If we look back at the history of our country, political instability has been the major hindrance to economic development. Therefore, the Nepali people are hopeful that the country will see economic growth this year if the interim election government is able to hold fresh polls.[break]
With the rapid rise in the number of convenience stores and supermarkets in the country, trading business has established itself as one of the important economic contributors in the last few years. People used to hesitate to enter such stores earlier, but now there is a big change in their lifestyle and shopping trend.
“These days convenience stores are the first choice of customers as they do not have to bargain, can get a wide range of products under a single roof and can rely on the quality of products,” said CN Paudel, operation manager of Saleways Department Store.
The opening of Bluebird Departmental Store in 1985 is considered to be the beginning of the trend of super stores in Nepal, but it was only after the opening of Bhat Bhateni Super Market (BBSM) in the early 1990s that the middle-class consumers enjoyed the shopping experience at departmental stores. Today, convenience stores and super stores are present in every nook and corner of the major cities.
There was also a huge increase in the number of private vehicles during the real estate sector boom. The real estate and housing industry witnessed a rapid growth from 2005 until the Nepal Rastra Bank (NRB) imposed ceiling on real estate loans in September 2010. Not only that, the government also announced a new provision which made it compulsory for real estate buyers to declare their income source for purchasing property worth more than Rs 5 million.
“The sale of private vehicles reached its peak in 2009/10 when the real estate sector enjoyed a boom. But since the real estate sector slowed down after the NRB’s policy, the sale of vehicles has been highly affected and it is only this year that the sale has slowly started picking up,” said Saurav Jyoti, president of Nepal Automobile Dealers’ Association (NADA).
The market also saw the arrival of many new brands and models of electronics devices, especially TVs and mobiles, in the past few years, with LCD TVs replacing CRT TVs and smartphones replacing feature phones.
“With the introduction of new technology and drop in prices, electronics market saw exponential growth in the last few years. The sales of electronics devices have been growing by around 15 percent every year,” said KN Jha, general manager-sales of Chaudhary Group.
Likewise, sales and import of luxury brands are also on the rise in Nepal at a time when sales of luxury brands in Europe and the United States have dropped since the financial crisis. “The changing lifestyle and improving living standard of Nepalis have increased the demand of these items and this has increased trade deficit due to our dependency on other countries for such items,” said an economist, Chiranjibi Nepal.
“The political instability after the year 2000 has halted industrial growth while trading business has exploded as it is easy and there are less risks,” said Nepal, adding that the increase in number of groceries and sales of vehicles, electronics and luxury items is the result of growth in trading business.
According to Sudip Thapa, managing director of ANS Creation who is soon venturing into trading business, said that big industrial houses also started trading business in the past few years which has hindered the economic growth as trade alone cannot enhance the country’s economy.
Future prospects
Nepal said that if elections are held this year and the country gets a stable government, investments will flow in areas such as hydropower, agriculture and tourism besides trading business provided the government’s policy is favorable for investment. Besides, he said that groceries, service centers and showrooms of electronics products and vehicles and branded shops for luxury items will also increase exponentially.
The growth potential of groceries is very high but many investors willing to invest in this business had refrained because of the political instability and poor security situation. “If situation improves, anyone can easily guess that more groceries and supermarkets will open in the future due to their increasing popularity and the changing lifestyle of people,” said Paudel.
Agro products have very high potential in Nepal. “Many domestic investors and industrial houses are planning to invest in agriculture if a stable government is formed. This can also reduce the ballooning trade deficit the country is facing through import of agro products,” said Thapa.
With the ever growing demand for luxury items, investors need to carry out research about the potential of those items that can be manufactured in Nepal itself. Economists say that herbal cosmetic items have demand all over the world and the production and export of herbal products would see rapid growth if a stable government is formed.
Reducing the ever increasing import of goods and gradually decreasing the import of those goods that can be produced in Nepal itself will help strengthen Nepal’s economy. Hence the economists suggest that investors should explore the areas and invest in manufacturing of goods that can be produced within the country but are still being imported to cut the ballooning trade deficit.
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