POLITICAL ECONOMY IN TRANSITION - DOCKING NEPAL'S ECONOMIC ANALYSIS ISSUE 44 | MARCH 2021 - Thuprai
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NEPAL
ECONOMIC
FORUM
ISSUE 44 | MARCH 2021
POLITICAL ECONOMY IN TRANSITION
DOCKING NEPAL'S ECONOMIC ANALYSIS
DOCKING NEPAL’S ECONOMIC ANALYSIS
ISSUE 44 | MARCH 2021
FACTSHEET NEPAL FACTSHEET KEY ECONOMIC INDICATORS GDP (2021) *** USD 30.6 billion GDP growth rate (%)*** 0.2% GNI (PPP, 2021) *** USD 3610 Inflation (y-o-y) **** 4.05% Gross Capital Formation as of 2021, preliminary 50.2% Agriculture sector (% share of GDP)** 27.65% estimate (% of GDP) *** HDI * 0.602 Industry sector (% share of GDP)** 14.27% Rank 142 Service sector (% share of GDP)** 58.08% *HDI figure from Human Development Report of the UNDP-2020 ** Based on Nepal Rastra Bank's 12 months data of 2019/20 *** Based on World Bank Data ****Based on 4 months' Data (2020/21)
CONTENTS CONTENTS
MARCH 2021 | ISSUE 44
NEPAL FACTSHEET 1
EDITORIAL 4
1 GENERAL OVERVIEW 5
Political Overview 6
International Economy 8
2 MACROECONOMIC OVERVIEW 10
3 SECTORAL REVIEW 13
Agriculture 14
Energy 16
Infrastructure 17
Telecommunications 20
Real Estate 23
Education 24
Health 27
Tourism 29
Trade and Debt 31
Foreign Aid 34
Remittance 36
Environment 39
4 MARKET REVIEW 40
Financial Market 41
Capital Market 45
5 SPECIAL SECTION: POLITICAL ECONOMY IN TRANSITION 48
ENDNOTES 57
NEF Profile 61
Issue 44: March 2021 Executive Board Members:
Publisher: Nepal Economic Forum Alpa B. Shakya
Website: www.nepaleconomicforum.org Chandni Singh
Shayasta Tuladhar
P.O Box 7025, Krishna Galli, Lalitpur — Sudip Bhaju
3, Nepal Sujeev Shakya
Phone: +977 1 554-8400
Email: info@nepaleconomicforum.org Advisory Board:
Arnico Panday
Contributors: Kul Chandra Gautam
Nasala Maharjan Mahendra Krishna Shrestha
Raju Dhan Tuladhar Prativa Pandey
Sugam Nanda Bajracharya Shankar Sharma
Sambriddhi Acharya Shraddha Gautam
Sampada Shah Sneh Rajbhandari
Sarik Koirala
Tanushree Agrawal Senior Distinguished Fellows:
Bibhakar Shakya
Design & Layout: Giuseppe Savino
Thuprai Solutions Suman Basnet
support@thuprai.com
Senior Fellows:
This issue of nefport takes into account Apekshya Shah
news updates from November 16 2020 Ashraya Dixit
to February 16 2021. Chandan Sapkota
Diva Shrestha
The USD conversion rate for this issue Mark Perrin
is NPR 117.73 to a dollar, the quarterly
average for this issue.
Reproduction is authorised provided
the source is acknowledged.
The views and opinions expressed in
the article/publication are those of the
author(s) and do not necessarily reflect
the official opinion of Nepal Economic
Forum. Neither the organisation nor
any person acting on their behalf may
be held responsible for the use which
may be made of the information con-
tained therein.
EDITORIAL We all have had an eventful quarter as globally we saw economies start to stop with the advent of new COVID-19 variants. In the case of Nepal, the political turbulence continues with the dissolution and reinstatement of the parliament all in one quarter. It has been a year since the COVID-19 lockdown and restrictions began, and such turmoil makes it unlikely that we will see a full recovery soon. Economic indicators again do not seem to reflect ground reality, with bank deposits and the stock market continuing to swell. Contrary to multiple reports that forecasted a dip, remittance continues to soar. Work at the Nepal Economic Forum has continued with us making it into the Top 100 think tanks from South and South East Asia and the Pacific Region in the annual list compiled by the Lauder Institute at the University of Pennsylvania. Our family of the advisory board, senior distinguished fellows, and senior fellows has grown with members added who bring in diverse experiences. Institutionally, we have consolidated the Himalayan Circular Economy Forum (HiCEF) and the Renewable Energy Center (REC) while adding new verticals including, Global Nepali Network (GNN), Centre For Private Sector Development (CPSD), Nepal and the World (NAW) and Centre for Digital Transformation (CDT). Similarly, the work at Business Policy Research Center (BPRC) and Doing Business in Federated Nepal (DBFN) is being redefined and restructured. We are looking forward to exciting days ahead with our expanding family and new adaptive ways of working in the days ahead. For this issue of Nefport, we take a closer look at this political economy of transition, to take stock of current events and analyze what they mean for Nepal’s development. We have framed the analyses by looking at the current shifts in international politics which have also seen momentous shifts this quarter, starting with the presidency of the United States. We would like to thank our contributors –and especially Apekshya Shah (Assistant Professor, Department of International Relations and Diplomacy, TU), Dr. Prashanth Parameswaran (Director of Research at Bower Group Asia), and Lisa Hanon (Development Director, British Embassy, Kathmandu, Nepal) for their valuable time to contribute to this edition of Nefport We are working continuously on recalibrating this publication to make it more useful to our readers. We are also ideating on how we can make the extensive data, research, and analysis from the past 11 years to make it more accessible and useful. Please do provide us your comments and suggestions or click on our survey page. Sujeev Shakya Chair, Nepal Economic Forum
1
NEFPORT ISSUE 44 – MARCH 2021 5
GENERAL
OVERVIEW
6 DOCKING NEPAL’S ECONOMIC ANALYSIS
POLITICAL OVERVIEW
POLITICAL OVERVIEW
Due to the internal conflict within the ruling Nepal Communist Party (NCP), this review
period saw dramatic turnovers in the political scenario of the country. President Bidya Devi
Bhandari, on the recommendation of Prime Minister KP Sharma Oli dissolved the House
of Representatives and announced the dates for mid-term elections. This move received
widespread criticism and was deemed unconstitutional by several political leaders and as
well as, civil society leaders.
Following the dissolution of the lower house, cabinet members resigned, after which the
government appointed officials to several Constitutional bodies, for which they were scrutinized
again. Many political parties and civilians, especially the Dahal-Nepal led faction of the NCP
led protests against the dissolution, while the Oli-led faction and his supporters organized
mass gatherings and rallies in support of the Prime Minister.
The Supreme Court of Nepal reinstated the House of Representatives (HoR) after conducting
hearings on the 13 writ petitions filed against the PM’s decision for over a month.
House of Representatives dissolved: and deemed unconstitutional, as the PM's move as unconstitutional. Those
On 20 December, 2020, Prime current Constitution of Nepal does ministers who filed their resignations
Minister KP Sharma Oli called for not give the Prime Minister any were closely affiliated to NCP co-
the dissolution of Nepal’s parliament, power to dissolve the Parliament. As chair Pushpa Kamal Dahal and
which was swiftly endorsed by many as 13 writ petitions were filed senior leader Madhav Kumar Nepal.
President Bidya Devi Bhandari citing against the PM’s decision.1 Several Agriculture Minister Ghanshyam
Article 76 (1) and (7), and Article 85 opposition political parties--Nepali Bhusal, Energy Minister Barshaman
of the Constitution. The President Congress, Rastra Samajbadi Party, Pun, Drinking Water Minister Bina
also announced the dates for the new Bibeksheel Sajha Party, as well as the Magar, Culture and Tourism Minister
elections which were to be held: on Dahal-Nepal led NCP faction staged Yogesh Kumar Bhattarai, Education
30 April, 2021 and 10 May, 2021, demonstrations and protests across Minister Giriraj Mani Pokhrel, Forest
a year ahead of schedule. The PM’s the country ever since the dissolution Minister Shakti Basnet, and Labour
decision to dissolve the parliament of the Parliament. Minister Rameshwor Ray Yadav
came after the Dahal-Nepal faction were few Cabinet members who
of the Nepal Communist Party Seven ministers resigned over immediately resigned.2
(NCP) planned to move a vote of no parliament dissolution: Seven
confidence against him. The NCP ministers from PM KP Sharma The Supreme Court reinstated the
has seen a vertical split following Oli’s cabinet resigned following Parliament: On 23 February, 2021,
the decision of house dissolution. the dissolution of the House of the Supreme Court of Nepal reinstated
PM Oli’s move was widely criticized Representatives condemning the the House of Representatives (HoR)NEFPORT ISSUE 44 – MARCH 2021 7
that Prime Minister KP Oli had December, 2020. However, these began the hearing on the writ petition
dissolved on 20 December, 2020. appointments drew widespread and issued a show cause notice to the
A five-member constitutional criticisms as the officials were government seeking answers for the
bench comprising of Chief Justice appointed bypassing parliamentary appointments.5
Cholendra SJB Rana, and Justices hearings, which is a mandatory
Bishwambhar Prasad Shrestha, Tej process required by the constitution NCP’s Oli and Dahal-Nepal led
Bahadur KC, Anil Kumar Sinha and for appointments made by the faction staged mass gatherings in
Sapana Pradhan Malla conducted Constitutional Council.3 the Capital: Ever since the dissolution
hearings on the 13 writ petitions filed of the House of Representatives, 4
against the PM’s decision for over a The House of Representatives February, 2021, the Dahal-Nepal
month before giving the final verdict. Speaker Agni Sapkota had sent back faction called for a general strike
Subsequently, the government the appointment recommendations across Nepal, after the government
recommended the House session to since they were received after the administered oath to over 30 officials
be summoned on 7 March, 2021. House was dissolved by the Prime appointed to several constitutional
Minister. Sapkota filed a writ petition bodies unconstitutionally bypassing
Officials of Constitutional bodies in the Supreme Court seeking the lower house. The cadres of the
appointed by the Government: On invalidation of the unconstitutional Dahal-Nepal faction resorted to
3 February, 2021, the government appointments. He also sought action vandalism in several places during the
administered oath to officials for against 39 dignitaries involved in strike. Meanwhile, Prime Minister KP
different constitutional bodies this appointment including Prime Sharma Oli called for a rally of over
including the Commission for Minister Oli, President Bhandari, 200,000 people in Durbar Marg, for
Investigation of Abuse of Authority Chief Justice Cholendra SJB Rana, the very next day as a show of power.
(CIAA) and the National Human National Assembly Chairperson The Dahal-Nepal faction, as a reply to
Rights Commission, as per the Ganesh Prasad Timalsina and Chief Oli’s power show organized another
recommendations made by the Secretary Shankar Das Bairagi.4 The mass rally on 10 February, 2021.6
Constitutional Council on 25 Supreme Court on 7 February, 2021
“ OUTLOOK
The conflict between the ageing leaders of NCP has led to the instability of the entire political system in the country.
The country has fallen victim to the bickering of PM KP Oli and NCP chair Prachanda and their struggle for power.
Although the Supreme Court issued its verdict against the Prime Minister’s decisions and reinstated the parliament,
the struggle for power between KP Oli and Pushpa Kamal Dahal is still ongoing in full throttle. It is clear that the
average Nepali person has had enough of this, even though these types of shows are not uncommon in Nepal. At
a time when the economy and health system of the country has been crumbling due to the COVID-19 pandemic,
and the risk of the spread of the virus still a matter of concern, the decision to gather thousands of people as a show
of power makes is clear that both the Prime minister and the NCP co-chair have no regard to the lives of the people
and are only interested in seizing power.8 DOCKING NEPAL’S ECONOMIC ANALYSIS
INTERNATIONAL ECONOMY
INTERNATIONAL ECONOMY
As the inoculation campaign against COVID-19 start rolling out across the world, there is a
renewed optimism among the global economies. India and China, in particular, are expected
to experience the highest economic growth this year. China has now become the biggest
receiver of new foreign investment, the spot which had been previously taken by the United
States. Likewise, Vietnam is emerging as a strong competitor in the global market for semi-
conductor manufacturing.
Farmers protest in India: Six month billion, respectively. Nevertheless, towards the state. According to the
since it began, the protest against the US still holds the number one deputy mayor of Moscow, the capital
the recently proposed agricultural position in destination in terms of city with a population of 12.7 million,
bill to remove price protection still total FDI.8 only 12,000 to 15,000 people are
continues in Delhi. Farmers from getting vaccinated daily.11
Punjab and Haryana have demanded Countries start rolling out COVID
the government rescind the new vaccines: Among several vaccines 2021 growth prospect: The
agricultural laws. While the Indian that have been developed so far, International Monetary Fund (IMF)
government promises that these laws the leading developers are Pfizer, has painted an optimistic picture
are imperative in reforming the sector Moderna and Oxford. The former two for the global economy this year. It
through modernization and increased have been given approval in the US, forecasts increased growth owing
investment, the farmers are convinced the UK and Europe while Oxford/ to the combined effects of COVID
that the state’s reform effort only AstraZeneca has been approved only vaccination and fiscal stimulus.
serves the interests of corporations at in the UK and Europe. In India, Economic setbacks brought by the
their expense. Their frustration also Covishield and Covaxin have been pandemic are expected to decline..
stems from the fact that the farming approved by the regulators, the former India and China, in this regard, are
unions and leaders were not informed of which is the local name for the likely to grow the most this year.
or consulted about the new bill.7 Oxford/AstraZeneca vaccine. On the Notwithstanding, employment across
other hand, Covaxin was developed the world has a rather bleak prospect
China is now the biggest receiver locally by Bharat Biotech.9 Two more in 2021 and will not be able to
of new FDI: China has overtaken the vaccines developed by Janssen and return to the pre-COVID level; the
United States to become the largest Novavax are still awaiting the green pandemic has displaced 225 million
recipient of Foreign Direct Investment light from regulators upon the recent jobs as per the ILO estimation.12
(FDI). According to the UN figures, result from “large-scale trials”.
Chinese firms experienced a 4% Vietnam pushes for digital growth:
increase in new FDI last year while Likewise, China has introduced The Communist Party seeks to drive
the inflow into the US shrank by Sinovac, CanSion and Sinopharm tech innovation in the country partially
almost half in the same period. The vaccines which have been distributed by strengthening the manufacturing
amount China and the US each to Asian and South American of semi-conductors. Its target to raise
brought in last year, as claimed by the countries.10 Russia also has their own the share of digital/tech contribution
United Nations Conference on Trade Sputnik V vaccine, however, relatively to the nation’s GDP to 20% by 2025
and Development (UNCTAD), few are taking the shots primarily and 30% by 2030 aligns with the
were USD 163 billion and USD 134 due to the distrust among the people nation’s larger objective to graduateNEFPORT ISSUE 44 – MARCH 2021 9 from the lower-middle-income status to “diversify supply chains out of the investment of USD 475 million. by 2025 and become a developed China” after the world witnessed Furthermore, the Prime Minister is nation by 2045. For Vietnam, the the nation’s remarkable capacity to intent on acquiring investment in timing could not have been more apt effectively contain the pandemic. In semi-conductor manufacturing from with international companies looking fact, Intel, the US chipmaker, recently Samsung, but this remains to be into the country as a preferred choice supplied its Vietnam branch with decided.13 “ OUTLOOK The pandemic has already brought a shift in investment patterns among world economies. As in the case of Vietnam, foreign investors/companies have started to diversify their resources to countries that have fared well amid the COVID pandemic. Furthermore, the arrival of vaccines has given an optimistic outlook for the economic recovery across the globe.
2
10 DOCKING NEPAL’S ECONOMIC ANALYSIS
MACROECONOMIC
OVERVIEWNEFPORT ISSUE 44 – MARCH 2021 11
MACROECONOMIC OVERVIEW
MACROECONOMIC OVERVIEW
Inflation rate remained relatively moderate in the first six months of the fiscal year 2020/21.
While there was a massive decline in the number of workers applying for foreign employment
in the review period, remittance inflow nevertheless increased. Accordingly, there was a
substantial boost in Balance of Payment (BoP) surplus during this period.
Inflation: In the first half of the Remittance: There was a 11.1% (USD 11.91 billion). Nepal Rastra
fiscal year 2020/21, the year-on-year increase in remittance inflow bringing Bank held forex reserves of NPR
inflation remained at 3.56%. Last year the amount to NPR 495.31 billion 1318.66 billion (USD 11.2 billion)
during the same period, the year-on- (USD 4.21 billion). In the same in mid-January 2021, an increase of
year consumer price inflation (CPI) period last year, remittance inflow 7.5% from mid-July 2020. Reserves
stood at 6.82%. The price of food and grew by a mere 0.6%. On the contrary, of banks and financial institutions,
beverage increased by 4.27% and that the number of institutional and aside from NRB, contracted by 0.4%
of non-food and service increased by individual Nepali workers applying to NPR 175.09 billion (USD 1.49
2.99% when compared to last year’s for employment abroad declined by billion).
figures. On the other hand, the salary 77.6 % compared to the growth of
and wage rate increased by 1.72% 17.7% in the previous year. Likewise, Government revenue and
in the review month as compared to application for renewed entry went expenditure: The total government
10.04% last year. down by 68.9% in this period. revenue amounted to NPR 422.24
billion (USD 3.59 billion) in the
Import-export: In the first six months Balance of Payment and forex first half of the FY 2020/21 while
of the current fiscal year, the trade reserves: There was a Balance of the expenditure of the federal
deficit contracted by 5.8% to NPR Payment (BoP) surplus of NPR government during the same period
600.45 billion (USD 5.1 billion) 124.92 billion (USD 1.05 billion), stood at NPR 415.75 billion (USD
with imports decreasing by 4.8% and which is a 368.7% increase in the 3.53 billion) according to the
exports increasing by 6.1%. More figure from the previous year. The Financial Comptroller General Office
specifically, merchandise exports current account deficit stood at NPR (FCGO). Tax and non-tax revenues
increased 6.1% while imports of the 49.53 billion (USD 422.7 million), each amounted to NPR 386.53
same went down by 4.8%. Despite lower than last year’s amount of NPR billion (USD 3.28 billion) and NPR
the overall increase in merchandise 79.65 billion (USD 699.4 million). 35.70 billion (USD 303.23 million)
exports, exports to China dwindled Similarly, capital transfer and net respectively. Moreover, the federal
by 50%. Accordingly, this period FDI plunged by 8.1% and 37.2% government mobilized the total
experienced relatively less export respectively. domestic debt of NPR 57 billion
growth compared to the same period Gross foreign exchange reserves, on (USD 484.14 million): NPR 7 billion
from last fiscal year, during which the other hand, increased by 6.6% (USD 59.5 million) through treasury
there was a surge of 26.1%. to NPR 1493.75 billion (USD 12.69 bills and NPR 50 billion (USD 424.69
billion) from NPR 1401.84 billion million) through development bonds.12 DOCKING NEPAL’S ECONOMIC ANALYSIS
“ OUTLOOK
Although the trade deficit narrowed down to some extent, the export failed to grow as much as it did during the first
six months of the previous fiscal year. BoP surplus, on the other hand, witnessed a massive surge in this period as the
current account deficit contracted by some percentage points. The pandemic has brought a significant decline in the
migration rate among the Nepali workers.3
v
NEFPORT ISSUE 44 – MARCH 2021 13
SECTORAL
REVIEW14 DOCKING NEPAL’S ECONOMIC ANALYSIS
AGRICULTURE AGRICULTURE
AGRICULTURE
The lifting of lockdown has stimulated exports of agriculture products as evidenced by the
increased export revenue of the listed items in the first half of the fiscal year. Amid few
developments taking place in this sector, local farmers have voiced their discontent against
the government’s recent decision to allow FDI into the sector.
Opening up the agriculture phase of the Nepal Agricultural not do much to reduce the existing
sector to FDI: The Government’s Market Development Programme trade deficit of the country.16
recent decision to entirely open up (NAMDP), under the Ministry of
Nepal’s agriculture sector to foreign Land Management, Agriculture and Promoting Nepali tea in the global
investment has been met with strong Cooperative (MoLMAC) of Province market: The government has recently
resistance from small farmers and 1 along with the Swiss Agency for rolled out the Sustainable Export
farmers associations. While the Development and Cooperation (SDC) Promotion Project of Nepali Tea in an
government has justified their move on has begun. Also known as Sahaj, this effort to strengthen the competence
the grounds of enhanced productivity four-year project aims to facilitate of Nepali tea and facilitate its
through increased investment and the operations of agri-businesses in integration into the global tea market.
technology transfer, those opposing the province by providing necessary Accordingly, the project aims to
are sceptical about such promises. financial and technical support. ameliorate the tea quality by ensuring
They are convinced that the so-called According to the program manager of a sturdy supply chain linkage using
productivity improvement through SDC the second phase is expected to a tracing mechanism. The 36-month
foreign investment would not “strengthen forward market linkages long project is expected to benefit not
translate into an increased income and expand segments of vegetables, just the tea producers but also its avid
or even employment for the local maize, cardamom and dairy value consumers.17
farmers. They are afraid that small chains”.15
farmers could be replaced by the Marijuana no longer a narcotic: The
technology. Surge in agriculture exports: In the United Nations has recently voted to
first half of the current fiscal year, decriminalize cannabis by removing
Meanwhile, the proponents of FDI export revenue of agriculture products the narcotic label associated with the
lament about the extreme lack of grew by 15.46%. This has been plant. Prior to this, in November, the
investment in the agriculture sector attributed to increased “shipments European Union Court of Justice
and its primitive characteristic. They of cardamom, tea and medicinal (ECJ) had also decided to remove
are certain that without attracting and aromatic plants to India”. These cannabis from the list of narcotic
foreign investment, the sector is shipments saw increase not only in drugs. Such turn of events have raised
doomed to stay stagnant with no quantity but also in value ever since the possibility of exports of cannabis
technological progress.14 the lockdown ended. However, based products in Nepal.18
according to the former commerce
Agriculture commercialization secretary Purushottam Ojha, this
efforts in Province 1: The second increase is inconsequential and doesNEFPORT ISSUE 44 – MARCH 2021 15 “ OUTLOOK There have been several efforts to commercialize Nepal’s agriculture sector and enhance its productivity. While initiatives as such could strengthen the country’s comparative advantage in agriculture and bring in foreign currency into the country, the state needs to be mindful of the implications the so-called reforms could have on the local small-scale farmers. In this regard, the government must heed the suggestions/opinions of those who are directly affected by certain policies before hastily implementing them.
16 DOCKING NEPAL’S ECONOMIC ANALYSIS
ENERGY
ENERGY AGRICULTURE
During the review period, meetings have been held to develop rules and guidelines for Nepali
power producers to gain access to Indian markets, to strengthen and expand the power
sector in the country, with an ambitious inter-continental pipeline project in the process, the
energy sector has experienced positive changes, and Nepal now looks forward on building
cleaner and sustainable sources of energy.
Meeting held to strengthen the investing in Nepal’s hydro and (NOC) denies any loss although it
power sector cooperation between solar power projects, building more had been informed that the pipeline
India and Nepal by investing in cross border transmission lines, and was attacked. The corporation further
Nepal’s power projects, developing developing integrated power grids. clarified that it has been getting diesel
transmission lines, and integrated The cooperation between the two in the expected amount regularly and
power grids: The 8th meeting between parties set a positive example with those responsible for the attack on
the joint steering committee and joint projects such as completion of South the pipeline has been arrested by the
working group of Nepal-India co- Asia’s first cross-border 400 KV Indian police.20
operation in power sector was held Muzaffarpur-Dhalkebar transmission
virtually in the presence of the power line, agreement on funding modality NOC to construct country’s second
secretaries of both the neighboring for Gorakhpur-Butwal 400 KV inter-continental pipeline project:
countries. The meeting assisted line for which the construction The second inter-continental pipeline
in developing suitable rules and will commence soon, and the brisk project in the country, Siliguri-
guidelines for allowing Nepali power progress on the 900MW Arun-III Charaali petroleum pipeline is set
producers access to Indian markets, Hydro Electric Project19. to begin soon. Out of the total 50
development of energy banking km long pipeline, 15 km lies on the
mechanism and development of cross- NOC uninformed of the diesel theft Nepali side and the remaining 35 km
border high-voltage transmission lines. that happened 100 kilometers away in the Indian side. Once completed it
The meeting also reviewed the progress from Nepal: Indian daily newspaper, will have the capacity to store 12,050
of the SJVN Ltd-developed 900MW Navbharat Times reported that kiloliters petrol, 28,050 kiloliters
Arun-III Hydro Electric Project in over 1000 liters of diesel has been diesel, 450 kiloliters kerosene and 250
Nepal. The joint meeting further stolen from Nawijung, Bihar around kiloliters air fuel.21
helped in strengthening and expanding 100 kilometers away from Nepal
the power sector cooperation by however, Nepal Oil Corporation
“ OUTLOOK
With approximately 1 GW of installed capacity, hydropower provides almost all of Nepal's domestic electricity
generation on the grid. The economy is experiencing a rise in power demand. According to a research22, the installed
capacity requirement will reach up to 18,000 MW by 2025 which is more than double of what Nepal is producing
now (6012GWh).23 Along with this, the government must hold meetings/talks to amend the power sector
cooperation with other neighboring countries (apart from India) for development of energy banking mechanism,
development of cross-border high-voltage transmission lines.NEFPORT ISSUE 44 – MARCH 2021 17
INFRASTRUCTURE AGRICULTURE
INFRASTRUCTURE
During the review period, the Nepal government has taken responsibilities of many
infrastructural and construction activities, to overcome the infrastructural gap highlighted by
the COVID-19 pandemic. The participation between all three tiers (federal, provincial and
local) of the government for various projects has also been highlighted. However, lack of co-
ordination in implementation of the infrastructure projects and subsequent disputes are still
evident and need to be overcome to bring effective results.
Ropeways to be constructed in with a capacity to store 40,000 Supplies has also begun preparations
Bagmati: The Ministry of Physical kiloliters of petrol at Charaali-based to conduct a feasibility study for the
Infrastructure and Development is 23 bigha land, is set to begin soon. dry port. The Indian government
set to construct ropeways in different According to Manish Neupane, has agreed to construct an Integrated
parts of the Bagmati Province Chief of the Nepal Oil Corporation’s Check Post (ICP) on the border,
(Province 3) to ease transportation Charaali depot, the depot which which will be connected to the dry
in the area. Minister Rameswar will be constructed will have the port by a railway line. The proposed
Phuyal and his team is soon to capacity store 12,050 kiloliters of dry port and ICP will be spread over
begin the study for the construction petrol, 28,050 kiloliters of diesel, 280 bighas of land.26
of the ropeways and cableways in 450 kiloliters of kerosene and 250
Indrasarowar, Makwanpur, and kiloliters of air fuel. The total budget Second cross-border petroleum
Gosaikunda in Rasuwa and Dolakha. for the construction is set at NPR 10 pipeline project to move ahead: In
According to the Minister, the billion (USD 84.03 million) for a January 2020, joint-secretaries of
ministry has been engaged in various three-year period. The construction Nepal-India Joint Working Group
discussion to develop detailed project of this petroleum pipeline will be held a meeting in New Delhi. The
reports for the ropeways and will the second inter-continental pipeline team made a decision to construct a
begin the work shortly. He believes project in the country.25 petroleum pipeline project at Nepal’s
that the increase in power production request with cooperation from the
in Nepal has provided a ground A dry port in the far west to be Indian side. Currently, the plan to
for them to promote electricity- constructed: By considering Mumbai develop the second cross-border
based transportation. Moreover, the city in India as a transit point for petroleum pipeline has moved a
ministry is also beginning the study third country trade, Nepal has started step closer after the agreement of
of feasibility for gravity ropeway that to construct a dry port in Dodhara, the delegation from the Indian Oil
may run without any energy supply. Chandani on the western border Corporation arrived in Nepal for field
Besides, the ministry also plans to carry with India. This is the shortest route study. The pipeline project has moved
another study to see if the Hetauda- to the sea and is believed to provide ahead taking into consideration the
Kathmandu ropeway, built 102 years increased access to Nepal in terms of demand for oil until 2034 as per the
ago during the premiership of Rana increasing foreign trade and lowering Executive director, Surendra Poudel,
Prime Minister Chandra Shumsher, costs. The dry port is also considered of Nepal Oil Corporation. After the
could start operations again.24 to be the first business gateway to field study, a detailed project report
India from Nepal’s far west. will be prepared by the mid-April in
Petroleum pipeline to be constructed the coming year 2022.27
for Siliguri-Charaali area: The Moreover, the Intermodal Transport
construction of infrastructure for Development Committee under the Obstruction in the infrastructure
Siliguri-Charaali petroleum pipeline, Ministry of Industry, Commerce and expansion works in Kathmandu: In18 DOCKING NEPAL’S ECONOMIC ANALYSIS
December 2019, the Department of each lawmaker directly elected from suggests that each project got NPR
Roads confirmed that road expansion the 165 electoral constituencies 1.44 million (USD 0.012 million) on
work would begin from early 2020. received NPR 60 million (USD 0.50 an average.29 Now that the dissolution
However, even a year later, the project million). However, the decision to has been overturned by the Supreme
is in limbo and the construction works allow the lawmakers to mobilize the Court, this can undergo some
are obstructed. More specifically, amounts drew instant criticism due changes. However, it has not been
the second phase of the Ring Road to the outsized role of lawmakers decided yet.
expansion is indecisive due to ongoing in determining projects and their
disputes over Swayambhu's road implementation. It also raises concern Sustainable Development Goals
shrine and property encroachment over good governance in the country. Assessment shows infrastructure
along the 8.2 km road from Kalanki to development not enough: National
Maharajgunj. The locals of these areas Amid these criticisms, CIDP and Planning Commission (NPC) has
point out that they are not against CDF were merged and renamed unveiled Nepal’s progress in attaining
development, but they stand against Local Infrastructure Development Sustainable Development Goals
the government for not exploring Partnership Programme (LIDPP). (SDGs). Under SDG 9:Industry,
other alternatives to preserve the Along with these changes, lawmakers Innovation, Infrastructure, it has
heritage and infrastructure that took were also made responsible for been assessed that the road density has
years to build. These disputes have, consulting local governments to increased in Nepal, but is still low in
thus, hindered the projects.28 select projects for the programme. comparison to other countries, along
Beginning from early July 2020, the with the infrastructural gap. The
Controversy regarding the Local federal government discontinued report further states that the growth
Infrastructure Development releasing resources for projects under of industrial sector has remained slow
Partnership Programme (LIDPP): LIDPP and decided to invest the in Nepal, and that there has been no
The Federal Democratic Republic unused funds under the programme improvement in the industry’s share
of Nepal releases two types of for COVID-19 response instead. in GDP. Moreover, as per the National
funds to its Members of Parliament However, after the dissolution of the Planning Commission’s progress
(MPs)- Constituency Infrastructure House of Parliament on December report, there is a clear lack of data base
Development Programme (CIDP) and 2020, the KP Sharma Oli government regarding many important indicators
the Constituency Development Fund released around NPR 6.56 billion including industrial infrastructure
(CDF). The funds were distributed for (USD 55.71 million) for the highly clean technologies, etc.
the developmental projects, and power controversial LIDPP to implement
for its mobilization was handed over over 4,552 projects in 164 out of 165
to the MPs. During the FY 2019/20, electoral constituencies. The decision
“ OUTLOOK
Infrastructural development is one of the pre-requisites of development in any country, and the same is the case in
Nepal. However, even though the potential for development in Nepal through the investment in infrastructures has
long been realized, it still faces many bottlenecks.
In the early months of the fiscal year, many construction and infrastructural works were halted due to the COVID-19
pandemic and its subsequent lockdowns. Despite all the hardships, the government has resumed its work in
infrastructural development. However, according to a report published by National Planning Commission, the
progress that should have been achieved in the sector is comparatively low. However, it should be noted that although
there is the will to undertake the infrastructure projects, they are often paralyzed by political instability, poor decision-
making, lack of data base and lack of capacity. For example, according to the list of projects compiled from the
Annual Development Plans of the National Planning Commission, infrastructural projects have been ongoing forNEFPORT ISSUE 44 – MARCH 2021 19 more than 11 years. One of the many instances is that out of the total 80 bridges in the Postal Highway Project of the government, 78% of the work has been delayed due to design mistakes, political interference, weak contract management and negligence.30 This has aggravated the situation of unbalanced development, created wastages and has caused the sector to become dysfunctional. Considering the strength and weaknesses in development projects, the way ahead for a strong infrastructure base would be the participation from both the government and the private sector, as well as a strong legal and policy foundation. Besides, it is also important to strengthen the local government to ensure monitoring and effective implementation of the projects.
20 DOCKING NEPAL’S ECONOMIC ANALYSIS
TELECOMMUNICATIONS
TELECOMMUNICATIONS
The strong consumer demand, and liberal reformist policies of the Government of Nepal
have been instrumental in the rapid growth in the Nepal telecom sector. The Government
has enabled easy market access to telecom equipment and a fair and proactive regulatory
framework, that has ensured availability of telecom services to consumer at affordable prices.
The Government has has introduced several reforms in the telecom sector and continues to
be proactive in providing room for growth for telecom companies.
Figure 1: Telecom Operators Market Share
Source: Nepal Telecommunication Authority ‘MIS Report dated February 2021
The Nepal Telecommunication a total of 20.1 million subscribers As shown in Figure 2, the internet
Authority (NTA) recorded a decline (GSM & CDMA), while Ncell had penetration is largely driven by mobile
of 9% in the number of subscribers 15.7 million GSM subscribers.31 broadband services which accounts
(fixed and mobile) from 42,878,367 for approximately 60% of internet
subscribers in mid-December 2019 Similarly, the growth in data/internet penetration while fixed broadband
to 38,856,331 subscribers by mid- subscribers increased from 21.4 (wired & wireless) contributes to 22%
December 2020. The tele-density million in mid-December 2019 to of internet penetration.
of the country is currently at 128% 24.3 million in mid-December 2020,
and 2.46% for mobile and fixed line a growth of approximately 14%. The Foreign currency recommendation:
respectively. As shown in Figure 1, internet penetration rate as of mid- During mid-November and
market leader Nepal Telecom recorded December 2020 stands at 81.5%. mid-December, the NepalNEFPORT ISSUE 44 – MARCH 2021 21
Telecommunication Authority the company is set to launch the 4G Telecommunication infrastructure
provided recommendation wireless home broadband service sharing: The government’s long
amounting to approximately NPR targeting potential customers who term policy has been to bind the
56 million (USD 476,000) for do not have access to its Fiber to the telecom companies and mandate
payment of bandwidth and other home (FTTH) and ADSL services. them to share telecom infrastructure
service charges of different telecom The technology allows subscribers to to ensure better services. As per
operators and NPR 122 million access internet services at NPR 900 the implementation, infrastructure
(USD 1 million) for payment of (USD 8) per month using dongle or sharing policy companies will no
telecommunication equipment. router equipped with SIM cards.32 longer establish their own resources,
Nepal Telecom is also on the path to but will share infrastructures with
Nepal Telecom to launch 4G testing 5G network during the current one another. Nepal Telecom has been
wireless home broadband service: fiscal year. assigned with the responsibility of
Nepal Telecom has announced that setting up an infrastructure company
Figure 2: Growth trend of voice telephone and data service penetration
Source: Nepal Telecommunication Authority ‘MIS Report dated February 2021
that will enable telecom and Internet government is set to implement the phone used inside the country, curb
Service Providers (ISPs) to share Mobile Device Management System circulation of unauthorized or stolen
infrastructure. (MDMS) in three months to control phones and as well as raise more
the grey phone in Nepali market. revenues at the customs.
Implementation of Mobile Device The government through the MDMS
Management System: The system aims to keep track of every22 DOCKING NEPAL’S ECONOMIC ANALYSIS
“TheOUTLOOK
buzz within the telecom sector is the launch of 5G network. However, the huge investment and clarity on
the spectrum to use for 5G services is seen as a major hurdle for the launch of 5G services. As per the directive
of Ministry of Communications and Information Technology (MOCIT) Nepal Telecom may have allotted 5G
equipment within the current 4G expansion project to make provision for rolling out 5G services.
The concept of telecommunication infrastructure sharing is expected to reduce capital flight as well reduce haywire
establishment of towers, optic fiber and create business opportunity for incumbent operators. The policy is expected
to reduce redundant infrastructures bring about uniformity in services and setup a level playing field for fair and
healthy competition resulting in consumers accessing higher quality service at an affordable cost. However, sharing
of infrastructure may be difficult as public procurement act may create major obstacles for private companies
looking to upgrade technology thereby impacting service delivery.NEFPORT ISSUE 44 – MARCH 2021 23
REAL
REALESTATE
ESTATE
The nationwide lockdown imposed by the government on 24 March, 2020, did not seem to
inflict strain on Kathmandu’s real estate market. Although the market underwent some major
shocks in the first few months into the pandemic, a gradual boom was noticed in the buying
and selling of houses and plots of land across the country. The government has come up with
rules to strengthen the land and renting policies.33
Boom in Kathmandu’s real estate No dual ownership of land: The standard regarding use of public
market: Kathmandu’s real estate Ministry of Land Management, Co- land to make the existing provisions
market has witnessed a boom amidst operatives and Poverty Alleviation has more systematic. As per the new
the pandemic. According to reports, decided to end the dual ownership standard, public land can be used
between mid-December to mid- of land. The dual ownership of land by government hospitals/health
January, 76,532 houses and plots between the landowners and the facilities and community schools for
of land were bought and sold across tenants has been a long standing 30 years depending on the need. The
the country. The pandemic resulted problem in the country. The period may alter on the basis of its
in lack of other investment avenues government will facilitate in resolving rationality and any non-governmental
such as excess market liquidity, which the dual land ownership if both the organization or private sectors are not
has prompted banks to offer loans in parties cannot reach an agreement.34 eligible.35
low interest rates. Lastly, the gradual
revival of the economy and consumers' New standard for the use of
savings are few of the major reasons public land issued: The Nepal
behind the increase in real estate. government has introduced a new
“ OUTLOOK
With the economic activities resuming to normalcy, it can be predicted that the real estate market will experience
a boom in Kathmandu and areas adjacent to Kathmandu. The government has to come up with more policies to
regulate the buying and selling of the assets.24 DOCKING NEPAL’S ECONOMIC ANALYSIS
EDUCATION
EDUCATION
This review period witnessed some remarkable development in the education sector of the
country. After nearly 10 months of closing down, schools and colleges across Nepal have
finally resumed physical classes. The National Examination Board (NEB) also published the
much-awaited results of 2077’s Grade 12 examinations. Likewise, the Supreme Court paved
the way for the Ministry of Education, Science and Technology (MoEST) to implement a new
curriculum for Grades 11 and 12 after months of indecision. Moreover, the National Education
Commission report, that the government had been withholding from the public for two years
was made public without government approval.
Around USD 7 billion remitted abroad Supreme Court issued a fresh directive, MoEST itself, which finally made the
as educational expenses: As the to implement a new curriculum for decision to incorporate mathematics
global pandemic compelled countries grades 11 and 12 of the National as a compulsory subject that students
to close their borders, number of School Curriculum Framework 2076. could choose instead of Social Studies
students leaving abroad for education Private school operators were hesitant & Life Skills.39
sharply declined. However, the money to implement the new curriculum
remitted for education expenses shot developed by the Curriculum Grade 12 Results Published: The
up to almost USD 7 billion. As per Development Committee (CDC) National Examination Board (NEB)
the Ministry of Education, Science citing problems despite repeated published the results for the Grade 12
and Technology, the number of directives from the MoEST. As per examinations on 1 February, 2021.
students applying for No Objection the new curriculum, +2 students Owing to the Covid-19 pandemic
Letters (NOC) decreased by 35% in would have to study six subjects followed by the nationwide lockdown,
the first four months of the current in each grade with 3 compulsory the examination which was originally
fiscal year compared to the previous subjects and 3 elective subjects out of scheduled from 20 April, 2020 was
year. The data from Nepal Rastra 80. Private school operators had filed conducted from 24 November to 1
Bank (NRB) showed that NPR 6.80 a writ against the implementation December 2020. A total of 310,316
billion (USD 57.76 million) was of the new curriculum, after which students appeared for the regular
remitted for students studying abroad the Supreme Court had halted examinations from 4,105 higher
as educational expenses, food, and its implementation until further secondary schools that were turned
accommodation expenses in the first decision.37 The dispute between the into exam centers all over Nepal.40
four months of the current fiscal private schools and the government
year. Students who went abroad for created a lot of confusion as some Government of Nepal gave approval
higher education usually work to pay institutions had started teaching the for reopening of Schools across
their tuition fees and living expenses, new curriculum while others held on the country: After 10 months of
however due to the pandemic and to the old curriculum. After months online operation, the Covid-19
loss of jobs it was found that Nepali of indecisiveness, the Supreme Court Crisis Management Committee
parents had been remitting money finally passed the verdict in support of (CCMC) finally took the decision to
from the home country to support the new curriculum on 13 January, allow schools across Nepal to resume
their children.36 2021.38 However, there were concerns physical presence in classrooms and
whether mathematics would be schools. The schools will have to
Supreme Court allowed new a mandatory subject or not. The adopt appropriate health and safety
curriculum for grades 11 and 12: The Supreme Court left the decision to the measures, and the District Covid-19NEFPORT ISSUE 44 – MARCH 2021 25
Management Committee (DCCMC) exam and books’ fees up to secondary Commission public even after two
are given the authority to close the level. Additionally, the rules mandate years after it being submitted. The
institutions, if necessary.41 Earlier, schools to make provisions for report cost the government USD 20
the federal government had provided providing mid-day meals, school million to prepare and it was submitted
guidelines to resume classes. They uniforms and other basic facilities to PM KP Oli on 15 January, 2019. As
had also given the responsibilities for differently abled, Dalits, and per senior officials at the Ministry of
of reopening schools to the local poor children. Similarly, the rules Education, Science and Technology,
governments.42 With permission from also require local levels to arrange the ministry had refuted to make the
the local governments, many schools residential facilities for those in need.. report public at the bidding of private
had already started resuming in-person Local levels are also required to conduct schools and education mafias, as the
classes since September last year. three-month literacy programs report made recommendations to
The Private and Boarding Schools’ such as—basic adult education or convert all private schools into trusts
Organization (PABSON) warmly traditional/non-formal education within the next 10 years.44 Regardless
welcomed the government’s decision, through community learning centers. of the government’s hesitation,
while the parent’s organization and Provisions for offering scholarships the commission, comprising of
health experts are not too keen about as per the law is also drafted, which educational experts, government
the decision as it might exponentially will be managed by a five-member officials, teachers, former education
shoot up COVID-19 infections. scholarship management committee ministers and other stakeholders made
headed by the chief of the local the 502-page long report public on 4
Compulsory and Free Education government. In order to monitor December, 2020. The publication was
Rules 2020 framed: The government the implementation of the rules, an financed by two NGOs, the National
published the ‘Compulsory and Free eight-member monitoring committee Campaign for Education and Global
Education Rules- 2020’ in the Nepal would also be created, which would Action Nepal. The ministry accused
Gazette aimed at implementing the be led by a secretary at the Ministry of the two organizations of violating its
constitutional provision of free and Education, Science and Technology.43 copyright and sought for legal action
compulsory education. As per Nepal’s against them. The ministry also wrote
constitution, every citizen has the Government refused to make to 16 donor agencies of the NGOs
right to receive compulsory and free National Education Commission including the UN, World Banks,
education from the state up to basic Report public: According to officials UK Aid and the British Council
level, comprising of grade 1 to 8 and at the High-Level National Education expressing its discontent over their
free education up to secondary level Commission and the Ministry of support to report the publication.45
comprising of grades 9 to 12. The Education, the government of Nepal
recently published rules prohibit allegedly hid the National Education
community schools from charging Commission Report and refused
admission fees, monthly tuition fees, to make recommendations of the
“ OUTLOOK
The Education sector was one of the hardest hit sectors by the Covid-19 pandemic. Schools being shut for
almost 10 months took a hefty toll on the students, particularly those coming from public schools. While
private school students had the privilege of learning through online classes, majority of public-school students
were left in dark as the both schools and students lacked proper resources. The government’s decision to allow
schools across the country to resume physical classes was welcomed by most of the schools. However, health
experts have warned that this decision could further accelerate the spread of the virus. While the government
has ordered schools to maintain strict health protocols and has given local bodies the authority to oversee and
monitor these schools, it is uncertain whether the schools have been following the required health and safety
measures or not.26 DOCKING NEPAL’S ECONOMIC ANALYSIS
Meanwhile, the Oli government’s delay in publishing the High-Level National Education Commission’s report,
and its strict actions against the organizations clearly shows the government’s deliberate attempt at hiding the
report. The government’s hesitance in making the report public can therefore be seen as an indication that the
private school cartels and political groups have a firm grasp on the government.NEFPORT ISSUE 44 – MARCH 2021 27
HEALTH
HEALTH
The Government of Nepal has initiated the drive to acquire vaccines from India in addition
to sending requests for vaccine procurement to other countries. The procurement process
comes at a time when a new variant of the COVID-19 vaccine has been found in the United
Kingdom which prompted the government to ban entry for passengers from the country.
The sector has also been entangled by various challenging issues. One such instance is
healthcare workers demanding risk allowance in government run hospitals in the country in
addition to an alarming level of air pollution in the capital city of Kathmandu.
Government initiates vaccine will be vaccinated through the complained that the payment was
procurement: The Nepal government COVAX program. The COVAX far less than what the government
has written to the Indian government program has the world's largest and had fixed. Medical doctors receive
requesting for the procurement of most diverse portfolio of potential salary from NPR 55,000 to 60,000
COVID-19 vaccines on December COVID-19 vaccines. WHO has asked (USD 467.17- 509.64) per month
2020. The government aims to the Government of Nepal to prepare in other public hospitals around the
inoculate around 20% of the Nepali for vaccine rollout under COVAX in country while the salary in BPKHS
population through these vaccines.46 the third trimester of 2021. Each dose is only NPR 34,500( USD 293.04)
The government has requested the of vaccine under the COVAX scheme per month. Although the complaint
Indian counterparts to procure is estimated to cost NPR 1,177(USD was lodged time and again, their plea
adequate vaccines for Nepal while 9.9). The Government of Nepal has to resolve the issue were neglected.49
India procures the jabs for their own also expressed interest in procuring A similar incident occurred in
population. Currently, there are five one million doses of the Covidsheild Kalaiya District Hospital too. The
vaccines against corona virus which vaccine and 25 million doses of hospital's doctors, nurses, health
are at various stages of human trials Sputnik V vaccine from India and workers and employees shut down
in India - Oxford AstraZeneca and Russia respectively. 47 48 all services except the emergency
Bharat Biotech are in advanced ward. The health workers staged a
phase 3 trials. Besides India, the Health workers express their demonstration demanding COVID
Nepal government has also sent discontent: Agitating doctors and risk allowance. The employees at the
diplomatic notes to China, Russia, medical officers started a protest Kalaiya District Hospital took the
the United Kingdom and the United on January 18, 2021 demanding drastic step of boycotting their duty
States requesting for supplies of the COVID risk allowance at BP Koirala at the hospital after they did not
COVID-19 vaccine. At the present Institute of Health Sciences, Dharan. receive the allowance for the past 10
stage, 15 different vaccines from The Medical Officers are seeking a months.50
various countries and companies salary on par with the eighth level
from all over the world are now in the (NPR 38,784, USD 329.4) and a Air quality in Kathmandu deteriorates
third phase trial. It has been reported COVID allowance while residential to hazardous levels: The air quality
that in Nepal, children under 15 years doctors are demanding a risk in Kathmandu reached hazardous
will not be vaccinated as the vaccines allowance. The agitated workers had levels on January 4, 2021, crossing
produced so far have not been tested also warned of boycotting their duty the 600 mark to briefly make it the
on those belonging to the age group. at the emergency ward. The health most polluted city in the world.
Of the remaining population, 20% workers unsatisfied with their salary The air-quality monitoring stationYou can also read
