Recently government of Nepal made public a study report titled Nepal Trade Integration Strategy (NTIS) 2010 which ‘identifies’ 19 products as having export potential (EP). The study, mainly based on last five year’s (2004-2008) figures of the export of different products has identified 12 commodities and 7 services namely tourism, labor services, hydro-electricity, education, health, engineering and IT /BOP as having EP. Of the 12 commodities 7 are agro-food products. Besides, another 5 products/services also have been included.
The donor-assisted study aims at promoting export trade for a medium-term of 2 to 5 years. The report provides detailed analysis of potential products and their markets while recommending policy and institutional reforms to exploit their EP; it also does some SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis of those products but hardly analyzes their CA or CA in general in the overall context of political and macro economy of the nation, which I attempt to do in the lines that follow.
It is true that agricultural products identified in the report like big cardamom, ginger, honey, lentils, tea, dairy products, sugar, and medicinal herbs have EP. Nonetheless, farm supplies are mostly too little in quantity to lure or capture reliable export markets besides being too low in value-added. As such, the whole agriculture sector needs to be restructured and its capacity enhanced with an integrated approach on raising production and productivity, promoting value addition and balancing domestic demands and exports.
‘Iron and steel’ has been identified on the basis of recent export surge of iron rods (especially to Tibet). But first, we cannot rely on single market as it may collapse anytime depending on the destination country’s tariff and import policies and other conditions (recall what happened in the exports of vegetable oil). Second and more importantly, a commodity whose every raw material is imported and whose power requirement is very high cannot be defined as having CA, especially in a power-deficit power high-cost country; and EPs without CAs do not make sense. Cement is of course an area of natural CA as the nation has large good quality deposits of limestone- its main raw material.
Service sectors like transit trade (between India and China), IT/BOP, health-care, education and engineering may bring dividends provided we come with innovative/qualitative programs or products in competitive prices. But again we must first build our fundamentals and capacities before launching such products, lest they become a non-starter. Similarly, native Nepali paper, pashmina, carpet and other woolen products and silver jewelries are promising export items provided we maintain our competitiveness in labor costs and craftsmanship skills.
Sandwiched between two large manufacturing powerhouses, Nepal faces huge disadvantage of economy of scales. Natural-geographical, economic-political adversities limit our opportunities to only three areas of products or services which are nature’s gift to us.
NTIS admits that the socioeconomic impact of most such exports have been low or medium, except in tourism and labor export where they are high. So the truth is that, sandwiched between two large manufacturing powerhouses, which are also two fastest growing economies of the world, Nepal faces huge disadvantage of economy of scales. National economy, already cursed to bear the extra costs of land-locked and rugged terrain, has fallen prey to the by-products of bad politics such as power shortage, excessive labor activism and lawlessness which have severely affected production and investment. Natural-geographical, economic-political adversities, compounded as they are, limit our opportunities to only three areas of products or services which are nature’s gift to us. However, they too- namely hydro-power, tourism and to a lesser extent, agriculture/forestry sector products- are not without constraints, most of them again man-made.
HYDRO-POWER
Energy is the scarcest commodity of modern times- both at home where load-shedding hours have been increasing, and in neighboring India. Nepal is one of the most potential hydro-power countries in the planet that, according to recent studies, is capable of generating over 100,000 MW of clean and cheap energy, something in far excess of her requirements. Hundreds of snow-fed, mansoon-swollen rivers criss-crossing the land, mountainous geography and sloping elevation make the country suitable and cost-effective for hydro-power projects—mega as well as micro.
On the other hand, with rapid economic development India’s power requirements have shot up, especially in her less developed north and north eastern states which fortunately lie within transmittable distance from Nepal; therefore, the demand-supply equilibrium seems perfect. Nevertheless, because of the protracted political instability and excessive politicization of the subject we have been losing the opportunity, even to Bhutan. As water resources related joint-ventures between Nepal and India in the past proved more beneficial to the latter, mainly because of our poor technical and negotiation abilities during those days, now any hydro-power joint-venture deal will be more than enough to overthrow the decision maker with labels of traitor and ‘Indian puppet’; accusations of selling out to India will shower from all directions- ultra-left and ultra-right ‘nationalists’, energy sector middle-men, transnational ‘environmentalists’ INGO-and NGOs, so-called civil society leaders, a section of the Press and so on.
TOURISM
Opulence of topographical heterogeneity and cultural heritage make Nepal one of the most favored tourist destinations of the world. Neighboring Indians from the hot plains find the place even more magnetic and convenient because of the cool climate, mountains, pilgrimage sites, close proximity, free visa access and currency convertibility facilities. With growing middle and upper class population both in India and China, willing to and capable of spending on travel, sky is the limit for our hospitality industry.
But, apart from sector related bottlenecks and poor infrastructure, rampant acts of anarchy like strikes, extortions and chakkajams are poisoning this otherwise thriving but sensitive industry.
AGRICULTURE
Despite limited availability of arable land Nepal enjoys CA in agriculture-forestry sector products as a result of her geological diversity and favorable agro-climatic conditions. Because of its co-relationship with rural poverty the sector is politically sensitive and deserves more attention and investment. Vicious circle of poverty-subsistence farming-poverty over the years has only produced followers for the communist parties at the costs of growth, development, equity, justice and social and political stability. Had the sector, that provides livelihood and employment to majority of the population, been buoyant or fast growing in the past, Maoist insurgency would never have taken roots.
Well that is a different story; coming back to CA, lack of vision and political will along with weak administrative structure have resulted in poor implementation of all agricultural plans and programs so far, including the ‘20-year Agricultural Perspective Plan’ (APP). Therefore, in all likeliness, NTIS 2010 too will meet the fate of APP as capabilities and intention of politicians and bureaucrats haven’t changed any. Therefore, investing single-mindedly on products that have natural competitiveness and fixed cost advantages and on infrastructure and social sectors like education, health and food security should be our focus as diverting resources (both public and private) elsewhere is simply a misuse of the scarce means.
jeevan1952@hotmail.com
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