• Nepal in the booming South

    15 Mar 2013

    HDR 2013 Cover

    As development experts would tell you, there is no theory of development as such, but only of underdevelopment. Experts can explain why certain countries have failed to develop, but they can not necessarily prescribe a definitive development path that can lead country X or Y to prosperity. As the rise of the countries in the global South who have adopted different models than that of traditional welfare state in the North shows, there is no one size fits all solution. Each country, including Nepal, has to find its own way.

    The Global Human Development Report 2013 which was released late yesterday in Mexico endorses this view of multiple development paths and paints a very hopeful picture of the state of global development. It hails the rise of the South and documents key interventions that have allowed the region to grow rapidly.

    The Report observes that the economic growth of developing countries is influencing global financial architecture by introducing indirect competition and pressuring traditional donors—away from the terms set by ‘Washington consensus’—to pay greater attention to the needs of the developing countries. 

    “Overall, the rise of the South is infusing new patterns of resource accumulation into the global financial system and building a denser, multilayered and more heterogeneous financial architecture for the South,” the Report says.

    It identifies three key drivers that are changing the global developmental landscape: Proactive developmental state; tapping into global markets; and determined social policy innovations.

    The Report defines developmental state as “strong, proactive state with an activist government and often an apolitical elite that sees rapid economic development as their primary aim. Some countries go further and add an additional feature: a bureaucracy with the power and authority to plan and implement policies.”

    Though on many counts Nepal does not meet the criteria of a developmental state, it has, nevertheless, shown some elements, of late.

    The Government of Nepal is already taking proactive steps to build a framework for rapid development. The government identifying national priority projects and directing foreign direct investment in these key projects is a hopeful sign that the instincts of the government in the region are spreading. 

    Once the Kathmandu-Tarai fast track, the mid-Hill Highway, the Second International Airport, Upper Tamakoshi hydro plant etc are completed, they will provide strong impetus for development in Nepal. Some of these are being built by the government itself and are on track for timely completion. Lack of infrastructure, energy shortage and poor policy environment has stifled innovation and growth in Nepal so far. In all these areas, the government is beginning to take a lead.

    While government leadership and public investment should be welcomed and encouraged, involvement of private sector and private capital can allow up-scaling of these infrastructure projects more rapidly.

    The second driver identified in the report is the tapping of global markets. Rapid globalisation brings both risk and opportunities. Fast developing economies of the South have benefitted tremendously from the global markets. Countries like China, India, Brazil and Thailand have developed export-oriented industries. But not all countries can compete in the global stage at the same level. For smaller economies like Nepal, tapping into global market with niche products is one option. For example, Chile, Bangladesh, Mauritius and Ghana have benefitted from exporting niche products. 

    As the Report points out, jobs or growth does not always have to come only from export-oriented manufacturing. Tourism can match foreign currency earnings generated by manufacturing. Tourism is one of the most ‘internationally traded commercial services accounting for nearly $1 trillion in 2010.’ Nepal can tap into the growing number of Chinese and Indian tourists, including those coming for religious pilgrimage. 

    With rising food prices, agro-industries exporting niche commodities can also create stable jobs in the Nepali economy. There are early signs that Nepal’s agriculture sector is being modernised with a young breed of entrepreneurs taking to commercial farming. Nepal’s government will have to work proactively with the private sector to identify more such products and services that Nepal can sell competitively in the global market.

    The third driver identified is determined social policy innovations that lead to better delivery of social services contributing to a more equal, healthy and educated labour force. Any country that underpins long-term economic growth with elements of safety net and social protection can hope to have sustained growth. As the Report reiterates, economic growth does not automatically get translated into better human development. Unless states make conscious decisions to foster social equality, instability and political unrest have the potential to reverse development gains. 

    As the 2012 inequality adjusted HDI ranking (where Nepal has suffered the biggest gap due to inequality in South Asia, followed by Pakistan) shows, health, education and income disparity between regions and social groups poses biggest threat to sustained and inclusive growth in Nepal, besides political instability. 

    The Report cites Brazil’s cash transfer programme, India’s Nation Rural Employment Guarantee Scheme, China’s Minimum Livelihood Guarantee, among others as examples of social policy innovations that have worked in creating social equality. Nepal does have social security programmes aimed at various groups, but it needs to learn from others to make it effective. 

    Equally important in this phenomenal development story of the South is the growing partnership between countries in the region that is leading to an increase in diffusion of technologies, capital and expertise at an affordable rate. Nepali micro hydro experts, for example, are assisting Afghanistan to bring modern energy to Afghan villages. But much more can be done to foster regional integration and cooperation if countries are to benefit fully from the prosperity in their neighborhood.

    Given Nepal’s strategic location between the two biggest economies in the South, and its natural endowments, there is immense potential for growth. 

    For starters, some policy reforms coupled with political commitment on economic agendas can take Nepal on the path of rapid economic growth. While political actors may continue to disagree on political issues, it is time they agree that economic agenda can no longer be shelved for later.

    Courtesy: The Kathmandu Post