

However, entrepreneurship as a skill set or as a resource of the society is different than any other resources in the society. Treating entrepreneurship development like any other developmental issues is likely to corrupt it and lose its value for the developmental sector, if not for the society. As Dr. Ernesto Sirolli, the world renowned entrepreneurship development consultant pointed out during his visit in Kathmandu last week, thousands of initiations by international donors in developing societies like Africa have done more damage than good despite their noble intentions. The major mistake made by the donors is to assume that they know better than the locals and patronize them. The follies made by international donors in developing societies of which Sirolli was once a part has given him a simple but difficult lesson to make economic development initiations more effective i.e. shut up and listen.

Understanding the real problems

Unlike other issues, entrepreneurial journey is about innovating and taking risks to produce something of value to the society which in turn brings revenue to the enterprise and uplifts the living standard of the people involved. Entrepreneurship is not for everyone and even for those who aspire to be entrepreneurs, success is not guaranteed. Hence, entrepreneurship promotion is a job that requires detailed observation and continued support during the various stages of the entrepreneurial journey.

One time intervention and misguided help may in fact do more harm than good in promoting entrepreneurship. One classic example is the case of doling out money with the intention of promoting entrepreneurship like the Government of Nepal did with Youth Self Employment Fund. Contrary to the popular belief, having easy access to finance may not promote entrepreneurship. In fact, easy money could easily kill the entrepreneurial spirit and creativity making the person dependent on donations. Despite spending huge amount of money, Youth Self Employment Fund barely had any impact in developing entrepreneurship in Nepal as a large volume of low interest loan was lent to speculative business instead of new ventures that create employment opportunities. Similarly, the notion in the development sector that entrepreneurship is equal to sum of accounting, technical skill and a team is also misguided. Entrepreneurship is always more than the sum of these various aspects. Besides uncertainty is always a constant factor in any entrepreneurial venture.

Hence, promoting entrepreneurs requires understanding the various aspects of an entrepreneurial journey and identifying at which an entrepreneur is and providing help accordingly. It is essential to shut up and listen to the entrepreneurs and understand the ground reality that an entrepreneur is operating in. As Sirolli points out in his popular TED speech, small scale entrepreneurs are generally besieged by lack of expertise required to delegate the major aspects of businesses and grow the business into another level. Entrepreneurs find it difficult to get support in these areas regardless of where they live and operate. The civil society organizations as well as the private organizations aspiring to develop entrepreneurship in Nepal should take heed of these lessons if they want to be effective in their efforts.

Ensure Safety of Life and Property

Similarly, in the context of Nepal, various political and social problems pose a serious threat to the existence and growth of any enterprise. The security of life and property is so weak that people still hesitate to expose their success to the society for the fear of being extorted or attacked. It is a shameful thing that it is usually the political parties themselves who are involved in extortion and disruption of businesses. Frequent bandas and strikes pose another major problems for small scale entrepreneurs who face severe losses if the operation of their enterprises is disrupted even for a few days.

Lack of infrastructure and government’s apathy towards infrastructure development has resulted in increased cost of doing business for any enterprise regardless of its size. The increased cost of doing business usually affects the small and medium scale enterprises more than the large scale enterprises. Lack of infrastructure and rule of law also discourages the aspiring entrepreneurs from embarking into the entrepreneurial journey.

The government bears the ultimate responsibility in making the provision for the infrastructure development as well as maintenance of law and order. If the Government of Nepal wants to help thousands of entrepreneurial individuals across the country rather than just a few large scale enterprises, it should focus on developing infrastructures that ease up the cost of doing business and ensure safety of lives and property of its citizens so that more and more people are encouraged to dream big and make it big in the entrepreneurial journey.

(Published in The Himalayan Times- Perspectives of 14th September, 2014)

Articles / Economic Growth / Entrepreneurship / Property Rights / Rule of Law

Mar 3, 2014

The Wealth Gap : Should We Be Concerned?

March 03, 2014 Surath Giri

Relationship between Economic Freedom and Inequality

Last month international development organization Oxfam released a startling figure about the wealth gap between richest people in the world and the poorest half. According to the report, 85 of the wealthiest people in the world own as much wealth as the poorest half of the world. In other words, less than a hundred people have control over half of the world’s current wealth. The revelation has appalled many people and has refueled the tirade of criticisms being raised against capitalism and free enterprise. Nepalese media and intellectuals too have picked up the issue and resumed their criticisms against market. Income inequality is an issue Nepal should be concerned with too. It ranked 157th in the Human Development Index 2013 and the Gini Coefficient is 32.8 suggesting a significant income inequality. In this context, it is imperative to dwell on whether such income inequality is desirable for a society and what can be done about it.

Not just economic implications

High levels of income inequality and concentration of wealth among a few people is certainly not desirable for a society. It can dampen the benefits of democracy and skew national policies making them favorable to the political and economic elites only which in turn will have negative effects on economic growth and development process and poverty alleviation measures. Income inequality has been found to correlate with violence and higher crime rates in a society too.

However, it is essential to dwell on whether income inequality is a problem in itself or is it a symptom of underlying structural problems in the economy. Hence, the question is not just why 85 people own half of the world’s wealth but it is also why the poorest half of the world is producing and creating so little wealth when there seem to be immense possibilities for creating a wealthier world.

Lack Economic Freedom: The main cause

It is interesting to note that majority of the poor in the world live in societies that are miles away from free market system and are supposedly pursuing policies aiming equality and wealth redistribution. India alone hosts one-third of the world’s poor and until 1990s, its major policy thrust had been wealth redistribution and state control of the economy. China which is another major home for world’s poor, started down the path of market economy only after disastrous 3 decades of anti-market and supposedly pro-poor policies. By moving towards market economy and promoting growth rather than redistribution, India has reduced its poverty rates from 51% in 1991 to 22% in 2013. China has achieved an ever more impressive progress by reducing poverty rates from 84% in 1981 to around 12% in 2013. What critics of market system have left out is the fact that the wealth distribution around the world was even more skewed before 1990s when many countries around the world started moving towards market economies.

Empirical studies conducted in the context of developing countries have also found that economic freedom and income inequality have inverse relation suggesting that higher degree of economic freedom would result in lesser income inequality. For instance, a study titled “Economic Freedom and the trade-off between inequality and growth” conducted by economist Gerald W. Scully has found that economies with higher economic freedom not only enjoy higher growth rates than less free economies but they are also more equal. Economic freedom reduces inequality by increasing the share of market income going to the poor and lowering the share going to the rich. Economic Freedom of the World Index, a cross-country study on economic freedom conducted by Fraser Institute of Canada also shows that freerer societies are comparatively more equal than societies with lesser economic freedom.

Articles / Capitalism / Crony Capitalism / economic freedom / Free Markets

Nov 11, 2013

Election Promises!

November 11, 2013 Surath Giri

The second round of the Constitution Assembly polls are at our doorstep. So are politicians representing different political parties. Political parties have come up with their election manifestos which, if reality were to be ignored, are very impressive. Almost every political party has gone out of their way to make beautiful commitments, especially in the economic sphere.

Unrealistic Promises

For instance, U-CPN Maoists party has promised us a 7.9 per cent economic growth rate for the next five years which is supposed to increase to 11 per cent in the next decade whereas the Rastriya Prajatantra Party has promised us double digit economic growth within a decade. Nepali Congress promises us a double digit growth in four to eight years. Similarly, CPN-UML promises to create 300 thousand jobs annually and bring two million international tourists to Nepal in the next five years among other things.

Although fun to read, these manifestos raise some very important questions:

The first and foremost question is how. How are they going to achieve those goals? How is Nepal going to have a more than seven per cent economic growth rate, let alone double digit growth? If we look at our current growth rate, it hovers around four per cent which is hardly indicative of our possibility of leaping to a double digit growth in the near future. Economic growth does not come out of thin air. It requires economic policies friendly to growth, an environment encouraging entrepreneurship and a commitment from the government to support the growth process or at least not act as a hindrance to economic growth.

In this regard, the current picture of Nepal is miles away from satisfactory. In the recently released Doing Business 2014: Understanding regulations for Small and Medium-Size Enterprises report, Nepal ranks 105th out of 180 countries with regards to the ease of doing business. Although improving, the pace of reforms are too slow to have any significant effect. Similarly, in the latest Economic Freedom of the World report which measures the degree of economic freedom enjoyed by citizens of a country, Nepal ranks 125th out of 152 countries with a score of 6.19 out of 10. Out of the 10 components of the index, Nepal’s performance is especially dismal in regard to legal structures and security of property rights. Security of property rights and economic freedom are essential for growth of any society. Empirical evidences also show that promotion of entrepreneurship and the private sector is a prerequisite for economic growth and development.

Unfortunately, none of the political parties seem to have anything to say on these issues.

Unanswerable Questions

Since the upcoming elections is Constitution Assembly polls not just regular elections, it is important that political parties discuss macro issues like economic model, role of government and private sector in the economy et cetera rather than micro issues like how many tourists we will bring or what roads will we build. What kind of development path shall we follow is more important than what roads we will build. Rather than discussing what amount of Megawatts of electricity will we produce, we should be discussing about macro issues like will foreign direct investment be a major instrument of hydro-power development? If we are creating 300 thousand jobs, how will that happen? Will the government create those jobs for the sake of jobs or will the government be committed to creating a business-friendly environment to create more jobs? Will the government be committed to building the necessary infrastructure and business environment for preventing industries from shutting down? Will we embrace an open economic model or try a closed economic model? Will we do it through economic reforms and by attracting foreign direct investment like China and India or will we shun foreign investment like before?

Not answering these questions means repeating past mistakes. The Nepali people have heard promises of rapid growth, transformation of Nepal into Singapore and Switzerland number of times. And they have been disappointed several times and this time will not be an exception too. In the last CA elections too, we had heard numerous lofty promises such as 10,000 Megawatt of hydro-electricity within a decade. The ensuing disappointment is well-known to everyone. The trend of making arbitrary promises in election manifestos also shows that political parties are not taking economic issues seriously.

Conclusion

For every revolution and political change in the past, political agendas have taken the front seat. An economic agenda has never been a priority and no wonder countless revolutions and political changes have failed to deliver economic growth and prosperity. It is time that political parties start taking about economic issues and agenda more seriously. The citizens too have the responsibility to ask and analyse how political parties plan to achieve what they promise. Without answers to the how question, the economic aspects of the manifestos are nothing more than empty promises.

-Surath Giri

(Published in The Himalayan Times - Perspectives of November 10, 2013)

Articles / Economic Growth / Election Manifestos / Nepalese Economy

Sep 10, 2013

Give youth a chance

September 10, 2013 Surath Giri

-Surath Giri & Kanchan Kharel

The current state of Nepali politics has frustrated the majority, if not all Nepali youth. Youth response to current political developments has ranged from complacent indifference to active hatred. As a result, an important segment of the population does not find any stake in the ongoing political process. Will my vote really make a difference? Or am I better off not wasting my time by indulging in politics? These are pertinent questions beguiling the youth today. This is unfortunate because in addition to their vivacity and passion for progress, youth make up around 42 percent of the total population of Nepal, which makes them an indispensible component of the political process. Hence, it is imperative that their involvement in the process be actively sought.

Since the last Constituent Assembly (CA) election, political parties seem to have at least acknowledged this fact. However, political elites still see youth participation merely as a way to reinforce the legitimacy of their rule rather than a way to involve them as decision makers. Even during the last CA discourse, voices of young parliamentarians was as good as non-existent and key decisions largely revolved around older and more prominent leaders of the parties, although increased youth participation in the Parliament was touted as a harbinger of change. Besides, there is an emerging misconception among state actors that confirming the ‘participation’ of frustrated voters in the election alone would safeguard democracy and legitimise their rule. In the long run, such a fallacy is likely to end up in another revolution and more political upheaval in the country.

Articles / Nepali Politics / Youth

Jul 1, 2013

Penchant for legislation

July 01, 2013 Surath Giri

Nepal’s list of socio-economic problems is never ending. All three actors — government, civil society and the private sector — have a crucial role to play in solving these problems. How do they intend to solve these problems? The usual answer is through vision and planning. In reality, however, Nepal’s favourite way of solving or at least responding to such problems is through making new legislation.

Numerous examples can be found in recent legislative activity. Educational institutions are spending ‘excessive’ amounts of money on advertising? Put a ceiling on educational institutions´ advertisement spending. Nepal is not receiving foreign direct investment in so-called priority sectors? Enforce a price floor on foreign direct investment in all sectors. Nepali workers are not making enough money? Raise the minimum wage level. There is a high unemployment rate? Add ‘right to employment’ to the Constitution. People smoke in public places? Ban public smoking. Online news portals are proliferating and some are publishing misleading news? Regulate them. Some private educational institutions are charging high fees? Put a price ceiling on the fees. The price of commodities get hiked during festive seasons? Price ceiling, of course. And the list continues.

In Nepal’s context, legislation is dangerous not only because the government uses it as an easily digestible yet not well researched response to troublesome public issues, but also because legislation has become an ally for crooked private sector entrepreneurs and organisations. Many, if not all of Nepal’s business houses rely on favorable legislation to survive and grow. The proposal to put a USD 200,000 price floor on foreign direct investment is one such example. Such a provision will help only large business houses and large scale entrepreneurs who can swallow that sort of money. Such a price floor will eliminate smaller competitors in growing businesses from the market, perpetuating big business dominance. Similarly, by closing registration to new private schools in the name of preventing unhealthy competition (unhealthy for whom, by the way?), which was tacitly endorsed by the existing private educational institutions and their associations, is a barrier to entry for new players.

The negative results are numerous. If new players provide better education, other educational institutions in the market will have to increase their quality of education as well, therefore increasing the overall quality of education in Nepal. Without allowing new players to enter, innovation cannot occur, and the market will not change. Additionally, with barriers to entry, existing educational institutions can not only stagnate, yet they can charge a premium price. A final example is the case of ‘excessive’ price hikes during festive seasons, where the government passed maximum retail price legislation, accepting the easy way out instead of solving the core issues that underlie such problems, such as infrastructure gaps and supply side constraints.

Our penchant for legislation is not only at odds with the so-called commitment to a free-market economy but it also frequently exacerbates the problems we are already facing. Without any doubt, price hikes during festive seasons will continue in the coming years, the price of private education will surge higher, and Nepal’s meagre performance in attracting foreign investment will continue to be a pillar for cronyism and market degradation. It will only be few months before labour unions demand another rise in the minimum wage. It is leading to a state where government presence is everywhere but effective nowhere. The exact opposite is required, a limited government that is effective and efficient.

It is time that our policymakers as well as public intellectuals decide whether legislating is the really the way to solve problems in a society, especially the economic problems. These officials need to ask if the legislation has actually been accomplishing anything, or if it is just a red herring distracting from the government’s incompetency. If legislation can really defy the universal principles of economics, why stop at current legislation? If minimum wage laws can ensure economic prosperity of the workers without the need for an increase in their productivity why not set the wage levels as high as Rs. 30,000 a month? If through legislation itself we can ensure more and better foreign direct investment, rather than by creating an investor friendly environment, why not raise the ceiling to half a million dollars? Why not outlaw unemployment so that we can have universal employment? If fixing a maximum retail price solves the problem of excessive price hikes during festival season, why not fix prices for every product indefinitely? Why not ban educational institutions from advertising at all so that no money is wasted on ‘frivolous’ activities like advertising and ‘unhealthy’ competition is eliminated.

Half-baked interventions in the economy neither ensure a good-functioning market nor ensure government control over the economy. Instead, citizens of Nepal will end up with what we have now, a market economy in theory with government present everywhere but effective nowhere. Such an approach will undermine the credibility of government itself. It will lead to a situation where government has numerous laws but no one takes them seriously as the chances of them being implemented are slim. And as suggested by Nobel Laureate Economist, Douglass North, legislating to counter problems ignores and undermines the role of social norms and values upheld by the society. As evidence of prosperity in developing nations throughout the world suggests, the government is better off ensuring the freedom of the markets.

(Published in The Himalayan Times-Perspectives of 30 June, 2013)

Articles / Crony Capitalism / Government / Nepal / Regulations

May 6, 2013

Why blame private schools?

May 06, 2013 Surath Giri

Like an annual customary event, public grievances against private educational institutions in Nepal are currently making headlines once again as the new academic session has begun. Private schools have been accused of charging exorbitant fees, selling stationery and uniforms within the school premises to make profit and not providing adequate infrastructure. This has led to the public asking for more government regulations and some political parties have even demanded that new registration of private schools be ceased. The controversy is even being wielded as a weapon to denounce the liberalisation of the education sector itself and advocate for outright nationalisation of education. Amidst the heated debate, a few things are being ignored in the discourse that might have grave implications for the educational scenario of Nepal.

Value variables

The advent of democracy in 1990 was a crucial moment in the history of education in Nepal. Primary education was to be provided freely by the government while move towards open economy helped proliferation of private educational institutions. As a result, the education sector in Nepal has come a long way since then. According to the Ministry of Education and Sports, there were 33,160 primary, lower secondary and secondary schools, 3,067 higher secondary schools and five universities in Nepal as of 2011. Some 15 per cent of the institutions are run by the private sector. However, more than a quarter of the total students of Nepal attend these institutions.

Despite the availability of free public schools and the accusations of exorbitant fees charged by private educational institutions, more and more people are flocking to these institutions to educate their children. The phenomenon provides an inkling of the dire state of public education in Nepal. Moreover, it also suggests that the general public values the importance of education more than policymakers and education officials who supposedly are in charge of educating Nepal think they do.

This is also highlighted by the fact that education is among the top four expenditure areas for households receiving remittance. On an average, 3.5 per cent of amount received from remittance is being spent on education. From this scenario, it can be surmised that parents value education enough to spend a considerable amount of their earning for education.

Regulation restraints

When there is a free alternative available and parents are free to choose where to send their children, it is hard to find reasonable criteria for the government to dictate price controls for these institutions. Parents being the

direct stakeholders have a higher incentive and at the same time a responsibility to find out if schools are milking them exorbitantly.

Similarly, the fee structure of a handful of elite private educational institutions neither reflect nor represent the overall private educational scenario of Nepal. The wide spectrum of private schools ranging from low-budget schools such as Samata Sikshaya Niketan to high-end elite private schools like Shuvatara is lost during the debate regarding private educational scenario in Nepal. The call for more regulation fails to acknowledge the fact that same set of regulations cannot accommodate wide spectrum of private schools. Regulation through price control might not hurt low-budget schools but will affect high-end schools, forcing them to compromise on quality. Alternatively, regulation through standard setting might not hurt high-end private schools but will force low-budget schools to either operate illegally or raise their costs.

In fact, more regulations might end up making private education more inaccessible to the poorer segment of the population. The proposal to prevent registration of new private schools is one of them. Basic law of demand and supply dictates that whenever the supply of a good or service is restricted, prices escalate.The proposal which was tacitly endorsed by the existent associations of private schools will not only restrict the supply of new private schools but also allow existing schools to charge premium prices owing to the increasing demand for education. It will also give leeway for crony capitalism and syndication of private schools as the number of players in the market gets limited, making quality education further inaccessible for the poor.

Quality quotient

In this scenario, if our policymakers and concerned stakeholders really want to make quality education accessible to a higher number of people and drive down prices, they should promote more competition in the sector by making it accessible for more entrepreneurs to invest in the sector. The presence of more competitive and cheaper schools will be more of a check to the private schools charging premium prices than the government agencies will ever be.

Similarly, actions of political parties, media and social activists envisioning equality in education would be more effective if they focused more on improving the quality of public schools rather than criticizing the private sector. If the public sector could provide better education for their students at a lower cost, there is no reason to assume that parents will continue flocking to private educational institutions with their hard-earned money.

--Surath Giri

(Published in The Himalayan Times- Perspectives of 5th May, 2013)

Articles / Nepalese Education System / Private Schools / Regulations

Feb 10, 2013

Dalit Capitalism for Nepal

February 10, 2013 Surath Giri

Despite the almost universal acceptance of free markets as the most superior system for economic growth and prosperity around the world, the concept does not resonate well with policymakers and public intellectuals of Nepal.In this context, free market as a means of social transformation may sound like a paradox but that is precisely what it is. An example from Nepal can shed light on this phenomenon.

Going by the law

Caste-based discrimination is arguably the worst social evil facing Nepali society today. Although it was officially abolished in 1963, the problem persists and is prevalent across the nation, especially in remote parts. Oppressed castes have been historically denied access to decision-making as well as power sharing. The untouchable castes are estimated to be around 15 per cent of the total population and almost half of them are below the poverty line, which is much higher when compared to the national poverty rate of 25.16 per cent. The government has passed the Caste-based Discrimination and Unaccountability Act 2011 to prohibit caste-based discrimination in both public and private spheres but the effectiveness of the law to prevent such practices is yet to be seen.

As long as these people languish in poverty and are economically dependent on people of 'higher castes', people of lower castes will have a hard time trusting legal remedies as a recourse for their ailments. Letting the socially oppressed economically empower themselves by encouraging them to participate in the market process, however, can be an effective way of discouraging discrimination. As Nobel Laureate Economist, Milton Friedman once said, “The great virtue of a free market system is that it does not care what colour people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.” Thus free market is an antidote to discrimination based on caste or other ascribed values rather than merit.

Changing scenario

In fact, this transformation is in progress in many rural parts of the country. Foreign employment, which is estimated to be engaging more than three million Nepali workers already, has been a popular source of economic empowerment for people of oppressed castes who find little or no employment opportunities outside their traditional jobs in the current social system of Nepal. “As dalits have started to go abroad, they have started getting richer and more confident about their rights. And in many cases, people of higher castes have started to become financially dependent on them for loans and borrowings. In such a scenario, it is undesirable and difficult to discriminate against dalits,” a school teacher from Hodaa village of Kalikot district told this scribe during a visit to the region.

Such economic empowerment can be a more sustainable solution to the problem of caste-based discrimination than enactment of new laws or use of force to change people’s behaviours. Similarly, development of entrepreneurship among dalits within the country is also contributing significantly in their empowerment. A study titled Social Inclusion of Dalits through Micro-enterprise included in Micro-enterprises Development for Poverty Alleviation report by Ministry of Industry notes that 83 per cent of dalits engaged in entrepreneurial activities in Nawalparasi district have started getting respect from non-dalits, whereas 28 per cent of them have started approaching police, courts, local groups and government offices as compared to just nine per cent in the past.

Practical and effective

The idea that free markets are beneficial to oppressed castes has been corroborated by India’s experience since the economic reforms of 1991. Chandrabhan Prasad, a well known anthropologist and dalit activist in India, has termed the transformation of dalit people of India after the economic reform as ‘dalit capitalism’. In his study titled Market and Manu: Economic Reforms and its Impact on Caste in India, he argues, “The market has the potential for neutralizing caste in India’s public life and finally leading India into a caste-free zone. Unlike the State, the market operates from within caste society, as an internal force, and hence has the inherent capacity to rip apart the very fabric of the caste order.” And much to the credit of his hypothesis, Dalit Indian Chamber of Commerce and Industry which was formed in 2005, now boasts of more than 1,000 dalit entrepreneurs as members, majority of whom were able to embark on their entrepreneurial journey after the economic reforms of the early 1990s.

Hence, liberalization and market-oriented economic reforms could be a more practical and effective solution to one of our worst social evils. Unlike the picture painted by politicians and public intellectuals about markets, as demonstrated by the case of India, free market whose main value system is merit rather than caste, can be a perfect antidote to the unfair value system created by the caste system.

--Surath Giri

(Published in the The Himalayan Times- Perspectives of 10th February, 2013.)

Articles / Caste Based Discrimination / Economic Reforms / Free Markets / India / Nepal / Social Issues

Dec 17, 2012

Growing Enterprises in Nepal

December 17, 2012 Surath Giri

Since the fall of Soviet Union and dire performance of centrally planned economies, the world in general is moving towards open and market economies. The trend is highlighted by the increasing economic freedom around the world. According to the Economic Freedom of the World Report, the average economic freedom score of the world in 1980 was 5.30 which has ever since increased steadily to 6.83 in 2010. One of the important aspects of a market based economy is the crucial role entrepreneurs and private sector play in the economic growth and development. Entrepreneurship is slowly getting the recognition it deserves for its role in among other things, poverty alleviation. United Nations' Commission on the Private Sector and Development has acknowledged that “the private sector can alleviate poverty by contributing to economic growth, job creation and poor people’s incomes. It can also empower poor people by providing a broad range of products and services at lower prices.”

According to Global Entrepreneurship Monitor which makes an annual assessment of the entrepreneurial activity worldwide, India and China alone are home to more than 200 million small firm owners and entrepreneurs currently. India is said to be already enjoying the third wave of entrepreneurship that has transcended the national boundaries and vying for international supremacy. Prior to the reforms of early 1990s, in their first wave of entrepreneurship, Indian entrepreneurs were busy fighting the bottlenecks, regulations and limits as well as other non-political hurdles and had limited impact in the economy.

Unfortunately, Nepal till date seems to be caught up in that particular phase. Entrepreneurship as a means of poverty alleviation and economic growth as of now does not resonate well with the government, intelligentsia and the development sector of Nepal. So it should not come as a surprise that major employment programs of the government are focused on providing employment or equipping people with 'marketable' skills which is supposed to them a better employee but not necessarily a job creator.

However, with a comparatively lesser amount of resources more jobs could be created through fostering entrepreneurship in Nepal. An estimated 400,000 people enter the job market in Nepal annually and very few of them have the idea of starting their own venture on their mind. As observed around the world and in case of Nepal too, entrepreneurship development requires more than just a program and more than just one of the actors of the society. To create a sustainable environment for fostering entrepreneurship and reaching out to a wide range of the populace, there is a necessity to create an entrepreneurial ecosystem which can support aspiring entrepreneurs in every step of their entrepreneurial journey. Addressing just one aspect of the entrepreneurial ecosystem is likely to end up in failure. E.g. Even if the government's Youth Self-Employment Fund had been implemented as intended, it would have ended up in failure because it seemingly addressed only one aspect of entrepreneurship- access to capital.

So what constitutes an entrepreneurial ecosystem and how can it be built? The first step to building an entrepreneurial ecosystem would be finding ways to tackle the stigma held by our society towards entrepreneurship and profit-making. Society's attitude towards business and profit-making as immoral and tantamount to cheating and robbing people can be a self-fulfilling prophecy and encourage the already pervasive crony capitalism in Nepal that has been benefiting a few at the cost of many. Values of entrepreneurship and innovation can be instilled in the students by introducing entrepreneurship in the curriculum from school level. Lack of any encounter with the idea of entrepreneurship during school curriculum has resulted in students seeking good employment as career goals rather than starting a venture on their own. Although a few educational institutions like King's College have started entrepreneurship in the syllabus of their tertiary level education, and few organizations like Samriddhi, The Prosperity Foundation have been running courses on entrepreneurship that focuses on introducing the concept of entrepreneurship to university level students, there is a need to introduce the concept in younger levels too.

Next, in the entrepreneurial ecosystem is the access to capital and mentorship required for aspiring entrepreneurs. Venues for aspiring entrepreneurs to pitch their ideas and acquire necessary funding, to network with other entrepreneurs working in similar fields and practical suggestions and guidelines from a more experienced entrepreneur or leader have to be created to turn the ideas of entrepreneurship into reality. Private sector, especially non-governmental organizations and even self-help styled groups that aspiring entrepreneurs can form on their own can achieve this step in the ecosystem. The rising popularity of interaction and story sharing programs like Entrepreneur for Nepal's Last Thursdays with an Entrepreneur shows that there is huge demand for such initiatives. Similarly, Biruwa Ventures, an attempt by 3 Nepali students to adopt the model of venture capitalism and provide support mechanism for aspiring entrepreneurs is getting wide appreciation. The concept of mentorship of young aspiring entrepreneurs by well-established entrepreneurs is slowly getting popular. Entrepreneurs for Nepal, a loosely connected group of entrepreneurs of Nepal has been providing avenues for such mentorship through its sounding board and boot camp programs. It is high time that programs like these be replicated across the nation, especially other cities and major economic areas. Development organizations working in economic development and livelihood issues can play a vital role in getting these programs across the country and have a larger impact.

Entrepreneurial journey does not stop here. Expansion and sustainability of the business venture that comes next is a crucial step for ensuring that businesses have a significant impact in the society through creation of long term job opportunities and capital formation. Commercial banks play a major role in this step. Financial institutions as of now are not eager to invest in areas outside of their traditional domains and businesses outside the well-established business houses although a few banks like Mega Bank have come up with loan mechanisms for aspiring small scale ventures.

Government and civil society should also start focusing on recognizing entrepreneurs for their contribution in the economy and nation's prosperity. The recently concluded Global Entrepreneurship Week which had 35000 activities being organized around the world bringing message of entrepreneurship across to more than 7 million participants in 130 countries including Nepal is one such platform. Similarly, increasing recognition of social entrepreneurs and their contribution in solving society's problems can be harnessed by complimenting such efforts with efforts from government as well.

Last but not the least important aspect of entrepreneurship development is the policy regime of a country. Regulatory hurdles, corruption, political intervention in the economy has made Nepal one of the toughest countries to do business. The poor performance of Nepal is the Doing Business Report is a well-known fact for our private sector as well as policymakers. Being the domain of the government, policy reforms and business environment enhancements have to be carried out by the government. The government's priority should be on how to create a nation of entrepreneurs rather than a nation of job-seekers or providing employment to everyone.

-Surath Giri

(Published in The Himalayan Times of 17 December, 2012)

Articles / economic freedom / Entrepreneurship

Nov 18, 2012

Destination Nepal

November 18, 2012 Surath Giri

Blessed with mesmerising natural beauty and one of the rarest entourage of natural and cultural heritages in the world, Nepal could easily attract millions of tourists — at least in theory. But the highest number of tourists we have received in a year so far was some 736,215 in 2011, which was short of the initial target of a million tourists by more than one-fourth. Similarly, the tourism sector’s contribution to the gross domestic product (GDP) remains less than four per cent.

Nepal’s tourism potential can be estimated by the fact that the total number of tourists that arrived in Nepal in 2011 was just about one per cent of the total outbound Chinese tourists and about six per cent of the total outbound Indian tourists in the same year. With rapid economic growth and a growing middle class, the numbers of outbound tourists from both nations are expected to increase significantly. Hence, even if a significant portion of either Chinese or Indian tourists could be attracted to Nepal, tourism could play a major role in the economic growth of the country. But this is easier said than done.

Problems galore

For a tourist intending to visit Nepal, problems start at home. Travel advisory warnings issued by foreign governments regarding Nepal during the civil war period are still in place, forcing tourists to reconsider their travel destination. Meanwhile, due to the lack of effective marketing, especially online marketing, Nepal is yet to receive the international recognition it deserves with regards to tourism.

Then comes the somewhat hard to find and unreasonably expensive air travel to Nepal. After major international airlines like Lufthansa, Aeroflot and Singapore Airlines cancelled operations in Nepal, there is no direct flight connectivity between Nepal and Europe as well as Northern America. Expensive ground-handling charges, monopolised by Nepal Airlines Corporation (NAC), has been constantly cited as a prominent problem by other airlines. Similarly, the deplorable performance of NAC has resulted in sign-ificant portion of the money spent by tourists to Nepal going to foreign airlines.

Similarly, the poor condition and performance of the country’s only international airport gives a very shoddy first impression. The continuous labour strikes, bandhs and other disruptions, along with the poor state of tourism infrastructures accentuate the negative image, whereas lack of innovation in the tourism sector have limited the choice of tourists to the decades old and already saturated destinations and activities.

Domestic tourism, which has grown rapidly in recent years, suffers from negligence from both the government and private sector. Inconsistency of policies is one of the factors affecting domestic tourism, for example, though domestic tourists are recognized as tourists, they are not allowed to use tourist vehicles for commuting.

What can be done

First and foremost, a makeover of the NAC is necessary. The public-private partnership (PPP) model could be followed for this, but it will also be necessary to look into other options like full privatisation in case the PPP model does not work properly. Also, incentives to international airlines to operate in Nepal must be improved. To this end, more open air service agreements should be implemented.

Since internet is becoming the primary source of information for citizens around the world, it is imperative that Nepal also focuses its marketing efforts online rather than just the traditional mediums. As China and India are developing as major sources of tourist inflow for Nepal, marketing campaigns should focus on these two countries. But while India and China could be the major source of volume, European and North American nations can be the source of high-value tourists.

Attracting these new sources of tourists requires innovation in the packages Nepal will have to offer. Developing religious tourism could be an effective means of catering to the Indian and Chinese tourists. Hence, the upcoming priorities of the concerned authorities,especially the government and Nepal Tourism Board, should be to develop major religious destinations of the country like Lumbini, Pashupatinath and equip them with appropriate tourism infrastructures.

The discourse related to tourism in Nepal is overwhelmingly focused on dev-eloping tourism for economic growth. However, the fact is, economic growth and development also attract more tourists, especially the high value tourists. For example, Hong Kong, despite its very limited tourism resources, attracts more than 36 million tourists a year and India’s tourism growth has been, in part, a correlation to its rapid economic growth.

With right actions, Nepal’s tourism sector could be the best sector to bring prosperity to the country.

-Surath Giri

(Published in The Himalayan Times - Perspectives of 18 November, 2012. )

Articles / Economic Growth / Tourism

May 20, 2012

In defence of liberalisation

May 20, 2012 Surath Giri

In the political and economic discourse of Nepal, liberalisation might sound like a popular word but it is also one of the most derided. From the critics who blame it for everything that has and can go wrong to the apologists, liberalisation rarely finds a voice in its support. For politicians and planners, it is the perfect scapegoat for their own wrongdoings, whereas for left leaning intellectuals it is the thing to bash when-ever they have an urge to pour out their frustration and hatred. Many also hold a mythical notion that liberalisation is a panacea to every economic evil.

This was well reflected when a prominent economist of Nepal recently wrote an opinion piece saying, “Despite liberalisation, more than 50 per cent of children are unable to attain secondary level of education and 15 districts are yet to be connected by roads.” Unfortunately, liberalisation in itself does not do these things. It just allows a platform for all of these things to be done by the individuals in a free society. It would be beneficial for any rational economic discourse to analyse if Nepal has truly liberalised its economy and if liberalisation has any contribution in keeping the poverty levels where it is.

The myth about liberalisation

One of the greatest myths regarding liberalisation in Nepal is that after reforms of 1990s, Nepal is a fully liberalised free-market economy and an epitome of free-wheeling capitalism. Critics love to assert that despite all attempts, the promised utopia of liberalisation not only seems elusive but unattainable. However, nothing can be further from the truth.

Liberalisation in its essence means an economy free of interference from the government (or politics for that matter). Though government has done so in paper, it is not in practice. From agriculture to transport and health, every sector reeks from the heavy hand of government control or sponsored distortions. The best example is the government approved cartels in the transport sector which have wrecked havoc on the overall economy through monopoly.Energy, one important prerequisite for economic growth, is still in the grips

of the government. Nepal Electricity Authority, the sole authority on electricity in Nepal fails to provide power even for 12 hours a day and has negative net worth. Petroleum products are also in the government’s grip. Frequent disruptions in fuel supply have become common now.

Infrastructure is also mostly controlled by the government. Although concepts of Public Private Partnership and Build-Own-Operate-Transfer have been discussed for a while, we are yet to see any significant progress in implementation. The fact that 15 district headquarters are not yet connected by roads, begs a deeper question: Whose fault is it? If we expect liberalisation to work miracles, should we not first free the sector from state’s monopoly?

Labour market is miles away from liberalisation. Politically backed militant trade unions have monopolised the labour market but slapped any liberalisation attempts in Nepal. State-owned enterprises whose losses and quality of service are inversely proportional, such as Janakpur Cigarette Factory, Nepal Airlines Corporation and Nepal Oil Corporation are a drain on the economy. Liberalisation has been unable to spread to these darkest corners of the state.

The myth of failure of liberalisation

In this context, it is imperative to rethink Nepal’s liberalisation reforms or even call it a liberal market-oriented economy. Shifting the blame for underachieved development on liberalisation suggests that policy-makers are cynical and lack commitment to take reform efforts to conclusion. Liberalisation, in its limited form, has worked wonders, if not miracles. A common farmer in the remotest part of the country using a cell phone symbolises the success of liberalisation, wherever it has been done.

The thriving and vibrant media sector of Nepal is another example. The critics of liberalisation should consider that absolute poverty, a major problem of Nepal which decades of planning and government action could not solve, is being rapidly alleviated by a simple move towards liberalisation. Liberalisation in making passport has allowed mill-ions of poor Nepalis to find jobs abroad and raise their living standards. Critics are quick to point dependence on remittance is not desirable for the economy. But, are there any realistic and better alternatives? Relying on the government to fulfil the Nepali dream of prosperity is being naive.

Nepal’s liberalisation, despite many discussions, has remained a will-o-wisp till date. It is true that liberalisation has not been able to deliver to its fullest so far, but liberalisation itself is the last thing to be blamed for it.

-Surath Giri

(Published in The Himalayan Times - Perspectives of May 20, 2012)

Articles / Economic Reforms / Liberalization

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