Road To Economic Progress

Amrit P. Shrestha

What the modern industry needs is better infrastructure. Traditionally, infrastructure services across the world were provided by governments in limited areas like airports, electricity and roads. Today infrastructure must improve in all parameters, which requires immense financing through external and internal channels. Without basic infrastructure development, no sector can achieve any sort of target. To keep the wheels of the economy running, countries must make enormous progress in attracting private investment in the infrastructure sector, as the government alone cannot invest huge amounts in it. In order to send the right signal to international investors, there is a burgeoning need to create sophisticated infrastructure in selected key cities and projects as seen in Beijing, Shanghai and Kuala Lumpur, which have emerged as the investor's choice in the last three decades.

Infrastructure needs three key inputs - large amounts of money, skilled manpower and selected projects. Governments must realise that the only way to become the nation's doorway to economic zoom is to give new thrust to infrastructure development. Thus, the Essential Facility Doctrine has been recognised by most of the developed and developing countries. Australia, Singapore, South Korea and India have been adopting the doctrine. Investment requires long-term funds with a long payback profit period. More importantly, Public-Private Partnership (PPP) is a signal to investors in general that the policy framework is sound and environment conducive for investment. Such models have to be initiated in key sectors like roads, airports, power and tourism. Nepal lacks the necessary physical infrastructure to qualify as an international investment centre. Investments must have easy access, and there should be well-developed infrastructure within acceptable parameters. At present, we must have suitable strategies to convert challenges into opportunities. Better infrastructure helps in alleviating poverty and expanding the industrial base because accessibility to services improves as a result of it.

Currently, GDP's contribution to infrastructure development is less than 4 per cent, which is less than the share of our neighbouring countries. Actions must be accelerated on the following track, to help build trunk infrastructures in the country. First, Modernisation or industrialisation require massive expansion of national highways, airports, electrification and telephones linking every village with the urban areas. Ground water exploration, minor irrigation, water supply and sanitation are other priorities. Highways form the economic backbone of the country. Likewise, rain water harvesting and human resources management must be developed, which is sorely lacking in the country. Given the size of the country, air travel has become the swiftest mode of transport. Hence, Nepal should take bold steps to expand and upgrade its airport infrastructure. Second, among the bottlenecks to achieving growth in the country is electricity supply. Power and its allied sector play a crucial role in economic development. Electricity is the lifeline of our lives as its use ranges from mundane applications to complex tasks and operations. Our productivity is affected because of this.

Third, the tourism industry could gather momentum if the government plans innovative promotions. Tourism should introduce new products such as monsoon tourism, helicopter tourism and the like. Such programmes will attract visitors, especially from India and Europe. With Nepal becoming a business hub especially for tourism, regional disparity can be minimised upto a certain extent. Likewise, growth of tourism will help enrich the lives of traditional workers and artistes. Unfortunately, lack of roads, accommodation, safety measures, well established communication systems and hospitality management centres are some of the hurdles in its promotion. Fourth, building IT Parks in important cities can offer a unique confluence of advantages - robust physical infrastructure, power and data connectivity and trained technical manpower. All this will effectively reduce the operational cost. Fifth, there is a need to hand over the entire infrastructure development to the private sector with no political interference. There should be no bureaucratic controls over enterprises. They should not be asked to get approval for minor decisions.

Sixth, an act to form an independent Infrastructure Authority, similar to the National Highways Authority in India, Afghanistan, Laos and the Philippines, has to be announced without delay. Meanwhile, a vision paper with priorities and national consensus must be flashed, emphasising on infrastructure development to attract investors and also to make the entire cycle of investment, productivity and wealth creation sustainable.Seventh, special packages of tax incentives must be introduced as a tool to encouraging private enterprises or an undertaking engaged in the development of infrastructure facilities. This is particularly important for infrastructure developing companies. Human developmentMost importantly, the overall environment needs to be free from prevailing corruption and petty-mindedness. For the common man, good economics is all that he cares. The government should accelerate the process of human development by delivering services in electricity, transport, water and sanitation that the poor need in order to live and participate in economic growth. A leader of outstanding merits, efficient bureaucrats and a graft-free culture are the invisible infrastructure to race with the modern world. Let us start from a good today to a better tomorrow.

Source: The Rising Nepal, May 22, 2007

NAC in trafficking

The people involved in human trafficking constantly explore creative techniques to exploit poor laborers by exporting them illegally to labor-deficient countries. These human traffickers get heavily compensated from the unemployed youth, who are ready to take any risk for the job abroad. The agents also get hefty commission from the labor recipients, who enjoy cheap Nepali labor force. The Nepal Airlines Corporations, Department of Immigration and security personnel have been found involved in human trafficking. The traffickers have established a strong nexus among these three institutions to ferry people to the United Arab Emirates without visa. The UAE immigration and security could also be suspected for their involvement in letting the trafficked people the back-door entry. This racket has to be immediately stopped by both the Nepali and UAE governments.

The incident in which 22 Nepalis were stranded at Dubai airport for about two weeks, and NAC received subsequent warning from the UAE Immigration Department has posed a serious question. The government should immediately form an investigation committee to unmask the NAC staff, immigration and police involved in the racket. NAC has claimed that its staff might have been deceived by the laborers as the labor visa comes in a loose paper from Arab countries. However, the reports say that most of the 22 Nepalis stranded at Dubai airport did not have any official paper whatsoever. So, the question of genuine or fake does not arise. Moreover, even if NAC failed to distinguish fake from genuine, the immigration staff should have stopped the human trade because they are trained for the purpose. And it is their responsibility to check any illegal emigrant. The security force is undoubtedly involved in the trade as it has been an opportunity for its personnel to earn money.

What is the problem if Nepalis are getting employment abroad -- be it legal or illegal? The problem is that the illegal laborers, who enter foreign countries without papers, are exploited to death. They can never recover the money they spend in finding the job abroad. Neither can they come back, even if they wish to do so. Such an illegal and illegitimate human trade tarnishes the country's image. Not only the UAE, soon all other countries where Nepali laborers aspire to go will debar NAC from flying. This act has also incurred huge losses to NAC because it has to bring back all the stranded people who fail to enter the country for free. The most dangerous aspect is that the illegal migrants are smuggled into war torn Iraq and Afghanistan. They may lose their lives as unidentified persons. So, the government should stop human trade and punish those involved in it - be they NAC staff, immigration officials or security personnel.

Source: The Kathmandu Post, May 22, 2007

Nepal-China Trade

IN ancient times there was significant volume of trade between Nepal and China, particularly Tibet the autonomous region of China. Now, however this trade is not up to an appreciable extent, and there is much more scope for boosting the trade between the two countries for their mutual benefit. In this connection a discussion was held between a Chinese delegation that is currently visiting Nepal with the representatives of Nepal Trans Himalayan Border Trade Association.

The purpose of the parleys is to manage the trade between the two countries as well as to clear up the problems that might arise while carrying out such trade, apart from creating a congenial environment that would be ideal for the enhancement of trade between the two countries. The Chinese government for its part has made it known that the government level discussions desires to further expanding and improving trade between the two neighbouring countries.

However, the governments alone are not able to further boosting the trade, and, as such, the private sector should also be actively involved so that a vibrant trade thrives that would bring in rich dividends for the people of both the countries and contribute substantially to raise the income of their peoples. For this it is found that a mechanism including the representatives of local bodies and trade representatives of the two countries should be made in an attempt to seek resolutions to problems that the traders face in Khasa. Incidentally, Khasa is a commercial hub for Nepal-China trade. Furthermore, the full potential of trade between Nepal and China could be realized if the Chinese investors were to invest in the banking and tourism sector.

China has now emerged as an economic superpower. Nepal stands to benefit were it to attract the investors from China for also such sectors as hydroelectricity that holds immense potential and with which Nepal is endowed aplenty. For the time being, trade between the two countries would be further facilitated if the visa processing for Nepalese businessmen were to be eased. Other measures that could be undertaken are to initiate trade by developing infrastructures for transits adjacent to Nepal and China. Nepal also would appreciate it were the customs duty for Nepalese agricultural products, handicrafts and food grains in the Chinese market were done away with. These are some of the measures that would revive and also contribute to the further enhancing the trade between the two friendly countries.

Source: The Rising Nepal, May 20, 2007

Nepal And Globalisation

Madhavji Shrestha

The globalisation process in its dodging way is rising on a larger scale each passing year. It is happening so because human needs worldwide remain at the core of its development. Meanwhile, it is also coupled with human inquisitiveness and mobility that have invariably added both speed and momentum in propelling it forward. The process will continue to move onward until some catastrophe of a greater politico-economic dimension puts the brakes over it.

Labour export

Undeniably, the trend has bestowed unprecedented benefits to some of the developing countries, especially huge countries like India and China in recent years. But countries like Nepal are hardly touched by the growing waves of globalisation across various continents. It is true that the ongoing globalisation process too has benefited Nepal in one particular area, i.e., labour export, be it unskilled or semi-skilled.

A recent report of Nepal Rastra Bank tells us that in 2005/6, remittances by Nepali workers in various parts of the world, especially in the Middle East and South East Asia contributed 16.8 per cent to Nepal�s GDP. This figure is the amount received through official channels only. If remittances received through unofficial channels are taken into account, the total contribution will rise to around 25 per cent of GDP. This indicates how Nepal is highly dependent on remittances.

This case of the Nepali people testifies how human needs force people to go abroad to take advantage of the opportunities from globalisation. However, its future is uncertain and cannot be relied on for long.

Seen in the current Nepali context, the globalisation process has yet to touch the Nepali society economically, although some effects can be seen on the cultural life and information technology, which again are concentrated mostly in the urban areas. This again is highly confined to the class of the young and educated people of the cities.

The process has yet to fly beyond the urban areas. This is so because of the political impasse coupled with the less developed socio-economic life now prevailing in the country. Most Nepali people are largely deprived of modern educational opportunities and are indeed suffering from a lack of material and physical facilities.

The truth is that the Nepali society is somehow under minimal effect of the globalisation process that has been thrown upon by universal organisations like the UN and its various agencies and world bodies like the World Bank, the International Monetary Fund and the World Trade Organisation.

Official globalisation, developing in the aftermath of World War II, and the subsequent global developments in the latter decades of the 20th century are accepted by the world community as being compulsive and supposed to do well for their security, development and social well-being. Alongside this evolutionary trend of the officially embraced globalisation process, other aspects of globalisation in the non-governmental fields of businesses and industrial and service areas have made great leaps forward.

Surprisingly, this development of globalisation have not been able to deliver better things to all countries and regions of the world equitably for sheer lack of physical facilities and absence of stability to impact the economic domain of a country. Until now, there is no global governance on this important matter, nor have the concept and practice of globalism come to the rescue.

The experience of countries which have so far taken great advantages from globalisation shows that for any acceptable and benefit-accruing process to take root in a country, certain positive conditions must be present within its territory and society. Of all the essential things we need, there must be acceptable governance with transparent laws and regulations. Primarily, legal provisions, especially related to property acquisition, management and taxation, need to be put in place. Meanwhile, the judiciary as a guardian and ultimate protector of life and property must be strengthened and respected by society.

Still far more important is the presence of infrastructure - transportation and communication that can make the movements of the people, goods and services easy. A disciplined workforce is also highly warranted for better performance. If these minimal conditions do exist, a positive invasion of globalisation is expected.

Nepal�s integration with the world through economic and trade linkages are still a far cry. The requisite conditions do not exist here because of the political instability and the conspicuous absence of a reliable political leadership. Political wrangling and social unrest have been raising their ugly heads unabatedly. However, in due course of time, if an environment friendly to foreign investment and outsourcing from abroad can be created, globalisation would have a positive impact on the country�s economic condition.

All the political parties with a large following and appreciable influence over the common populace need to make their political stance unambiguous and unequivocal as regards the property and property rights of not only Nepali citizens but also of foreigners. Without fail this must be done with good intention.

Trade and labour unions along with other social organisations have to move on as required for social and labour tranquillity. Work discipline needs to be maintained for their own well-being and harmonious relations between the employers and the employees. Discipline and normal work hold great significance.

Attainment of required skills and abilities by the workers is considered essential for enhancing and improving productivity in the industrial and service sectors. Unquestionably, technical and vocational schools and institutes play useful roles in producing quality manpower in enhancing the economy.

Industrial houses

At a time when liberalisation and privatisation are gaining ground, the industrial houses and business tycoons have a towering role to play in creating a congenial atmosphere for greater economic and trade connectivity. This is the foremost activity that the Nepali business magnets need to carry forward.

Unfortunately, however, they seem less inclined to do so. Initiatives must come from them. Looking up to the highly hobbled government, which is deeply sunk into a political imbroglio, will not liberate Nepal from the economic stagnation and trade deficit now facing the country. Their mindset must undergo a change for better days to come.

Source: The Rising Nepal, May 21, 2007

Road To Economic Progress

Amrit P. Shrestha

What the modern industry needs is better infrastructure. Traditionally, infrastructure services across the world were provided by governments in limited areas like airports, electricity and roads. Today infrastructure must improve in all parameters, which requires immense financing through external and internal channels. Without basic infrastructure development, no sector can achieve any sort of target.

To keep the wheels of the economy running, countries must make enormous progress in attracting private investment in the infrastructure sector, as the government alone cannot invest huge amounts in it. In order to send the right signal to international investors, there is a burgeoning need to create sophisticated infrastructure in selected key cities and projects as seen in Beijing, Shanghai and Kuala Lumpur, which have emerged as the investor's choice in the last three decades.

Infrastructure needs three key inputs - large amounts of money, skilled manpower and selected projects. Governments must realise that the only way to become the nation's doorway to economic zoom is to give new thrust to infrastructure development. Thus, the Essential Facility Doctrine has been recognised by most of the developed and developing countries. Australia, Singapore, South Korea and India have been adopting the doctrine.

Investment requires long-term funds with a long payback profit period. More importantly, Public-Private Partnership (PPP) is a signal to investors in general that the policy framework is sound and environment conducive for investment. Such models have to be initiated in key sectors like roads, airports, power and tourism.

Nepal lacks the necessary physical infrastructure to qualify as an international investment centre. Investments must have easy access, and there should be well-developed infrastructure within acceptable parameters. At present, we must have suitable strategies to convert challenges into opportunities. Better infrastructure helps in alleviating poverty and expanding the industrial base because accessibility to services improves as a result of it.

Currently, GDP's contribution to infrastructure development is less than 4 per cent, which is less than the share of our neighbouring countries. Actions must be accelerated on the following track, to help build trunk infrastructures in the country. First, Modernisation or industrialisation require massive expansion of national highways, airports, electrification and telephones linking every village with the urban areas. Ground water exploration, minor irrigation, water supply and sanitation are other priorities.

Highways form the economic backbone of the country. Likewise, rain water harvesting and human resources management must be developed, which is sorely lacking in the country. Given the size of the country, air travel has become the swiftest mode of transport. Hence, Nepal should take bold steps to expand and upgrade its airport infrastructure.

Second, among the bottlenecks to achieving growth in the country is electricity supply. Power and its allied sector play a crucial role in economic development. Electricity is the lifeline of our lives as its use ranges from mundane applications to complex tasks and operations. Our productivity is affected because of this.

Third, the tourism industry could gather momentum if the government plans innovative promotions. Tourism should introduce new products such as monsoon tourism, helicopter tourism and the like. Such programmes will attract visitors, especially from India and Europe. With Nepal becoming a business hub especially for tourism, regional disparity can be minimised upto a certain extent. Likewise, growth of tourism will help enrich the lives of traditional workers and artistes. Unfortunately, lack of roads, accommodation, safety measures, well established communication systems and hospitality management centres are some of the hurdles in its promotion.

Fourth, building IT Parks in important cities can offer a unique confluence of advantages - robust physical infrastructure, power and data connectivity and trained technical manpower. All this will effectively reduce the operational cost.

Fifth, there is a need to hand over the entire infrastructure development to the private sector with no political interference. There should be no bureaucratic controls over enterprises. They should not be asked to get approval for minor decisions.

Sixth, an act to form an independent Infrastructure Authority, similar to the National Highways Authority in India, Afghanistan, Laos and the Philippines, has to be announced without delay. Meanwhile, a vision paper with priorities and national consensus must be flashed, emphasising on infrastructure development to attract investors and also to make the entire cycle of investment, productivity and wealth creation sustainable.

Seventh, special packages of tax incentives must be introduced as a tool to encouraging private enterprises or an undertaking engaged in the development of infrastructure facilities. This is particularly important for infrastructure developing companies.

Human development
Most importantly, the overall environment needs to be free from prevailing corruption and petty-mindedness. For the common man, good economics is all that he cares. The government should accelerate the process of human development by delivering services in electricity, transport, water and sanitation that the poor need in order to live and participate in economic growth.

A leader of outstanding merits, efficient bureaucrats and a graft-free culture are the invisible infrastructure to race with the modern world. Let us start from a good today to a better tomorrow.
(Shrestha is ex-director of the Department of VAT and a financial management and VAT expert deputed in Tanzania by UNDP)

Source: The Rising Nepal, May 21, 2007

Oil crisis: Management of financial resources

Raghab D Pant

It is now clear that the occasional shortage of oil and oil products in the market followed by the long queues at the petrol pumps is due to the inability of the government to adjust domestic price to a change in world prices as well as its hesitation to release adequate funds to the concerned institution to maintain such artificial domestic price, fixed by administrative whim, rather than by market supply and demand. As a result, the Nepal Oil Corporation (NOC), a government-owned enterprise with monopoly on oil import, is virtually bankrupt with no resources to import oil except on credit that one creditor, namely the Indian Oil Corporation (IOC), has refused to provide without part payment of past dues — a reasonable, if not very soft, demand.

This means, in effect, there will be adequate oil in the market if (i) the import trade is only on cash basis; (ii) the import payment is made in accordance with the agreement reached between NOC and IOC; (iii) the domestic price is adjusted regularly to meet import price, and (iv) the government reduces the tax it has imposed on import of oil and oil products by NOC. In the latter two cases, NOC will be able to run its operation with huge profit.Unfortunately, the government has decided not to change the domestic price of oil before the election to the Constituent Assembly or to take any other measures on the domestic front — there have been customary long talks of involving private sector in the import trade of oil — to solve all the current problems once and for all. The government, on the other hand, has unnecessarily provided the issue a “cover of national crisis” and, as expected, the PM called the Indian ambassador for his help “in getting full supply of petroleum products resumed to Nepal,” though the Government of India has nothing to do with the crisis whatsoever except that IOC is also a government enterprise with a written business deal with NOC.

It is now safe to assume that the intensity of the problem may lessen only if the IOC decides to provide oil and oil products on credit to its bankrupt colleague. It will, however, further deepen the financial crisis of NOC as it is obliged to sell the goods at a price which is substantially less than the cost it has to incur. The Government of Nepal will, of course, benefit, firstly, by solving the current problem characterised by the shortage of oil and oil products and its low national reserve and, secondly, by an increase in government revenue from the tax paid by NOC on the import of oil. The only loser will be IOC and if I were its executive director I would definitely not sell goods to another enterprise that has difficulty making a part payment of Rs 240 million on a loan of about Rs 6000 million.

The government has often used the generosity offered by the Indian government for political purposes, in particular, to maintain the distorted domestic price structure that cannot be sustained in the long run or in the absence of assistance from India. The price of oil and oil products is the current example. Similarly, the exchange rate of the Nepali currency vis-à-vis Indian currency has been maintained at an artificial level by the Nepal Rastra Bank (NRB) by selling its US dollar to the Reserve Bank of India for the Indian currency, for which it has no adequate reserve to meet the public demand at the fixed rate of NRs160=IRs100; in the first six months of the current fiscal year, according to press reports, NRB has boughtRs 50 billion worth of Indian currency by paying US dollar. In addition, the import payment of about 91 commodities from India is made in dollar. It appears that such a misuse of the generosity provided by the friendly country has given the false impression to the public with a negative feeling about the concerned country itself.It is difficult to understand the national financial management in a unified method. NOC has difficulty making a part payment on its past dues, as stated earlier. The Government of Nepal, on the other hand, has no shortage of resources — the unused cash reserve of the Government of Nepal at the NRB in mid-April, 2007, totals Rs 18 billion — as its capital expenditure in the first ten months of the current fiscal year totals just Rs 11 billion, or 25 per cent of the allocated budget.

The government’s inability to use available resources for development has been instrumental in creating “stagflation” in the country, an economic situation characterised by stagnant income in real terms and rising price level. In fact, the government, if it so desires, can provide financial resources to NOC to clear the outstanding loan of IOC. There would be no reason to panic if the government managed the available resources with proper coordination within and among the ministries — a rare commodity for Nepal. The whole crisis can be solved with a minimum but intelligent effort.Dr Pant is executive director, Institute for Development Studies