- Nepal must boost economic productivity and combat unemployment, especially among its youth
May 14, 2014-Sometimes, there is a tendency to equate development with the presence of good infrastructure. Sure, that is part of the story but a better measure of development lies in the ability of a country's citizens to carve out their own destiny. That is perhaps why not all countries with tremendous natural resources are prosperous, as the 'resource curse' theory suggests. On the other hand, many countries with negligible natural resources but skilled populations, such as Singapore and South Korea, have punched well above their weight.
Today, Nepal releases its 2014 National Human Development Report, 'Beyond Geography, Unlocking Human Potential'. It comes at a time when Nepal has committed to graduate from a least developed to a middle-income country by 2022. Nepal has made remarkable progress in reducing poverty in the last decade. Inequality has also declined during the same period.
The aim of becoming a developing country is an appealing prospect for the population, particularly the youth. The criterion for graduating from the ranks of least developed countries requires a huge increase in per capita income. It also requires improvements in education and health (Human Assets Index) and the ability to absorb economic shocks, such as a financial crisis. There is one common thread running through all these preconditions: a productive and skilled population that is healthy and educated, and would continue to earn enough money to live well beyond a financial crisis. Nepal's Gross National Income, as of April 2014, is estimated to be around $733. It falls short by $457 to meet the graduation mark of $1,190.
At current prices, Nepal needs a cumulative estimated investment of $16 billion until 2021 to meet that income target, while the growth rate needs to rise close to double digits.
But much to do
It is very encouraging to note that trends in human development and poverty reduction in Nepal have been positive across all regions, and caste and ethnic groups. However, the pace of change has not been as fast as one would expect. The Western Hills and Western Mountains have made great strides in literacy and education and earnings from remittances as well as tourism have improved. But the Mid-Western and Far-Western Hills, the Western, Mid-Western and Far-Western Mountains, and the Central Tarai lag in these areas. Simply put, a person born in Rolpa or Rautahat has fewer opportunities compared to someone born in Kathmandu or Kaski.
The Kathmandu Valley and certain urban centres get priority in investments for infrastructure development and services, and consequently gain from expanding opportunities.
So a major challenge for policymakers is to create an effective and decentralised system where investments are made and opportunities created equally for other regions. This would also ensure that Kathmandu and other urban centres do not suffer from increasing inflation, pollution, overcrowding, problems in delivering services and the perils of natural disasters. All of these are potential threats to an economy.
In the Eastern and Central Tarai, where labour and productivity, as well as access to facilities, is at its highest in the country, human development is at its lowest and poverty high. This regional disparity, outlined in the report, needs to end quickly. But this can only come about with clear recognition of the strengths and weaknesses of Nepal's different sectors.
Farms and jobs
For a country where two-thirds of the labour force is engaged in farming, improvement in agricultural productivity is a precondition to spur economic productivity and bring about economic transformation and prosperity.
To make this happen requires a two-pronged approach. First, Nepal needs to transforms its agriculture from subsistence to a commercial and modern enterprise. Second, it needs to expand the manufacturing and service sectors in order to absorb a growing labour force. This is a priority as many workers now seek jobs abroad.
Finally, it is critical that Nepal harness its large young population to take advantage of the demographic dividend. It is cause for great concern that 30 percent of those of working age, many of them youth, remain underproductive. The rising trend of labour migration suggests that there is not enough gainful employment in the country. This mismatch between youth potential and actual employment status must be urgently addressed so Nepal remains on track to graduate to a developing country by 2022.
McGoldrick is UNDP Resident Representative in Nepal
Published: 15-05-2014 09:56