Despite severe political uncertainties and a violent conflict, the country has registered respectable growth and reduced poverty from 42% in 1995/96 to 31% in 2003/04. The private sector is understandably still hesitant, but the Nepali workers working outside the country are fueling growth through significant amounts of remittances – in 2003/04, remittances equaled US$794 million, or 12% or GDP. Under the right policy mix, Nepal has the potential to meet the ambitious target of 6% plus annual GDP growth set for the next decade. Some of the issues that could affect growth include: Political Uncertainty: After the “People’s Movement” of April 2006, a coalition government was formed, the Parliament was reinstated, further talks with the Maoists were held, and it was agreed that a new Constitution will be prepared. The political situation, however, remains uncertain, adversely impacting investor confidence. Internal Connectivity: The Western region and parts of the Eastern region are poorly connected to domestic and international markets. Improving infrastructure – roads, telephones, electricity – will therefore significantly improve growth prospects in these regions. Social inclusion and governance: The allocation of public resources to undo social stratification by gender, caste and ethnicity should be changed. Local institutions should be strengthened and the civil service be made more accountable to deliver social services to all. . Trade: Nepal has benefited from the special trade and employment agreements with India. To increase productivity and derive the maximum benefit from international trade with both India and other countries, Nepal needs to: - Improve trade logistics, customs and tax procedures
- Remove the anti-export bias
- Undertake measures to increase competitiveness of Nepali products and make the country an attractive investment destination
Remittances: Remittances by the Nepalese workforce employed overseas will remain an important source of income and economic growth. Nepal must strengthen the employability of its workers in better paying jobs outside the country. World Bank Assistance/ Involvement The World Bank is helping Nepal tackle the main growth constraints through a mix of analytical work, technical assistance, and lending. Recent products include: |
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