Nepali Economy: Reflections and Potential

PROCEEDINGS REPORT

NEPALI ECONOMY: REFLECTIONS AND POTENTIAL 24 July 2018 Ambassador Alaina Teplitz arrived in Nepal in October 2015 and has been one of the prolific diplomats traveling around the country, sharing thought through op-eds and an active social media presence. She has witnessed a historic period as Nepal transitioned into a Federal Democratic Republic and experienced many economic upheavals. In this context, Nepal Economic Forum organized a neftalk to reflect on her experience during her tenure and share learnings, both challenges and potential.

Speaker Alaina B. Teplitz, US Ambassador to Nepal Commentator Kul Chandra Gautam, Advisory Board Member, Nepal Economic Forum

ALAINA TEPLITZ, US AMBASSADOR TO NEPAL Nepal is at a point of tremendous opportunity to envision and deliver a new era of economic growth, independence and to emerge as a globally competitive economy where the government, businesses, and citizens all have a role to play.

Currently, Nepal’s economy itself is an impediment to economic growth as it is of small scale and with fundamentals not suited for the acceleration needed to reach middle-income status. However, it benefits from the commercially viable potential of hydropower sector, agriculture sector, yearly increase in foreign tourism and an increasingly healthy and well-educated workforce. But, potential alone is not enough to transform Nepal’s economy. Nepal has to tap into nontraditional, higher value, higher wage, and export-focused sectors and prioritize new industries like e-commerce, information technology, creative industries, light manufacturing of components and electronics, and agricultural processing.

Moreover, Nepal must address its policy and regulatory environment, improve workforce competency and resolve numerous infrastructure constraints to achieve this transformation.

For Nepal to transition to a middle-income country by 2030 it must address several critical risks that arrest its economy: 1. Corruption. Nepal must face corruption directly. Currently, restricted markets, cartels and syndicates, and rent seeking behavior patterns in both the public and private sectors hobble Nepal’s economy. It must commit to consistent and robust investigation efforts that result in arrests and other relief that will hold corrupt actors accountable in meaningful and public ways.

2. Access to capital. Nepal currently has insufficient banking oversight, and provides limited access to capital.

3. Social exclusion. Nepal continues extensive practices that result in the social exclusion of women and other groups.

If Nepal truly wishes to transform its economy, it must redouble its efforts to include women in meaningful ways.

These risk factors, in conjunction, portray Nepal as an unattractive investment climate, ultimately deterring meaningful investment. Despite all of these risks, in order for Nepal to achieve a progressive, stable and lucrative growth, it must streamline its economic agenda towards fostering an investment friendly economic environment as follows:



Nepal must commit to having predictable, consistent, and enforced laws and procedures that are not based on subjective decisions and personal relationships.

 

Nepal must commit to maintaining an independent free market, unrestricted by cartels.



Nepal must adopt and enforce protections for intellectual property rights. If Nepal truly wishes to establish an economy hospitable to creative innovation, then it must create an environment in which foreign creativity is not subjected to unfettered misappropriation.



Nepal must make all processes affiliated with foreign investment streamlined, transparent, and accessible. It must improve its regimes for registration, taxation, and licensing of new businesses created by foreign investment, and improve its immigration and visa processes, removing unnecessary and cumbersome barriers for foreign investors.

Nepal must demonstrate openness to international business norms and adopt international accounting and business practices to bring in capital and capital goods to foster an economic climate of investment.

Transformative Reforms for Global Competition The new government brings great potential for political and policy stability, as well as the time to implement policies that no other government has seen in Nepal in a generation. So far, it is recognizing the need to increase foreign investment, stem the reliance on a remittance-supported, consumption-led growth model, protect intellectual property, and expand infrastructure and regional connectivity. However, concrete manifestation of this vision is key. Nepal must not only envision the economy of the future but also create an environment for a transformational jump. Only a multifaceted, consultative approach will push Nepal toward its goals of a prosperous, progressive, and self-reliant economy of the future.

KUL CHANDRA GAUTAM Ambassador Teplitz has been an acute observer of Nepal’s economy and politics, and an active practitioner of people-to-people diplomacy. She has been openly sharing her views in a series of op-ed pieces in the local newspaper and has a very active presence in social media that it is quite appropriate for a knowledgeable diplomat working in an open and democratic society.

As the Ambassador mentioned, with a relatively low and manageable foreign debt, low unemployment rate and massive migration, Nepal has the fundamental economic ingredients needed to boost a broad-based economic growth. Besides, Nepal also has a geographic advantage of being right in the middle of a rapidly growing region— South Asia and China. However, economic potential doesn’t always result in commensurate economic performance. The economic potential for Nepal’s prosperity is definitely there but it is the socio-political economy that seems still fragile and uncertain. In this context, Alaina is very candid in drawing comparisons from the darker phases in the US history and offer lessons from how the US overcame some of these adversities to preserve and promote a perfect democracy. Hence, there are no shortcuts to the basics of good governance, strong rule of law, continuing vigilance of civil society and principal cooperation of the international community can led Nepal to a greater height.

CONCLUDING REMARKS Sujeev Shakya, summed up the event by highlighting three key take away from the discourse: 

Nepal should start dreaming big.



Nepalis need to shed their myopia of looking inward and should start looking outward.



Recalibrating the mindset to fight the issue of corruption is going to lead to a larger transformation in Nepal.

Nepal Economic Forum is a not-for-profit organization initiated by beed and aimed at becoming Nepal’s premier private sector led economic policy and research institution. neftalk is a platform for policy discourse and discussion on pertinent economic issues For more information visit our website: http://nepaleconomicforum.org/

ABOUT THE SPEAKER

ALAINA TEPLITZ H. E. Ambassador Alaina Teplitz was nominated to be the United States Ambassador to Nepal in 2015 to build upon seventy years of partnership and cooperation, enhance prosperity, encourage democracy and ensure stability. She joined the state department in 1991 and is a Career Member at the Senior Foreign Service with the rank of Minister Counselor.

ABOUT THE COMMENTATOR

KUL CHANDRA GAUTAM Kul Chandra Gautam is a distinguished international civil servant, development professional, public policy expert, and human rights activist. He was a United Nations official for over three decades, serving in several important capacities, including as Assistant Secretary-General of the UN and Deputy Executive Director of UNICEF. He has extensive experience in international diplomacy, development cooperation and humanitarian assistance.