Reframing Our Youth Employment Problem

Reframing Our Youth Employment Problem

  August 01, 2021    Surath Giri

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Photo by Phil DuFrene on Unsplash

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)

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Interview with Dr. Swarnim Wagle, Member of National Planning Commission

Interview with Dr. Swarnim Wagle, Member of National Planning Commission

  January 03, 2015    Surath Giri

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Just stumbled up on this interview of Dr. Swarnim Wagle who is currently one of the members of the National Planning Commission of Nepal. Dr. Wagle had an impressive career so far. Born in a remote village of Gorkha district, he got educated in the prestigious Budhanilkantha School and then attended London School of Economics, and Harvard University before finally getting his PHD from Australian National University. Having worked for international institutions like World Bank and UNDP in several countries, his decision to return to Nepal and take up a job at National Planning Commission that pays about 1/40 of his previous salary is truly appreciable. I am more impressed by the fact that he seems to be committed to promote the role of private sector in the economy and does not shy away from making his views clear although he is regularly swamped by leftist intellectuals and their centuries old rhetoric whenever he presents his views regarding the economy. I hope he will be able to make the changes he wishes to make before his willpower and motivation in engulfed by the corrupt Nepalese bureaucracy and politics. We need more people like him. My only fear, though, is that he may start patronizing and may end up making the state mechanism more efficient at repressive entrepreneurial aspirations of the citizens. I hope that does not happen.

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Out of Country but Out of Poverty

Out of Country but Out of Poverty

  October 31, 2014    Surath Giri

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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.

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Promoting Entrepreneurship in Nepal

Promoting Entrepreneurship in Nepal

  September 14, 2014    Surath Giri

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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)

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It's a hard earned poverty: Let everyone know!

It's a hard earned poverty: Let everyone know!

  April 30, 2014    Surath Giri

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Prithvi Narayan Shah, in his lessons for his fellowmen once said “It is not an easily earned nation, let everyone know”. We have neither forgotten his teachings nor rested on our laurels, although what we have added to our list of achievements is a much more formidable and unique thing that we believe the world should appropriately envy us for―abject poverty and backwardness. Any citizen of the world on an average earns about $11,640 and people around the world are reeling under the pressure brought about by increasing wealth and prosperity.  Whereas, it seems, we have laboriously worked to keep our income under $1300 and also keep any shreds of prosperity at bay. The world may wonder, how have we managed to achieve such poverty despite all the pressures but there are not many secrets for our success― although it does take an incredibly hard effort to do so. The world should learn from our efforts and follow us if it doesn't want to suffer the weight of choice, opportunity and prosperity.

The primary enemy of poverty is an individual. The ominous inbuilt impulse of every individual to seek ways to put oneself in a better position is the most formidable enemy for any seeker of poverty. Hence, letting individuals politically, socially and economically free is one of the surest ways of making them fall into the miserable pit of prosperity. Secure private property rights is the evil base for prosperity as the world has already realized. 

We have been working hard to make people insecure about their lives and properties till date. In the past, we let the Kings own the whole nation and do as  their whims pleased ,we had autocratic Ranas to shoulder the burden. Currently,  our political leaders and some self-appointed masters of the country  taken on themselves the task of bearing the burden of property and prosperity so that our mass can bask in the glory of poverty and backwardness. Anyone who dares to fall into the charm of prosperity is promptly brought out by our leaders who have aptly collaborated with criminals to strip these people of their properties and, in many instances, of their lives. Our political leaders and elites have been working hard to take away all the property of the mass and keep it to themselves so that they themselves suffer the evils of prosperity and save the rest of us. Some people question our leaders for amassing wealth while preaching about collective poverty. I find this unfortunate. People don't understand how hard the politicians and elites are suffering under the pressure of wealth so that we can enjoy our wretchedness.

Entrepreneurial instinct is another hurdle on our way to success. To counter this instinct and mitigate its impacts, we have made sure that our children grow up hating the concept of entrepreneurship and profit-making. State worship and cult of political leaders/kings are some of the concepts we instill in them. Ask any of our young people, if they know how nations around the world have fallen into the misery of prosperity and they will amaze you with their ignorance. Just utter a few words like economic freedom, free markets, capitalism in front of them and you will be taken aback by their hatred for these evils of prosperity even if they do not know what these really mean.

Despite our efforts to curb entrepreneurship, some people have eventually fallen into the trap. Enamored by this evil, they take risks, start ventures and many times convince enough people to buy their products and services and make enough wealth. But we have not been passive about this at all. Political interference and indoctrinated laborers have been our major tools for fighting against entrepreneurship. We have trained our workers enough and even equipped them with weapons to fight against any wealth creation. We want to be a nation of proletariats not of entrepreneurs. How could anyone undermine the importance of continuous labor agitations, industrial shutdowns, except that which stems out of sheer ignorance? Sometimes, our laborers are easily misled from their path of struggle by the shreds of wealth entrepreneurs throw at them. And that's a pity. In such cases, our leaders send their cadres to crush the enchantment and continue the agitations. But some people are really ungrateful. They complain of being jobless and curse the efforts of our labor unions. How ungrateful of them― instead of enjoying the new found poverty they question and curse our leaders' judgments. They and the world as well, should appreciate the way we have been tackling the problem. For e.g. If a business becomes well known or starts reaching out to too many people or starts spending a lot of money on advertising it products or tries to have an affiliation with the foreign prosperity, we promptly shut them down or ask them to depart with a significant portion of their wealth to feed the leaders so that they remain within our sphere of poverty. It definitely is a tough job, and the world should realize that.

You must be wondering how do our governments and politicians manage the wealth then. Well, that's not a tough job if you are well-skilled. Just look at our roads for an example, which have to be mended almost every month. If our government had built them properly and without careful strategy, we would have no place to pour our wealth and we would have accumulated wealth. Just imagine how disastrous that would have been. Take any instance of our government's work and you will find they have been carefully done in a way that we get a chance to pour wealth every once in a while. We have also taught the people that paying taxes to the government so that they can be poured into the aforementioned jobs is a very patriotic act. Just observe the success of our strategy through the hue and cry that arises when tax evasion by a person or company is found but not an utterance of protest when government (agencies, departments, officials, ministers) carefully mismanages and destroys that wealth. 

Political interference in any task has been our overarching tool for achieving poverty and inefficiency across the sectors of economy and classes of people. From educational institutions to religious institutions, from a family to districts, we have virtually left  no sector free from the loving embrace of politics. For, we are well aware of the fact that, political meddling is the sure shot way of making an economy kneel down. If a property is allowed to be mobilized by its owner, there is a high chance that it can be used to create prosperity so we have preached the virtues of collectivism and putting society above individual needs and rights to everyone. Just look at how every political party of ours’ talks about collective poverty but never of wealth creation. That is our secret.

Another very effective tool we have found for achieving our purpose is the blame game. Although, majority of our people have never seen or been to United States and is located on the other end of the world, we have made sure that everyone knows it is our primary enemy. Similarly, our political leaders have made it a condition that we all show our patriotism by cursing and blaming India. We know, if we people were to look within themselves and analyze, they might find that doors to prosperity lies within. It would be very unfortunate that if people stopped blaming foreigners and started self-analyzing. We could very well, bid our hard earned poverty good bye.

Despite all our efforts, we couldn't convince a portion of population about the virtues of poverty and backwardness. Lured by opportunities and prosperity in other countries, they have been quietly sneaking into those countries as laborers and workers. We did not put much thought to the trend at first because we were working hard to preserve our hard earned poverty here in home. But one day, to our horror, we realized that these people sneaking out of the country were responsible for a sudden decline in our poverty. We panicked, so did our international friends (organizations) who admire poverty. So we quickly adjusted the figure and have been thinking of ways to counter the trend. We have already countered the tendency of people going to foreign army through our effective tool of 'nationalism' and 'patriotism'. But we have been finding it difficult to counter rest of the emigrants. So we have been trying to make it harder for them to go abroad and making everyone aware that it is unpatriotic. These people should have enjoyed the poverty at home than going and laboring in the foreign country for the lure of prosperity, our argument goes.

We have been known in the world for our natural endowments rather than our achievements. That indeed saddens us. Hence, we intend to preserve our poverty and make it so unique in the world someday that we will be the only 'poverty blessed' nation on Earth. However, our achievements so far are equally appreciable. So, the world better know that our poverty is a hard-earned thing and it takes enormous efforts to do so.

(First published on www.bichardabali.com )

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Why is Nepal poor? Some common arguments we hear everyday!!

Why is Nepal poor? Some common arguments we hear everyday!!

  February 10, 2014    Surath Giri

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Why is Nepal poor? Why has it not been able to develop economically? These are some of our most favorite topics for conversations in tea shops. Infographic below lists 5 of the most common arguments we hear about why Nepal is poor and analyzes whether these arguments really hold their ground. Enjoy!

So what do you think about these arguments? Feel free to share your views and opinions in the comments!

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Why the world is getting better: A retrospect of 2013

Why the world is getting better: A retrospect of 2013

  December 31, 2013    Surath Giri

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Source: The Spectator

The rapid spread of globalization and capitalism has benefited millions of people around the world, especially in the developing societies. At the same time, it has annoyed and disappointed countless people, especially leftists, environmentalists and clergy. As per them, the world is coming to an end and the rapid economic growth has only accelerated our journey towards doom.  But, rarely do their gloomy predictions withstand the test of empirical evidence. If only the prediction of doomsayers governed the world, the world would have perished of global cooling in the 1970s, massive starvation in the 1980s and is supposed to end within a decade or two because of global warming (Hope you noticed the irony here). Despite their predictions, the life, in general is getting better for majority of the humanity as they have become richer and hence in a better position to attack enemies of humans such as poverty, illiteracy, operation, natural calamities and pollution to name a few. 2013 also saw a few changes that indicate a better future for human beings.

Fraser Nelson, editor of The Spectator has pointed out these changes in his article The biggest shocker of 2013? That it really is a wonderful world. As shown in the article, 

1. Deaths by malaria is decreasing rapidly as countries prone to it have grown richer and now are able to afford basic necessities like malaria nets. Places like Cambodia believe they’re three years away from extinguishing Malaria deaths. 

2. Looking at a broader picture, the world is living in the most peaceful time in modern history. The world-wide battle deaths per 100,000 people is decreasing rapidly. As economies are getting more integrated and interdependent, the war is becoming a costly thing day by day. This does not mean, every place in the world is peaceful. Many African countries are still engulfed in nasty civil wars but the overall trend is decreasing.

3. Global death rates due to extreme weather events is also declining. From 485 deaths out of 1000 deaths per year in 1920s, it has declined to 35 deaths out of 1000 deaths per year.

In the end of the article, the author has recommended a book which explains about the positive trends in the world and the causes behind them. In defense of Global Capitalism by Johan Norberg, happens to be one of my most favorite books and one of the few books that shifted my viewpoints very significantly. This book is a must read for anyone wishing to know about the status of the world and willing to do something to makes lives better. 

Fortunately, the book is available for free download. I have uploaded the book to slide-share and embed it below. Please feel free to read the book online or download it (recommended) for better reading.

In Defense of Global Capitalism by Johan Norberg from Surath Giri

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Election Promises!

Election Promises!

  November 11, 2013    Surath Giri

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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)

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How to increase foreign direct investment in Nepal?

How to increase foreign direct investment in Nepal?

  October 22, 2013    Surath Giri

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Foreign Direct Investment (FDI) is being recognized as one of the key drivers of rapid economic growth and prosperity around the world. Cases of China, India and many other South East Asian nations show that attracting foreign direct investment and sustaining it can lead to unprecedented economic prosperity catapulting developing countries into middle-income countries. During the economic reforms of early 1990s, our policy-makers had enough sense to open  up the economy and open doors for foreign investment. However, the process of economic reforms has stalled since long ago. Although foreign direct investment is on the rise, the growth is miles away from satisfactory.

This paper on foreign direct investment written by my colleagues at Samriddhi, The Prosperity Foundation under the guidance of Dr. Bhola Nath Chalise looks at what is the current scenario of foreign direct investment in Nepal, what hurdles are preventing its growth and what the second generation of reforms would look life for attracting more foreign investment in Nepal.  Please check it out and provide us with your comments and feedback.

Foreign Direct Investment in Nepal : Towards Second Generation of Reforms from Surath Giri

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How institutions affect the economic performance of a society

How institutions affect the economic performance of a society

  April 06, 2013    Surath Giri

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Institutions are the rules of the game in a society that guide or shape human interactions in the society. Not only formal institutions like legal system, property rights, contract enforcement mechanism but also the informal institutions like code of conduct, customs and traditions play a vital role in determining whether an economy evolves or stagnates or how fast the economy evolves.

I stumbled upon this video in which Nobel Laureate Economist Douglass C. North and Prof. Timur Kuran, professor of Economics and Political Science at Duke University talk about the evolution of institutions, the role institutions played in stagnation of Islamic societies after 12th century, how lack of feedback mechanism towards institutions in Soviet society led to its downfall and how internet and the free flow of information it has brought, is transforming closed societies of Middle East and elsewhere into more open and thereby, more prosperous societies.

What do you think? Please share your opinions in the comments below!

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Destination Nepal

Destination Nepal

  November 18, 2012    Surath Giri

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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. )

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