Prosperity depends on political course

Policies are formulated based on reality. Policies are made for better future. Forecast of the future is mostly influenced by hope. But hope itself should not be a determining factor to make policy decisions. It neither fast tracks our desire to develop a prosperous country, nor is a foundation of growth. Still, the hope guides us!
The country’s economic growth is shrinking.
An economic growth rate of just 3.5 percent has been forecast for the current fiscal year 2012/13, the lowest in the last five years. Lack of infrastructure, acute power shortage and low investment are some of the major bottlenecks in our efforts to achieve the desired level of economic growth.
Infrastructure, hydropower, and private sector development are the major areas where the government should focus on in the coming days in a bid to accelerate the economic growth. More specifically, only a vibrant private sector can help the country fill the infrastructure gaps and address the power shortage by injecting new investment in energy generation.
The dynamics of the country’s economic growth is slowly changing. The economy that was mainly driven by the agricultural sector, and remittance to some extent, is shifting to the services. The services sector has enjoyed a relatively higher growth rate in the last couple of years. Keeping this in mind, the focus should be on further accelerating the growth of services sector. For that, we need adequate infrastructure, power and an effective private sector.

The private sector was not able to make much progress despite the government’s free market-oriented policies since 1990 due to the extortion drive by the Maoists during the decade-long insurgency. The end of the insurgency in 2006 brought relief to the private sector and the Constituent Assembly (CA) election in 2008 gave some hope.
With the signing of the Comprehensive Peace Agreement (CPA) between the then seven parties and CPN (Maoist) in 2006, people were hopeful of economic development in the country. But that didn’t last long as the CA was dissolved in May 2012 without promulgating a new constitution.
People continued to suffer as the political mistrust started deepening even after the CA election. As a result, the private sector of the country was reluctant to make new investments and the mega projects in infrastructure development couldn’t gain momentum as successive governments failed to bring full-fledged budget on time.
Mega projects such as the Kathmandu-Tarai Fast Track, which will connect Kathmandu and Nijgadh by a 76-kilometer highway, are yet to find a developer. The much-touted Kathmandu-Hetauda Tunnel Highway is limited to talks. Neither the private sector nor the government is working seriously to devise plans to generate funds for the development of the projects.
The private sector is not ready to make the level of investment required to achieve the desired level of growth rate due to different reasons such as political instability and policy inconsistency resulting from frequently changing governments.
The economic growth rate had reached 5.8 percent in fiscal year 2007/08 mainly because the people were hopeful after the CPA was signed and the then CPN (Maoist) joined peaceful politics laying down its arms. However, that hope was short-lived.
The private sector that was badly hit by the decade-long armed insurgency in the country again started to be intimidated by the political parties. “We have to start from the political parties if we want to a corruption-free society,” Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said.
Following the CA election in 2008, some efforts were made in terms of infrastructure development. The government’s efforts to reconstruct the physical infrastructures that were damaged during the insurgency gained momentum after it established a separate entity, the Ministry of Peace and Reconstruction, following the CA election.
The private sector’s growth that is crucial to achieving the desired level of economic growth has not happened due to low investment and lack of favorable environment that can lure domestic as well as foreign investment in the country. “We need investments but at the same time the environment is not favorable for injecting fresh investment,” Vaidya said.
The economic slowdown and declining level of confidence of the business community doesn’t give much reason to be hopeful. But that does not mean we would not see any progress in course of time. “The situation is not favorable for making additional investment in the country,” said Pashupati Murarka, vice-president of FNCCI, who has investment in the cement industry in the country.
However, some others are still optimistic about the prospects in the next five years. “I am quite hopeful about the future and I see it happening,” Srijana Bhattarai, a returnee from the USA, who works for the Investment Board of Nepal (IBN), a high level government entity, said. “Probably, you won’t hear the same thing from people from the earlier generation.”
The development of the country’s private sector largely depends on how the political course unfolds ahead. Meanwhile, what we should not forget is that the private sector itself has a role to play in realizing our dream of achieving double-digit growth. The private sector that is supposed to lead the country’s economy has to make new investments in some strategic sector to achieve that goal.
Investment is required mainly in the infrastructure and energy sector from the government as well as private sector. “We need public as well as private investment to realize our dreams,” Murarka said.