Discussing the current economic crisis at an interaction organized by Nepal Republic Media on Monday, they asked the government to be serious and work in war footing to resolve the ongoing crisis. Instead of paying lip service, the government should establish ‘Economic War Room’ and address people’s woes, they suggested.
(As told to Kuvera Chalise, Rudra Pangeni, Kriti Bhuju and Sujan Dhungana).
Govt will have to pay high price for inaction: Swarnim Wagle, Former Member, National Planning Commission
The ongoing crisis should be viewed from the national security and economic perspectives. If we look at history, we can see many countries have emerged and collapsed because of their own economic issues particularly of being indebtedness. Our internal management has remained poor this time. The government can take austerity measures to reduce expenditure. I think the country will have to pay high price for this inaction. As fuel is not coming from India, the only option left is to either bring fuel from China or airlift from other countries.
Revenue figures are severely worrying. Revenue mobilization in the month ending mid-November was half of the target set by the government. Revenue shortfall will directly affect development works as the government cannot reduce recurrent expenditure that, among others, include salary of civil servants. Reduction in development budget will leave an impact on economic growth in the next fiscal years. To plug the gap between revenue and expenditure, the government will have to seek budgetary support from agencies like International Monetary Fund and the World Bank.
Rent-seeking has mushroomed in recent months. I fear the trend will continue even after the crisis is over. As rent-seeking drives inflation up, poor and consumers will have to suffer. Our inflation is derived as our currency is pegged with Indian rupee. It is a bit higher compared with India. And I see the real possibility of diversion now. If inflation is differentiated, our competitiveness will collapse.
Our trade imbalance has narrowed due to decline in imports. Import of fuels and intermediate materials has been affected because of the Tarai unrest. We need to import intermediate products as our export can be based on such products. I don’t think we will have external vulnerability as we are cushioned by remittances.
Real sectors are important for economy. The target of achieving 5.5 percent economic growth was reduced to 3.04 percent after the earthquake. We had set target of achieving 6 percent growth in the next fiscal year through reconstruction works. But I cannot see that happening.
I would like to give five suggestions in this present context. The first is to amend and endorse new laws related to economic sector. We need second-tier economic reforms for higher growth. The second suggestions is to improve our doing business indicators. We are very poor in three out of ten indicators in doing business. Problems that one face while paying taxes should be immediately addressed. Reforms are urgent in getting credit and enforcing contracts. The third suggestion is to enhance our connectivity and infrastructures. Landlocked countries not only need to build their infrastructures but also advocate for building good infrastructure in their nearest ports. Modernizing customs points is another important task. We should build at least five state of the art customs point with India and two with China. We cannot rely on such pathetic customs points of Raxaul and Jogbani. Likewise, the proposed Kathmandu Tarai Madesh Fast Track road project should be initiated immediately. Landlocked countries also need to expand aviation and telecom sector. Ethiopia, a landlocked country like Nepal, has showed that different industries will be viable with a sound aviation service. Ethiopia has progressed by selling cut flower to European countries. It became possible because they have effective aviation service. Ethiopia now exports cut flowers worth US$ 500 million annually to Europe compared to zero in 2000. We can have the best telecom company in the world. We should forsake the mentality of always being poor.
The fourth suggestion is, the government should immediately initiate works to boost fuel reserves. It should work to reduce dependency on fossil fuel. Solar plants can be installed within six months. I don’t know that is holding the government back.
The firth suggestion is to diversify our trade. Trade diversification does not mean import diversification alone. It also means diversification of assets and productive base. Export diversification alone does not give us solution. There is no two-way exchange of goods and services. It is high time we entered into regional value chain with India like the way it is happening between Indian and East Asian countries. If we had an energy-intensive vital component of Indian industry in Nepal, India could not have imposed blockade like this.
Business economists say Trump tariffs will harm US: survey
Government should prepare crisis management plan:Hari Bhakta Sharma, Senior Vice President, CNI
The government has not shown any urgency to resolve the ongoing problem. It can be solved only through talks. But nothing has been done to start meaningful talks with dissenting parties and initiate talks at diplomatic level with India.
The ongoing crisis will make severe impact on our economy. It can be compared to the Indian blockade of 1989. In these nearly three decades, the government has done nothing to develop industrial sector in Nepal. In these decades, political situation remained unstable and bureaucracy also failed to perform effectively. Similarly, political parties established the culture of organizing strikes and protest to fulfill their demands. Over these three decades, all the political parties used the same formula to fulfill their demands. This is what the Madhesi parties are doing at present.
We, the private sector, have given executable suggestions to the government time and again. But the government ignored them, stating that they only benefit the private sector. For example, CNI, right after the earthquake, requested the government to form business recovery center and launch package programs for recovery and protection of big industries, among others. But none of our suggestions went unheard.
We want industrial sector to be backbone of economy. For this, the government should ensure smooth supply of electricity, provide security in case of emergency, and ensure minimum supply of fuel for industries so that they can operate even during the period of crisis.
Black-market is flourishing at present. If goods are easily available in black-market, why cannot government ensure smoothen supplies.
Around 9,000 containers are stuck at different entry points or customs offices. Importers have to pay billions of rupees as detention and demurrage charge. We need to pay around Rs 5 billion to shipping companies to release good worth hundreds of billions of rupees that have remained stuck at different entry points. If importers are asked to pay such a huge detention and demurrage charge, the cost will be added on the price of goods. If this happens, everyone will suffer. To prevent this, the government should apprise shipping companies of the preset problem and request them to not levy detention and demurrage charges.
Industrialists and businessmen are doing their best to sustain their business. But the government has not fulfilled people’s demand to smoothen supplies. It should invite dissenting parties for result-oriented talks. If needed, the constitution should be amended to solve the existing problems.
The government shouldn’t remain mute spectator. It is the responsibility of the government to rescue private sector during crisis. It should provide discount on electricity tariffs and float loans at minimum interest rates, say at two to three percent to prevent job cuts as this has chain impact on economy. The government should immediately come up with crisis management plan. It should invest on infrastructure development, enhance energy generation and bring strategic policy for highest employment generating sectors like agriculture, manufacturing, and tourism, and focus on diversification of products, imports and employment.
I don’t understand why Nepal is not raising the present issue before World Trade Organization. We should tell them how India has disrupted supply of essential commodities like petroleum, food and medicines, among others.
The government should prepare white paper on our economic situation. It should make strong monitoring teams to discourage market anomalies. Similarly, it should prepare a structured implementation plan on what the country needs to do at present. Likewise, a high-level committee has to be formed to study the plight of commoners and find solutions to them.
Restore supply of essential goods: Madan Kumar Daha, Economist
The first and foremost thing that the government should do is improve supply of essentials commodities like medicine and fuel. People’s life has turned miserable because of Tarai unrest and blockade. While hospitals are running out of essential drugs, LP gas crisis has been affecting every household. Thus, the foremost thing is to address these fundamental issues through any means. The government should immediately declare state of emergency and assure peace and stability at border areas so regular supply is restored. Meanwhile, the government should also increase supply from alternative entry points, including those along the northern side. Priority should be given to develop infrastructures in trading points along Nepal-China border.
After improving supply of essential commodities, the government should bring long-term programs and policies so that the country will not have to face similar situation in the future. It should diversify trade and sign long-term trade agreements with China. As the country is passing through difficult times, the government should immediately adopt austerity measures and reduce unnecessary fuel consumption. For example, bureaucrats can use public vehicles instead of individual vehicles. Similarly, the government should launch a campaign to control black-marketing of essential goods. It should improve distribution system better and take strong action against unscrupulous traders involved in black-marketing.
I think we did nothing for economic development in the past decades. We only promoted ‘easy economy.’ Development activities couldn’t gain pace in the past decades due to lack of capability, poor governance and corruption. Our dependency with a single nation for trade and imports increased significantly in that period. Our present day suffering emanated from it. In a bid to promote commission game, none of the earlier governments broke the monopoly of Nepal Oil Corporation (NOC). All the previous governments failed to realize the fact that private sector is the pioneer of development activities.
Some have taken the ongoing Tarai unrest and Indian blockade separately. But for me, both are inter-linked and they are against humanity. Tarai unrest and blockade have to be criticized as they have disrupted supply of essential goods.
Most importantly the scenario of domestic economy shows that we are moving toward recession. The situation can turn dangerous if needful measures are not adopted timely. If the situation is not improved, it can even result to devaluation of Nepali currency vis-à-vis Indian currency.
As the problem is of political nature, the government should sit with agitating parties and initiate diplomatic talks with India. It should come up with a concrete action plan to resolve the ongoing crisis at the soonest possible time.
