Road to richesLeaders need to focus on robust economic growth to uplift the marginalised
As the Nepali people have finally received the much-awaited constitution written for the first time by elected representatives, we have no excuse but to push forward the agenda of economic reforms. Even though the constitution has been accepted by an overwhelming 90 percent of elected representatives in the Constituent Assembly, its viability will only be justified by robust economic growth to uplift the marginalised by providing equal opportunities to all.
Investment is considered to be the primary source of employment and economic growth. But both private investment and foreign direct investment (FDI) are lacking in Nepal. Despite the one window policy initiated by the Investment Policy 2014, FDI commitment in 2013/14 only increased marginally by 0.9 percent. According to the World Bank, Nepal needs $13-18 billion between 2011-2020 in infrastructure development—fast track roads, railways, tunnel ways, cable cars, and international airports—to meet its predicted growth.
To be able to attract more domestic and foreign investment, our government should push for more supportive policy frameworks to improve the business climate, infrastructure development, labour laws and regulatory mechanism. Only such policies will provide incentives for the private sector to invest.
However, unless we invest in infrastructure, we are bound to fall short in confronting our economic challenges. When we invest in infrastructure we are laying the foundation for a solid economy. The multiplier effect of such an investment will create a conducive environment for the private sector to earn profits and employ the labour force.
Take the example of our two neighbours for instance. India focused on its service sector, providing successful information technology services and business-processing exports. But its poor and inadequate infrastructure stunted its growth in the manufacturing sector. The Indian government itself has admitted that “infrastructure bottlenecks are emerging as the single most important constraint on India’s economy.”
China, on the other hand, chose manufacturing export as its path to development. The northern neighbour visibly invested in roads and highways, with plans to build 55,000 miles of highways by 2020, more than the total US interstate system. With new infrastructure, easy-to-do-business policies and cheap labour the Chinese market has been a very attractive place for FDI. And looking back at the two-three decades, China’s economy has grown almost twice as fast as that of India’s.
Importance of roads
Unfortunately, Nepal is considered to have one of the poorest infrastructures in the world. According to the Global Competitiveness Report, Nepal is ranked 143 out of 144 countries in quality of infrastructure. As a result, the average cost of shipping a container from Kathmandu is $2,295 which is around 30 percent higher than the average cost in other South Asian countries.
Considering the inaccessibility and poor condition of the existing roads in the country, the government should prioritise on expanding the road network. This will not only reduce the cost of doing business, but will also remove the bottlenecks for private sector investment and support business expansion, leading to more economic activities, market accessibility and service delivery. A shorter highway from the Capital to the Indian border and a much-needed improvement in infrastructure around the customs area would also significantly help in reducing business costs, eventually leading to the export of goods at a competitive rate and paying less for imported goods.
Road accessibility not only helps to do business but also makes health services and educational institutions more accessible to the people.
As Nepal is the only country in South Asia to have had budget surplus in recent years, we should be capable of spending more public resources on infrastructure. But due to the traditional way of prioritisation of projects and awarding of contracts, and its weak monitoring and implementation compounded by the lack of stringent laws to punish the culprits, our resources in recent years have been diverted to lower-priority projects, fragmenting the capital budget. In the last four fiscal years, over 72 percent of capital expenditure occurred in the last trimester, and over 80 percent of the contracts awarded were extended into the next fiscal year.
As disgruntled voices continue to surface in several parts of the country over the new constitution, we should not forget that the root causes of the unrest is deeply linked to poverty and inability to participate in the economy. As more than 450,000 labourers enter the job market each year, while the employment growth rate is only 2.9 percent, what our leaders now need to focus on is creating more jobs by giving everyone an equal opportunity to participate in economic activities. Only then will the Deepawali-style celebrations after the new constitution be justified.
Ghimire is a sub-editor with The Post