Print Edition - 2016-10-22  |  MONEY

US envoy: Focus on job creation as era of remittance-led growth is ending

  • The ambassador says foreign investors want certainty and do not like high opportunity cost of doing business in Nepal
- RUPAK D SHARMA, Kathmandu
Companies that come to make money here don’t want to be told that of every dollar [you make], you can only remit, say, 20 cents. Things have to make business sense - Ambassador Teplitz

Oct 22, 2016-

Nepal should immediately focus on creating more jobs within the country to bolster the economy, as the era of remittance-led growth is likely to come to an end, US Ambassador to Nepal Alaina B Teplitz has said.

The statement of the ambassador, who’s been in Nepal for a year, comes at a time when the number of Nepalis leaving the country for foreign employment has fallen for two consecutive fiscal years. 

The fall in number of outgoing workers coincides with job cuts in many oil-rich countries in the Gulf, the biggest absorber of Nepali workers, following a drop in petroleum prices.

“As jobs dry up in the Gulf and other locations .... people will start coming back to the country. Maybe not all will come home, but those who come will need something to do and they will need viable jobs to support their families,” the ambassador told journalists at her residence at Kamaladi on Thursday evening.

It is estimated that at least 15 percent of the country’s population, mostly youths, has migrated to India, the Gulf, Malaysia and other foreign countries in search of jobs. 

If a fraction of people working in these countries returns home, Nepal will need to generate hundreds of thousands of fresh jobs. On top of that, over 512,000 people join the labour market every year, as per the Economic Survey 2015-16. These people also need jobs.

“I think Nepal needs to create a spectrum of job opportunities,” said Teplitz, who has not hesitated to talk about Nepal’s priorities since her arrival here. “You need high-end jobs for those with college education and advanced degrees; you also need a place for people who have made it through the high school or undergone vocational training.”

Although jobs for people with different backgrounds are in short supply at the moment, it is not that Nepal does not have the potential to create them. “Nepal grows high-value crops, such as cardamom, tea, coffee, ginger and walnuts. Value can be added to these products through processing and packaging; and they could be exported,” Teplitz said, indicating these manufacturing units can employ lots of people.

Beyond export of these often-talked-about commodities, Nepal can also think of selling IT products abroad, the ambassador added. “I think there are many talented people here, who can design software and conduct back-office operations for global companies. All you need is big internet pipe and deliveries can be made anywhere in the world.”

Also, component manufacturing, according to Teplitz, is another area where Nepal can focus on. “These days, you don’t have to make the whole refrigerator. You can make parts of refrigerators or parts of cars and export them [to countries where assembly plants are located],” she said, adding, “The final area Nepal has not been able to capitalise on is tourism. If serious focus is laid on developing the sector responsibly, lots of high-end tourists will visit Nepal, generating lots of jobs.”

Proper development of all the areas that can support job creation and economic growth, however, hinges on availability of energy, transport, including aviation, and communications infrastructure. Although the country has fairly modern telecommunications network, energy and transport infrastructure are in a shoddy state.

Ironically, Nepal, home to around 6,000 rivers, rivulets and tributaries—with potential to generate over 50,000 megawatts of electricity—has installed capacity of around 850MW. In contrast, peak electricity demand stood at 1,385MW in the last fiscal year. Little wonder, power cuts prolong over 12 hours a day during winter, when the water level dips in rivers.

The condition of critical transport infrastructure, including roads and airports, is no better. 

This infrastructure gap suggests, Nepal needs to invest billions of rupees in different areas. But the government has already hinted it may not be able to mobilise all the financial resources to build critical infrastructure.

This calls for higher private investment, both domestic and foreign. Also, private investment, especially foreign, is required to set up industrial bases to create tonnes of jobs and give impetus to economic growth. 

“For this, a policy environment is needed that allows firms and investors to respond to the emerging business opportunities that Nepal offers to domestic and international investors and firms,” the ambassador said.

The government has recently made attempts to create a favourable business environment by introducing the Industrial Enterprise Act and the Special Economic Zone Act. Also, the Parliament is reviewing drafts of Labour Bill and Foreign Investment and Technology Transfer Bill, which are expected to be reviewed soon.

“While the draft Foreign Investment and Technology Transfer Bill calls for creation of one-stop service centre, it does not reduce the number of approvals for potential investors. This may make it difficult or expensive for investors to establish themselves here,” Teplitz said. “We encourage the government to look at the automatic window concept which is being used in India—the top destination for foreign direct investment in 2015.” 

An automatic window reduces the number of approvals and streamlines the investment process, making it easier for businesses to get to work.

Also, the provision on putting a cap on repatriation of profit generated by foreign investors needs to be removed from the draft bill, according to Teplitz.

“There should be no limit in profit repatriation. Investors come here, create partnerships, establish businesses, hire people and work here, so they need to feel certain that they will get a return on that investment and that profit can go into their businesses elsewhere,” she said. “Companies that come to make money here don’t want to be told that of every dollar [you make], you can only remit, say, 20 cents. Things have to make business sense.”

If such provisions are incorporated in the Bill, opportunity cost of doing business in Nepal will go up, redirecting the flow of American investors to other emerging economies, such as Myanmar, Laos, Cambodia and countries in Africa, Teplitz warned.

“So, processes should be well-defined, smooth and reliable, as foreign businesses want certainty. This will introduce Nepal as a low-risk economy, which will encourage businesses to come here,” she added.

The Ministry of Industry (MoI), which framed the bill, on the other hand, has said the bill is still in its draft format. “We are currently holding discussions with various stakeholders and are collecting their feedback. We will make necessary amendments to the draft before forwarding it to Parliament, MoI Spokesperson Yamkumari Khatiwada said, adding, “In a competitive world, we cannot afford to introduce a law that is regressive.”

Published: 22-10-2016 08:37

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