Wednesday, April 18, 2007
Snapshot of Nepalese Contemporary Economy
A contemporary phenomenon for current economic stagnancy in Nepal is blamed to past twelve year's armed conflict between Nepal Government and Maoist rebels. Though some milestones have been set to address political instability, the transition phase persists and its period can not be presumed easily.
Business activities during the conflict period was severely squeezed down and became second priority of public because life saving was the first priority of people especially outside the Kathmandu valley. This contributed to lock public money by investing in unproductive sectors like land and building. Banks and financial institutions forced for their survival to enter into retail banking sector by investing into real estate and consumer products. This further contributed to freeze nation's fund into unproductive sector. Manufacturing and trade business entities really faced nightmare by multifold reasons like obstacles in production, market recession, forced donations to political parties as well as criminal groups etc.
The armed conflict left its multifold adverse effect in Nepalese economy. Brain drain was a terrible experience during this period. The cream human resource force opted for immigration for safe living and their economic growth. Even the semi-skilled or unskilled people left nation for their safety and livelihood. This ultimately helped to further worsen the Nepalese economy. Nevertheless the seasonal migration boom created high level of remittance through both formal and informal channels but the level of inflation also gone up by an average of more than seven percent over the years.
Human development index of Nepal in global scenario obviously worsened during this decade. GDP come down as low as below 3 percent against the targeted above 5 percent. Donor driven budget injected more fund to support government of which major chunk spent to maintain general expenses of nation. Development activities became as an "unseasonably trumpet" and ultimately high liquidity hit the interest rate adversely in banking sector, confining them to less opportunities of investment out of the skyrocketed public deposits.
Despite the bad picture above, there is silver lining. In Nepalese economy, specially banking sector proved by articulating the survival and growth strategy, paralleling conflict. Banking sector not only covered up their operational cost but also paid dividends to their shareholders demonstrating high management caliber. Economic reform in different government sectors like public finance, agriculture etc. is underway now and government is heading towards more participatory governance. Corporate culture and governance is growing up. Banks are giving second thoughts to enter to support rural economy and innovative mega projects that mobilize Nepal's own natural, financial and human resources. This all raises hope of every Nepalese people towards their future prosperity.
Business activities during the conflict period was severely squeezed down and became second priority of public because life saving was the first priority of people especially outside the Kathmandu valley. This contributed to lock public money by investing in unproductive sectors like land and building. Banks and financial institutions forced for their survival to enter into retail banking sector by investing into real estate and consumer products. This further contributed to freeze nation's fund into unproductive sector. Manufacturing and trade business entities really faced nightmare by multifold reasons like obstacles in production, market recession, forced donations to political parties as well as criminal groups etc.
The armed conflict left its multifold adverse effect in Nepalese economy. Brain drain was a terrible experience during this period. The cream human resource force opted for immigration for safe living and their economic growth. Even the semi-skilled or unskilled people left nation for their safety and livelihood. This ultimately helped to further worsen the Nepalese economy. Nevertheless the seasonal migration boom created high level of remittance through both formal and informal channels but the level of inflation also gone up by an average of more than seven percent over the years.
Human development index of Nepal in global scenario obviously worsened during this decade. GDP come down as low as below 3 percent against the targeted above 5 percent. Donor driven budget injected more fund to support government of which major chunk spent to maintain general expenses of nation. Development activities became as an "unseasonably trumpet" and ultimately high liquidity hit the interest rate adversely in banking sector, confining them to less opportunities of investment out of the skyrocketed public deposits.
Despite the bad picture above, there is silver lining. In Nepalese economy, specially banking sector proved by articulating the survival and growth strategy, paralleling conflict. Banking sector not only covered up their operational cost but also paid dividends to their shareholders demonstrating high management caliber. Economic reform in different government sectors like public finance, agriculture etc. is underway now and government is heading towards more participatory governance. Corporate culture and governance is growing up. Banks are giving second thoughts to enter to support rural economy and innovative mega projects that mobilize Nepal's own natural, financial and human resources. This all raises hope of every Nepalese people towards their future prosperity.
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