Economic growth and socio-economic development
Three ways to realize the vision:
1) Invest in agriculture, manufacturing, infrastructure and human resource development.
2) Strengthen institutional capacity at all levels of government.
3) Upholding the rule of law for strong, efficient and equitable public administration and good governance.
After decades of political turmoil, Nepal entered a new political era with the promulgation of a new constitution in 2015. The constitution drafted by elected officials provides for extensive basic rights reflecting popular aspirations and envisions an egalitarian and just society in adopting a federal system with three levels of government. Now that we have a system accepted by all, the focus should be on implementing the constitution and achieving our development goals.
Nepal, which is currently classified as a “least developed country” (LDC), aims to achieve “developing country” status by 2026 and “middle income country” status by 2030. We we are also committed to achieving 17 development goals (SDGs) by 2030. We were able to achieve the Millennium Development Goals within the 2015 deadline. We also hope to achieve the SDGs and elevate the country from LDC status to time while honestly implementing the constitution.
When implementing it, we should also make careful investments to stimulate economic growth. Agriculture is our crucial sector where we need to invest to increase production and reduce our agricultural import bills. Nepal needs to invest in new agricultural technologies to increase productivity and introduce high-yielding, high-value crops to increase production and national incomes. We can replace and reduce imports by increasing our export capacity with cereals, vegetables, fruits and herbs.
Our investments should focus on agriculture, manufacturing, infrastructure and human development. We should also welcome and encourage foreign investment and development assistance in these sectors. Poor transport and energy infrastructure in Nepal has resulted in high transport costs and low electricity consumption. We must find ways to solve these problems and thus contribute to the development of the sectors of agriculture, industry, tourism and human development.
We can, for example, replace fossil fuel imports with clean energy for domestic consumption and export. Nepal has the potential to be a clean energy powerhouse of South Asia. More investment in clean energy and agriculture could increase our export capacity and minimize the high annual foreign trade deficit, which currently accounts for almost a third of our GDP.
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Nepal should also strengthen institutional capacity with administrative reforms at all levels, especially at the level of sub-national governments so that they can successfully discharge their responsibilities. There is a need to reduce recurrent expenditures and increase capital expenditures, which will result in increased productivity and national income and improved institutions.
We have had a high budget deficit with an increase in recurrent expenditure in recent years. This has led to a large internal public debt equivalent to about five to six percent of the country’s GDP each year. But capital spending is low, even at the federal central level: only about 10% of total government spending in the first six months of the current fiscal year 2021-22. We need public financial management reforms to address these issues.
Sustainable, sound and prudent fiscal management is necessary to ensure austerity in administrative expenditure and to plan the budget and execute development programs. Reforms are needed in public finance management with improved planning, formulation and execution phases, including the medium-term expenditure framework and accountability at each level of government, if we are to deal effectively with underutilization of capital and low productivity of spending.
Differences in growth between countries often depend on national factor productivity. Productivity growth in turn depends on technology, the quality of infrastructure, the capacity of the labor force and the business climate. There is therefore a need for the expansion of the manufacturing and agricultural sectors and the generation of more qualified human resources. Vocational training for domestic workers is needed to create jobs in domestic agriculture, industry and construction sectors to replace large-scale foreign workers in these sectors.
Nepal also needs to improve the quality of governance. For this, the country must have strong, effective and well-functioning public institutions to uphold the rule of law and increase productivity. Administrative institutions must not suffer from favoritism based on partisan prejudice. The selection of directors and staff should be strictly based on merit and professional competence.
The focus should be on sustainable development rather than a populist approach for short-term political gains. A strong, efficient and equitable public administration is essential to uphold the rule of law and improve the quality of governance and management capacity to ensure optimal use of public resources. This in turn will help us in our quest for economic development and social justice.
Liberal economy not against socialism
The constitution of Nepal envisions a country oriented towards socialism. There are misinterpreted rumors calling liberal economics the antithesis of socialism. But the liberal economy is also a path to socialism, and it helps to create jobs, increase national income and reduce poverty.
Even pro-Communist nations like Russia and China adopted liberal economic policies, encouraging private investment and privatizing state industries to increase the rate of growth, incomes and overall development. Since we adopted the liberal economy, the Nepalese way of life has improved. To date, all governments in Nepal have generally accepted this economic model. This is the part of the implementation where we have fallen behind.a