Looking inward

  • Nepal needs home-grown economic models for development

Dec 13, 2018-

A fundamental component of any successful development model is a clear, targeted and time specific agenda that outlines how a specified desirable change in society is best achieved. While Nepal has not adopted any complete economic model of its own, it has launched partial and temporary programmes—largely with support from external forces such as the United Nations. Nonetheless, these efforts have not been enough to meet our rapid development goals.

Under the party-less Panchayat system before 1990, public sector industries in notable numbers were established through external assistance.  It was assumed that economic growth could be achieved through industrialisation.  It is also true that a correctly designed massive injection of capital, coupled with interventions by the public sector, would also ultimately lead to industrialisation and economic development in its initial stage. At this point, two programmes based on political propaganda were also introduced. The ‘food, shelter and clothes for all’ initiative was a basic needs model that focused largely on short-term developmental goals. The other was an ambitious transformational approach that sought to overhaul the economy to make it equal to the ‘Asian Standard.’ While ambitious and promising (to a certain extent) on paper, no concrete implementation plan was devised to ensure that the goals moved beyond rhetoric.  Both programmes were completely unsuccessful.

After the restoration of the multi-party system in 1990, Nepal adopted the Structural Adjustment Programmes (SAP), implemented by the World Bank and the International Monetary Fund. SAP’s approach included concrete targets concerning fiscal austerity, privatisation, trade liberalisation, currency devaluation, retrenchment of the government and deregulation.

While the government largely withdrew from the SAP, the private sector took the lead role in the economy. But the private sector only adopted initiatives in low-risk and highly profitable social, financial and aviation sectors and not in the key manufacturing, agriculture, infrastructure and power sectors-which, at the time, were more important for the country.  Moreover, in the name of privatisation, public industries were sold without proper evaluation and monitoring. This occurred even though Nepali industries could not compete with goods produced in India and China, both of which have flourishing large-scale economies. Thereafter, in 2000, Nepal adopted the Millennium Development Goals (MDGs) established by the United Nations, which ended in 2015. These economic goals concentrated on the previously overlooked social sector with some emphasis on poverty eradication, development and environment sustainability. Nepal satisfactorily achieved most of these goals. Based on result of MDG, Nepal fulfilled two criteria out of three to upgrade from LDC to developing countries, however the government decided to request the United Nations Committee for Development Policy not to upgrade Nepal from least developed country till 2021, on the grounds that it requires concessional foreign aid and routes for trade.

Without a clear strategy and an innovative vision for economic development, our national objectives will continually be shaped by external models of development. Our economy is neither based on a liberal nor a mixed system. We don’t have a very pragmatic stable model to govern our economic policies and we continually struggle to bring rapid change in society.

The blame certainly goes to political leadership. There is a general lack of consensus among political parties regarding economic agendas and development initiatives. For example, political parties only support mega projects and programmes initiated by their government while opposing or scraping projects initiated by other party governments. The pitiful tactics including canceling, disrupting or delaying mega projects on the grounds of intra party conflict has been an ongoing phenomenon. Arun and Budhi Gandaki Hydro projects, Kathmandu Nijgadh Fast Track Road, Nijgadh International Airport are a few examples that illustrate how political tussles and party-related interests continue to hinder economic development.

The annual investment rate of country needs to be increased to at least 25 percent of the GDP,  one or two manufacturing sectors with a high rate of growth needs to be established, and an institutional, political and social framework has to be created in order to promote the expansion of those sectors. Government intervention in the economy to fuel the industrial sector, known as import substitution industrialisation and export promotion could divert economy toward self-sustaining growth.

People are at the heart of every successful economic model for development. By re-inserting Nepali people and our values in our economic models, we can promote stable, long-lasting change based on complete consensus and clear intentions.


- Shrestha is a former under-secretary of the Ministry of Finance and has served at the United Nations Development Programme in South Sudan and Sierra Leone.


Published: 13-12-2018 07:31

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