New study picks out 5 sectors for growth

- BIBEK SUBEDI, Kathmandu

Nov 17, 2018-

A new study by the World Bank and International Finance Corporation has picked out five priority sectors—tourism, agribusiness, education, health and information technology—that Nepal should focus on to boost sustainable investment and accelerate productivity for comprehensive economic growth. 


The two institutions’ first joint Country Private Sector Diagnostic for Nepal found that institutional challenges and a demanding geography have made it difficult for Nepal to build on its unique advantages. These obstacles can be overcome with a new approach focusing on strengthening institutions, infrastructure and connectivity while removing investment barriers, the study said.


The report, prepared in close consultation with the government and other stakeholders, assesses opportunities and provides recommendations and policy reforms that can enable the growth of a competitive private sector, the World Bank and International Finance Corporation said.


With more than 70 percent of the population working in agriculture, creating markets in high potential agriculture value chains, such as tea and spices, can have a substantial impact on living standards in rural areas, according to the study. It has pointed out low agricultural productivity due to an inefficient government seed and fertiliser procurement and distribution system, and difficulty in aggregating land to commercial scale as key constraints to agribusiness. The study has suggested diversifying tourism products to medium or high-end by capitalising on Nepal’s comparative advantages in high potential destinations, such as Annapurna and Lumbini, as they have the potential to create many better jobs and help less-developed parts of Nepal.


It has also suggested that an increase in private sector entry and quality in the tertiary education and technical and vocational educational and training subsector can ease a major constraint on firms, which is a limited supply of workers with market-relevant technical and managerial skills. 


According to the study, an increase in the number and quality of private healthcare service providers will help address critical human capital constraints by enabling better access in underserved areas. Similarly, it has pointed out that the information and technology services sector can expand good job opportunities for skilled youth, improve the productivity of other sectors and facilitate good governance as the sector is relatively unconstrained by Nepal’s weak physical infrastructure, logistics, high land prices and small domestic market.   


“Cross-cutting constraints need to be addressed to attract private investment and expertise,” said Nena Stoiljkovic, IFC Regional Vice-President for Asia. “Simpler regulations, better infrastructure, stronger institutions and more developed human capital can open the doors to investment.” Addressing a ceremony organised to launch the report, Finance Minister Yuba Raj Khatiwada said the government had begun work to scrap outdated laws and draft new ones to simplify the tax system, create a conducive environment for investment, and introduce reforms to help the sector thrive.


Hartwig Schafer, World Bank Vice-President for the South Asia Region, said significant opportunities remain for broader engagement for the private sector although it already plays an important role in areas such as health and technical training. “Nepal has asked the World Bank Group to support its immediate priority of crowding in the private sector,” said Schafer. “We view this as a positive step forward and stand ready to support these critical reforms by going beyond traditional sources of development financing.”

Published: 17-11-2018 07:28

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