Valley makes up 23pc of Nepal’s economy

- SANJEEV GIRI, Kathmandu

Jul 13, 2015-

Urban and suburban areas account for 63.1 percent of Nepal’s gross domestic product (GDP) as the country is on an urbanization drive, Economic Survey 2014-15 said.

Cities and towns contribute 33.1 percent while the surrounding village development committees (VDCs) make up 30 percent of the GDP, reflecting the increased economic activities and investment in infrastructure in these areas.   

Among urban centres, the Kathmandu Valley is the main hub of economic activities, accounting for a whopping 23.4 percent of the national economy. The share of the rest of the urban areas is 9.7 percent. “Though Nepal is among the least urbanized countries in Asia, population concentration in the country’s urban areas has been swelling for the past few years due to several reasons,” the report said.

Factors like geographical structure, transportation network, status of infrastructure development and economic viability and scope are the major factors contributing to urbanization. Due to the rapid growth of urban centres, the government declared 133 new municipalities in the current fiscal year, bringing the number of municipalities in the country to 191.

Another interesting revelation of the economic survey is that 37.7 percent of the urban population was born in rural areas or abroad. Similarly, 77 percent of the people migrating to urban areas are from remote regions of the country.

“The contribution to the GDP is higher in areas where the concentration of population and business is greater. This is natural,” said Dinesh Lal Shrestha, vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

According to him, 50-60 percent of sales in the country happen in the Central Development Region, with the Kathmandu Valley accounting for a massive share. Shrestha said that the very weak performance of the rural sector might be because of the government’s poor data collection mechanism.

Meanwhile, agriculture and related activities provide one-third of the jobs in urban areas. Wholesale and retail businesses account for 17 percent and manufacturing accounts for 14 percent of the employment.

“The significant contribution of urban areas and adjacent VDCs to the GDP shows where the concentration lies,” said Anuj Agrawal, vice-president of the Confederation of Nepalese Industries (CNI). According to him, the main reason behind the small contribution of rural areas is the failure of the government to focus on small and micro enterprises which mostly operate in remote regions.  

According to Agrawal, increasing the economic contribution of rural areas is both an opportunity and challenge for the government. “The government should be ready to take up this challenge and help micro entrepreneurs to produce better results,” Agrawal said.  

Manufacturing industries are bunched up in the Kathmandu Valley and suburbs of Biratnagar and Birgunj. The Kathmandu Valley accounts for 40 percent of the jobs generated in urban areas while Biratnagar and Birgunj account for 17 percent and 15 percent respectively.

“This is because of lack of adequate infrastructure,” said Shrestha, adding that the Industrial Enterprises Act contained a provision to provide facilities and incentives to industries operating in the 22 remote districts of the country. “However, these places do not have even a good road. And when roads are built, the place is designated a municipality, making it ineligible for the incentives and facilities.”  

As per the economic survey, the Kathmandu Valley has a comparative advantage in radio, television, communication equipment and publication and printing.  The report also states that 24 percent of Nepal’s urban population lives in Kathmandu Kathm-andu is home to 9.72 percent of Nepal’s total population.

The report has also revealed that Kathmandu is the only metropolitan city which has a population of more than 1 million. Though cities in the Tarai have immense economic potentiality, the valleys and inner Tarai have a higher rate of urbanization. The cities in the hills too have a substantial urbanization rate.

  • Cities and towns contribute 33.1pc to GDP

  • Surrounding VDCs make up 30pc of GDP

  • 37.7 pc of urban population born in rural areas or abroad

  • Agriculture and related activities create one-third of jobs in urban areas

  • 50-60pc of sales happen in Central Region

  • 24pc of urban population lives in Kathmandu

  • Valley accounts for 40 percent of the jobs generated in urban areas

Published: 14-07-2015 07:56

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