Most Asian economies experienced high economic growths along with increased foreign investment in the last few decades. While countries such as Hong Kong, Japan, Singapore, South Korea and Taiwan were roaring in the eighties and early nineties; other countries like China, India, Vietnam and Mongolia have firmly held the tempo of higher economic growth in the past decade. These countries have not only attained higher growth, but also reshaped the landscape of global economy. For example, China beat Japan and Germany to become the second largest economy of the world. Some economists believe that a higher rate of saving, higher investment in human capital, structural transformation, and a shift of labor force from traditional to modern contributed to the growth miracle in a number of emerging Asian economies.
While most of Asia was contributing to reshaping the global economic landscape, Nepal largely remained dormant on the economic front. Though a number of factors have contributed to its sluggish economic performance, political instability comes to the fore. Such instability has weakened institutions and worsened the law and order situation. General unpredictability is heightening in Nepal. An average investor who expects a good return for his investment with low risks cannot find an investment-friendly environment in Nepal.
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The instability has not only extended the transition but also created a number of power centers. The fragmented state power and increased burden of dealing with so many vested interest groups ranging from political parties to goons have dissuaded entrepreneurs. The situation does not inspire confidence in a businessperson to borrow the capital at a high interest rate from a bank in order to venture into a new business, and deal with a number of influential labor unions in order to successfully run it. A laborer, meanwhile, is suffering from the problem of daily necessities, and having no dreams for tomorrow, finds himself a loser in the current business environment. He thinks he is exploited due to an unfair distribution of business returns, evident in his remuneration far below the sustenance level.
But it is hard to distinguish between a loser and a winner in a dilapidated political economy like ours. Winners and losers may be apparent in a thriving economy with a competitive environment where there is a high demand for labor. But undoubtedly, one can easily conclude that ordinary folks suffering from hand to mouth problems are the biggest losers in a laggard economy.
Though it is evident that political instability remains a prime factor contributing to sluggish economic performance, it is also true that major stakeholders have disregarded the long-term interests of Nepal. Many of these stakeholders wasted time and energy on issues that are peripheral to development, poverty and inequality. Neither major political parties nor donors have identified the core priorities of Nepal’s economic development. Political parties have been selling agenda that easily fuel waves of romantic furies, whereby people can be fooled. Donors have their own agenda, which may not necessarily align with the need and rationale of the broader and sustainable spirit of development.
Nepal’s core priority is the development of major infrastructure such as transportation, electricity, health, and education. Since Nepal is in a political logjam, donors could have swayed political parties and got them to forge a common understanding on the development of infrastructures. Donors’ role in convincing development stakeholders and mobilizing higher foreign investment is particularly important in times of crisis. It is undeniable that only a huge investment in infrastructures can promote forward and backward linkages among the sectors with the most potential such as tourism and agriculture. The time, energy and resources spent by various interest groups in the last two decades would have transformed the fortunes of a country like Nepal, had they been made in the area of infrastructure development.
Stakeholders waste time and energy on issues that are peripheral to development, poverty and inequality.
Nepal not only lags behind the emerging economies of Asia, but conflict-plagued Africa has also leapt ahead of it. While Nepal has been struggling to sustain a four-percent growth, many African economies have been enjoying a buoyant growth. Countries such as Mozambique, Timor-Leste, Rwanda and Ghana, despite going through civil war in the past, have claimed a growth of eight percent in the last few years. An improved business climate has supported the transformation of Africa. The Economist has recently labeled Africa a “hopeful continent”, a notable upgrade from its earlier qualifications of a rising continent in 2011, and hopeless continent in 2000. A salient feature of the African growth is that it has been able to engage and increase the presence of emerging and competing players of the global economy such as China, India, Brazil and Russia. Unfortunately, Nepal, despite being situated between two giant emerging economies, missed this historic opportunity.
The growth train that many Asian economies have been riding for the last few decades and that some African countries recently jumped on to has left Nepal behind. Even though early riders have been enjoying the ride, Nepal should rush to catch the growth train soon. Strong and stable institutions, decent work culture, and a jumpstart to invest in infrastructures and human capital should cement the path for higher growth.
The writer is an economist
gunakarbhatta@yahoo.com
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