Follow in Chandannath’s footsteps

  • Hopefully more municipalities sensibly compete with each other to attract investment

Sep 19, 2018-

What could potentially have been a trail-blazing event in Jumla just got postponed. The district’s Chandannath Municipality was planning to hold an investment conference named Jumla Investment Conference on September 14. The aim was to attract investments for industrial development within Karnali Province. Finance Minister Yuba Raj Khatiwada was going to attend the event. But apparently the district coordination committee objected to the name, suggesting that the meeting be renamed Chandannath Investment Conference instead of referring to the whole district. Let us hope the concerned parties are able to sort out the differences, and the conference does take place soon.

In either case, the municipality deserves applause for taking the initiative. On the surface, this is not that big of a deal. We can brush it off by saying it is just an investment conference. One of those ‘been there, done that’ variety. Or, we can choose to recognise its significance at a time when the nation is just getting exposed to the pros and cons of federalism. What we are witnessing on the tax front in which local governments have been haphazardly imposing all sorts of taxes is the bad side of federalism at its incipiency. Let us just call it growing pains within the new setup. What we just saw in Jumla is the good side. The ideal side. Hopefully, more municipalities, districts and provinces sensibly compete with each other to attract investments—domestic and/or foreign. At its best, federalism gives local governments an opportunity to show how hungry they are.

Chandannath Municipality, or Jumla for that matter, is hungry—hungry for investments. For roads and bridges. For industry and commerce. For healthcare and employment. And for economic development and higher living standards. In fact, Jumla’s quest for ‘better’ is not specific to Jumla. This is the story of the whole nation. A nation of 29 million with a Gross Domestic Product (GDP) of $24 billion, for a per capita income of $800-plus, Nepal needs development. Badly. Until just a few years ago, the oft-used excuse was that the nation lacked political stability. Now that elections for all three levels of government have been successfully completed, that excuse does not sell any more. Not to a nation that saw its economy pushed back possibly decades during the decade-long Maoist insurgency. Or to the millions who are forced to migrate for low-skill foreign employment. Personal remittances accounted for 28.3 percent of GDP in 2017, as per the World Bank. They go because opportunities lack at home. Opportunities are lacking because, except for hydro, there is not much in the way of resources. The only way out is to be able to attract outside capital. If you are thirsty, you go to the river. It is not the other way round. Nepali leaders can learn a thing or two from our two immediate neighbours.

How Xi and Modi woo investments

In September 2015, Chinese President Xi Jinping began a week-long US state visit by landing in Seattle. There, he visited Boeing’s plant and Microsoft’s campus, and held a roundtable discussion with Apple CEO Tim Cook, Amazon.com CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, IBM CEO Virginia M. Rometty, along with 30 US and Chinese business leaders. Only then did he head to Washington, DC. In that same month, Indian Prime Minister Narendra Modi began a two-day trip to Silicon Valley in California by meeting Tesla Motors CEO Elon Musk and Tim Cook, among others. He had dinner with 350 business leaders. Then in June 2017, a day before meeting with US President Donald Trump, Modi once again held a meeting with the heads of some of the top US tech companies, including Tim Cook, Jeff Bezos and three Indian-born CEOs—Google’s Sundar Pichai, Microsoft’s Satya Nadela and Adobe Systems’ Shantanu Narayen.

Prime Minister KP Sharma Oli visited India in April and China in June this year. His visits were focused more on improving bilateral relations. Announcements on infrastructure projects such as railway connectivity, highways and hydro projects were made—all important stuff. Kudos to him. Equally important is the need to understand how businesses think and what they require before they are ready to bring capital. One would not know until one rubs shoulders with them, talks to them and—most importantly—listens to them.

In today’s global economy, this takes place routinely. In January this year, ahead of the annual World Economic Forum meeting in Davos, Switzerland, French President Emmanuel Macron hosted 140 multinational business leaders. One of the messages he drove home was how in his first months in office he pushed through pro-business reforms, including reforming the country’s labour laws and cutting regulations. Some other audience in some other geography would probably want to hear some other message. These days, many probably value good computer connections more than natural resources.

Nepal’s topography no longer bane

Sandwiched between two giants, Nepal’s predominantly mountainous topography historically was regarded as a bane. ‘A yam between two boulders’ was the proverbial expression to describe Nepal’s plight. Now, that very factor could prove to be a boon, if handled right. China is already the world’s second largest economy. India may be a decade or two behind, but it too is on a similar growth trajectory. The growth that is unfolding in these two economic forces can rub off on its neighbours, including—or particularly—Nepal as it is situated right in the middle. Consider this. Beijing’s ‘Made in China 2025’ programme plans to move towards robotics, aerospace and electric vehicles from predominantly making basic consumer goods such as clothing and consumer electronics currently. These low-level jobs in all probability are not going to move to South America or Africa or even central Europe. They will probably stay in Asia. Most of the supply chain is based in the Far East.

In recent years, wages have rapidly risen in China, particularly along the coast. This has already created opportunities for the likes of Vietnam. A lot of the low-skill, low-paid work that made sense to manufacture in China 10-20 years ago is pricing itself out. Foreign direct investment can—and will —start looking for alternatives. Even China might start to think about shifting production elsewhere. In fact, this is already happening. China is developing a 750-acre industrial park in Chittagong, Bangladesh, which will largely be used by Chinese manufacturing firms. For low-wage countries like Nepal, opportunities abound. Mr Oli, please do not pass up the opportunity.

Pandey specialises in portfolio investment and economic issues.

Published: 19-09-2018 08:18

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