Dr. Sharma is former Ambassador of Nepal to the United States, He holds a Ph.D. in economics from the University of Hawaii. He served National Planning Commission from 2002 to 2006 as Vice-Chairman. Dr. Sharma has an extensive experience in government, international institutions and economic research. He is well known personality in national and international forum.
Colleges Nepal talked with Dr. Sharma about current economic status and its issues in Nepal.
TALKING ABOUT THE WORLD ECONOMY, WHAT IS THE CURRENT POSITION OF NEPAL IN YOUR VIEW?
If we talk about Nepal in the context of the world economy, we still lie in the bottom. Talking about the Nepal’s position in South Asia, Nepal is still lagging behind other South Asian nations. There are some sectors in Nepal, which are doing quite well, though.
Forinstance, Nepal is doing quite well in the social sector including health, education and poverty, and our progress has been recognized as one of the best in developing countries.
However, we have not been able to do well in economic sectors. Without economic progress, we cannot imagine poverty alleviation and sustained prosperity.
HOW WOULD GLOBALIZATION IMPACT THE ECONOMIC GROWTH RATE OF NEPAL?
It’s obvious that we cannot stay away from the impacts of globalization due to our geographic position. We are in between two economic giants, India and China. Both of these nations are coming up with economic policies, which made them achieve a whopping 9-10% economic growth. And, it’s almost sure that they will not turn back from their policies in the future as well.
Nepal is located between India and China, and we should be looking forward to taking some benefits from them. But before getting into economic cooperation with them, we must first build our nation by developing infrastructures, addressing supply side constraints for attracting investment and solving our internal problems. We cannot expect other countries to do all these things for us.
WHAT KINDS OF IMPACTS CAN BE SEEN IN NEPAL DUE TO POLITICAL CHANGES IN THE FIRST WORLD NATIONS?
There would be some kind of impacts due to world politics. After the rise of Trump, we can see the rise of protectionism; America is not participating in the climate change project, and so on. The whole world may feel impact due to America’s decision. On the other hand, China and Europe have come forward on the issue of climate change. However, the most powerful nation, America, not participating in the world issues would impact the whole world.
The bilateral and the multilateral help of America to various organizations like the World Bank and UNDP could be affected. But, the prediction is that it will only be a temporary thing, as these decisions may push America back.
NEPAL IS LOCATED IN BETWEEN TWO ECONOMIC GIANTS, INDIA AND CHINA; HOW CAN NEPAL TAKE ADVANTAGE OF ITS STRATEGIC LOCATION?
Nepal’s position was taken as a disadvantage in the past, but in today’s context, Nepal can act as a bridge between two nations. Our main focus must be to take as many benefits as possible from the two economic giants. If we check our neighbors, we have Bihar, Uttar Pradesh, Uttarakhand, West Bengal and Tibet. Nepal can compete with most of the northern states of India. Talking about Tibet, it does not have its own resources despite that the region has able to develop infrastructures, rapidly.
Nepal can capitalize on these markets as North India alone has around 50 million people residing there. Nepal can not only focus on selling final products by itself, but it can attract Foreign Direct Investment (FDI) to effectively capitalize on these markets. We may also collaborate with the Indian and Chinese companies regarding the production and distribution of goods and services. We can also commercialize herbal and agricultural products. The tourism sector can also be enhanced if we can capitalize on the prosperity of India and China and bring more tourist from these countries. We definitely can take numerous advantages from our neighboring countries to enhance our growth and create employment.
IN TODAY’S WORLD OF GLOBALIZATION, HOW CAN NEPAL TAKE DIPLOMATIC ADVANTAGES WITH INDIA AND CHINA?
As I mentioned earlier, it will be relatively easy to take benefit from tourism. The second point is about investment. Both China and India are increasing their investment outflows. Nepal can attract investment in hydro, tourism, commercialization of agriculture, and manufacturing sector. We can provide them industrial estates; we can also help to create linkages between industries by promoting and facilitating value-chain activities and export to India and China.
Finally, Nepal needs to sell the electricity; we have limited alternatives in manufacturing exports, and India is the most feasible nation to whom we can sell the electricity. This is where we need to be smart diplomatically and commercially and take advantage of our strength. We should be able to create a path to sell the electricity at least to both India and Bangladesh.
WHAT COULD BE THE OPPORTUNITIES AND CHALLENGES IN OUR TRANSITION TO FEDERALISM?
First of all, there is an issue of allocation of rights. Some work has been done by the government, but there will be lots of challenges during its implementation. There is also a conflict between sub- national governments and central level. The central government wants more control thinking that the sub-national governments could misuse the money and may not follow financial and fiscal discipline, while sub-national governments believe that there has been a lot of unnecessary control on their activities and resources provided to them are not enough.
The major problem is the framework of division of the budget among the authorities. The government has not yet established the constitutionally mandated fiscal commission for a proper allocation of the budget. Similarly, sub national governments are yet to develop fiscal framework for following rules related to fiscal discipline and prioritize development. Staff recruitment process of
local governments are still vague. Due to these problems, transition to full implementation of federalism could take much longer than expected. Furthermore, we do not have an efficient government, which can make the transition phase even more time-consuming and complex.
HOW MUCH RESEARCH IS CARRIED OUT BEFORE DEVELOPING ECONOMIC POLICIES IN NEPAL?
We have not been able to conduct adequate research in identifying the reasons for not achieving results or making an impact on
socio-economic development of the country. Nepal has not been able to establish effective think-tanks and the Universities have not been able to integrate research into their system due to over politicization of institutions. The biggest university of Nepal, the Tribhuvan University, is not emphasizing on research works. Other universities are comparatively smaller, and integration of research works in their day to day activities could be expensive for them.
There has been proliferation of consultancy work, but the amounts of research works we need are not available for the development and implementation of effective economic policies.
ONE BELT, ONE ROAD; COULD YOU EXPLAIN THIS CONCEPT IN A SIMPLE WAY?
One Belt, One Road (OBOR) is the mega vision initiated by China to develop a path of connectivity between different nations, stimulate investment and trade and promote people to people relations. Development of connectivity is not limited to roads, but also railways, waterways and other forms of transportations. China has its own agenda like all other nations. It has already initiated this project, so Nepal must think of ways on how to capitalize on this project.