Development Issues and Practices 1 Krishna Khadka.
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Transcript of Development Issues and Practices 1 Krishna Khadka.
Session Coverage Session Coverage
Development? Development indicators GDP growth rate – issue very low growth rate and
consequences Poverty related issues – contribution of remittance at the
HH level – 1/3 of GDP Investment – government share and private share, FDI
and role of development partners Lack of proper identification of sectors for dev Trade and BP - paradoxical development Productivity – labour, land and capital (ROI) Macro indicators largely OK – FM but reality is different –
critical role of middle man (bichaulia) Emergence of urban cities – provisions for facilities Governance and institution building Crux of the issue – leadership - drivers of the nation –
manufacturers of constitutionsDisaster: Recovery, rehabilitation and reconstruction PDNAselected opportunities
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Development Development
What is development? Changing meaning of development Emergence of new problem calls for new definition
pre 1930s emphasis on growthpost world war - structuralisms, dependency, etcemergence of environmental issue MDGs sustainable dev climate change
Now emphasis on social development, inclusion, human rights, good governance, etc
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IndicatorsIndicators
Indicatorsvariables that measure the changes or marker of change. basic features of indicators are:
Objective Relevant Sensitive Specific Independent precise Cost effective Simple Easy understand and timely
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Growth rate of GDP Growth rate of GDP
The GDP growth rate of Nepal is very low. Over years it varies between 2.34 to 6 per cent of GDP. Between 2005 to 2014 it was 4%.
Last year it was 4.6% and this year it is 3.4% (4.3%).Population growth of Nepal is relatively high.To create visible impact on the living of the people
Nepal must have 6 to 7% of growth rate.Nepal expected to graduate by 2022 and inter group of
middle income country by 2030. Requires at least 7 to 8% growth rate of GDP. Doubling present level of GDP (How to double the present level of GDP?)
Big challenge (growth of developed coun1.8 in 2014 and 2.4 in 2015)
5Krishna Khadka
Cont…Cont…
The composition GDP shows that Nepal is a traditional rural economy.
As mentioned above the agriculture is the main producing sector in Nepal.
However the growth rate of Agriculture sector is very very low – 1.9 % in 2014/15
While the growth rate of non-agriculture sector is only 3.6% per annum.
Industry sector 2.6% Service sector 3.9 %
6Krishna Khadka
Income and Poverty Income and Poverty Although the statistical achievement in poverty
reduction is remarkable the reality may be different Reduced from 42 to 21% (23.8) (MDGs )But 50% are just above the poverty line – vulnerable and
a small event can push the population below the poverty line at any time
Recent earthquack has pushed 3.5% of the total population below the absolute poverty line.
75 lakhs out of 3 cror is under absolute poverty line Within the last 4 – 5 years the remittance has reduced
poverty by 11% But this is not solid basis of reduction vulnerable The poverty level can increased at any timePoverty level in Nepal is high one quarter of the
population
7Krishna Khadka
Income and Poverty Income and Poverty Population growth rate as compared to other countries is
high 1.2% /annum (WB)Per capita income is also low as compared to other Asian
Countries Per capita GDP in 2014/15 is US $ 762
The absolute poverty line of Nepal is Rs 18000?? (US $ 1.25)
Degree of inequality of income is also high Poorest 20% of the population hold 8.3% of consumption/
income in 2013 (WB)Similarly the Gini Coefficient is 4.3
Recent earthquake, flood and land slide could have further deteriorated the situation
The inequality must have increased
8Krishna Khadka
Cont…Cont…The World Bank has estimated that 7.5 million labour
force is added in Nepal, annually.
But Nepalese estimate is 5-6 millionIn the recent years no major industry has been
implemented in Nepal Hence, virtually there has been no significant number
of job is added in the Nepalese economy.
9Krishna Khadka
Dependent EconomyDependent Economy
Recently the remittance is Rs 2billion per day 30 % of GDP (1/3 of GDP) is contributed by the
remittance Unfortunately a greater proportion - almost all used for
consumption One study shows that 90% or the remittance is used
for consumption Construction of houses in urban areas and expenditure
on consumption specially conspicuous consumption
It is not used for productive purpose – no investment on manufacturing sector or capital formation
10Krishna Khadka
Crux of the issue Crux of the issue
Political instability is the crux of the development issueCollusion government is the reason for the
disturbances negative consequences in all sectors of the economy
every Nepali can make a long list of problems related to the present government.
not committed leadership another important reasonnot right leadership – basic objective is to grab power
and collect resources – corruption – one of the most corrupted country in the Asian regionno good governance
state role on its regulatory and facilitatory is very week or virtually non existence of government
government staffs are not neutral not committed the national building
11Krishna Khadka
Trade and BPTrade and BPInternational Trade is one of important aspect of
development However the performance of the sector is quite poorThe export earning can support the import of only one
item that is petrolIn 2003/04 import/export ratio was 39.0 and it is
gradually declined and by 2014/15 it is 10.7The volume of import is increasing – the demand for
construction material is increasing as a result of the natural disaster and increasing demand for housing services in Nepal.
Further the increasing volume of remittance increased the demand for construction materials
Similarly the demand for petroleum products is increasing as a result of the increasing opening of the transportation services in different parts of the country. 12Krishna Khadka
Trade cont….Trade cont….
However the balance payment position of Nepal is very strong. Despite of continuous trade deficit Nepal has huge surplus foreign reserve/exchange
Nepal has not been able to spend all the aid money.
Donors pointed out the poor absorptive capacity of Nepalese economy.
In many cases, Nepal has not been able to spend more than 50% of the donors allocated resources
Again the productivity of the major sector such as the agriculture is very low
It has been estimated that the Labour productivity of of Nepalese labour is the lowest in the Asia Pacific region.
Similarly the ROI of the capital is very low.
13Krishna Khadka
Cont…Cont…
In fact since the last of few decaded there has been no significant industry established in Nepal (only few consumer goods industries: cookies, confectionaries, noodles
This implies the lack of capital investment, that is, investment in the fixed capital is virtually nil.
Serious consequences – no production in the future
With such low productivity the agriculture sector contributes 60% of labour force but in GDP it contributes around 33%
14Krishna Khadka
Cont….Cont….The officially recorded inflation on the other hand is
low - 7.5 % per annum food inflation 9.5% non-food is 4.5%However the ground reality is different. As mentioned
above the country has not been able to produce more. Market is full of foreign goods especially Chinese products.
If the cost of Nepalese product is Rs 2000 the same Chinese product costs Rs 1000
Process of rising price in reality is very highThe economy is experiencing high inflation
Considering these complexities World Bank characterized Nepalese developoment as Paradoxical Development Complex situation
15Krishna Khadka
Examp of govt Development effort – budget
Weak program project implementation Lack of targeted programInstitutional development silent Management of critical socio-economic challenges
ignored: employment, trade promotion, energy, productivity, food security, social security and welfare
Ambitious program that could be inflationary The economy will be overheated
16Krishna Khadka
Education and DevelopmentEducation and Development
Education is main basis for development However the sector involves several problems
Education is not responsive to the market demand: unproductive education
Large number of students migrating for education Loss of resources The proportionate allocation of resources on science
and technology is much lower than in many developing countries
This leads to the production of educated unemployed mass
17Krishna Khadka
Role of Private sector, NRN, CBO & INGO/NGORole of Private sector, NRN, CBO & INGO/NGO
Private sector is suffering from number of problems (as mentioned in the previous slide).
Despites of these private sector (including HH) contributes almost 70% of the GDP but it is not included in the national income account.
Our GDP is underestimated Budgetary provisions for promotion of private sector
- no new tax,- VAT threshold increased from 2 to 5 million- job training for 50,000 workers- tax relief for earthquake affected areas and business- incentives for export oriented products - high priority for infrastructure - involving private sector in electricity transmission lines construction
18Krishna Khadka
Role of Private sector, NRN, CBO & INGO/NGORole of Private sector, NRN, CBO & INGO/NGO
However the participation of the private sector is very poor
Commitments of NRN has not been materialized
The efficiency of CBO and NGOs is questionable.
INGOs are promoting their interest rather than serving people
19Krishna Khadka
Other Improtant Issues Formulation of ConstitutionLand locked is another Low capacity utilization rate of industries High cost economic - cost of production is high low
level of demand for domestic products carteling in transportation and other services –
corrupted government unable to control. Labour Stricks, band and hadtal disturbed the
production units Loadseding all this increased cost of prioduction Strong trade union put pressure on project to increase
wage and other facilities
The productivity in the rural areas declined because of the outmigration and loss of active labour force.
20Krishna Khadka
Recovery, rehabilitation and reconstructionRecovery, rehabilitation and reconstructionIt has been estimated that the recent disaster –
earthquake, landslide annd flood caused a total loos of $ 7065 million (about one third of total GDP)
Social sectors: $ 4086m (58 %) housing (3505m), health ($75m), education ($ n313m), cultural heritage ($ 19.2M)
Production sectors: $ 1781 (25%) Ag ($ 283m), Commerce ($ 169m), Industry ($ 192m) and Tourism ($ 812m)
Infrastructure $ 668 (10%) Electricity ($ 210M), Communication ($ 87m), transport ($ 221m) water and sanitation ($ 114m)
Other cross cutting: $ 529m (7%) governance (187m) and environment and forestry ($ 340m)
Resource need for reconstruction $ 6695m
How to manage big challenge 21Krishna Khadka
Selected Opportunities Selected Opportunities Abundant resources Hydro, Ag, tourism and human resources Neighborhood of large and growing economies Can provid tourism services to the emerging middle
income Comparative advantages (trade and industrial
policies) 19 products identified as niche products
23Krishna Khadka