Globalization for this little one or not?

A land-locked nation of nearly 30 million people, Nepal remains one of the poorest countries in South Asia, and the twelfth poorest in the world (3, 5).  While over the past ten years, the country has made economic reforms consisting of international trade pacts (namely with India) and liberalizing trade regulations, helping exports grow considerably.  The country faces two large influences regarding trade and industries, and they are one, Nepal’s nearest port access is more than 900 kilometers away from the border, and two, it shares a de facto free trade border with the industrial giant India on three sides (2).

The percentage of imports/exports from the annual GDP from the years of 2000 and 2005 are 25% and 27% respectively (4).  As one can see, these do not contribute much to their overall gross domestic product. The thing is that Nepali exports have become unhealthily less diverse over the years into an “unhealthy concentration in carpets and garments (2).”  Also, in addition to the condensing of import products, Nepal has begun sending more and more of its goods solely into India, with the help of the 1996 Trade Treaty which basically advanced goods quality regulation and trade infrastructure.  Since 1996, Nepal’s imports to India have increased eight-fold, and has “diversify and expand Nepal’s industrial base, and attract Indian investments (1).”

The GDP in US billion dollars of the nation from the years 2005 to 2007, are 45,053.89, 48,626.70, and 54,347.04 respectively. The GDP growth has actually decreased with the growth rate slowing down to only annual 3.8% as compared to a 4.1% during the years of 1999 to 2000 (4).  The slowing down of the economy has been attributed to “intensified [political] conflict, decline in agricultural production caused by unfavorable weather conditions and a decline in clothing exports,” according to a World Bank report on Global Economic Prospects 2007: Managing the Next Wave of Globalization.  Also including globalization as a role player, the report predicts that in the next 25 years, average income rates would grow in comparison with the rates of the past 20 years.  “However, unless managed carefully, it could be accompanied by growing income inequality and potentially severe environmental pressures,” predicts the WB (3).

The income distribution disparity has increased over the past ten years, with income in the rural areas trickling and inequality increasing along with it.  Rural poverty has stunted the bottom 30% of people’s income distribution to only about 10% (6). However, certain urban areas such as in Kathmandu saw such a growth in income that the rise in poverty was overshadowed. During the last two decades, incidence of absolute poverty has increased in the rural areas and Nepal as a whole, which is another symptom of a skewed income distribution system. At the turn of the decade, Nepal underwent many extensive reforms and this included a concept of integration with the global economy.  This has brought about significant increases in exports, a lot of which is contributed through money sent home by Nepalese working abroad. 

Annual per capita income in Nepal is 27,209 rupees (418.6 US dollars), and the country experienced a growth of 8.8% from the previous fiscal year, according to the Central Bureau of Statistics. Actually, the per capita income increased mostly because of an estimated half a million Nepalese emigrants working in other nations. The money sent home by these citizens “was expected to cross 100 billion rupees this fiscal year, which ends in mid-July (2).”  Although there has been some increase in the per capita income thanks to the Nepalese living outside the country, “the expected economic growth for the current fiscal year is less than half the targeted rate (6).”  Also, the employment rate in the years of 2000 and 2007 were 49% and 48% respectively, but in comparison to earlier years such as in 1990, when the employment rate was much higher at 54%, it is evident that the country needs to start creating industry and opportunity for the nearly 50 percent of those unemployed (4).  

Experts point out the country’s slow economic growth to the political instability and civil war that has been ravaging the country in recent years.  Also, as a result of the instabilities and recent transition to an interim government that is currently governing the nation; economic development has reached a pause with regards to foreign investments and development projects. However, as of the end of 2004, “India was by far the most important foreign investor in Nepal, with over 32 percent of the projects (7).”  In an effort to name other nations that have some sort of involvement, no matter how minimal, the United States is second in foreign investments; China, third; the British Virgin Islands, fourth; Norway, fifth; Japan, sixth; and South Korea, seventh.  According to a report by the U.S. State Dept., the total number of jobs created through foreign investment is 102,229, and the number of jobs generated through U.S. investment is 8,074 (7).

            Unfortunately, globalization as of yet has not brought about any major change to the country’s “trade and domestic production (2).”  Because Nepal had gone on so long without the pressures of international competition, when trade opened up in 1990 and the monarch gave up a substantial amount of power, allowing for the creation of a multi-party democracy, they were unable to catch up.  For the upcoming years, Nepal’s future as a nation influenced by globalization looks quite bleak.  The structure of the government is unstable itself, and the living conditions of every-day citizens are not sufficient; therefore how is a nation supposed to join together and move forward into the realm of international trade and cooperation with other nations when they can’t even get their own domestic problems in check?  Also, the lack of progressive leaders has also contributed to Nepal’s inability to run with the rest of the world on the globalization track.  With the new interim government going underway, hopefully a group of fresh minds will be able to bring the country forward into a new era.

all photos courtesy of http://www.flickr.com/photos/babasteve/

Works Cited

1. “India ready to review trade treaty with Nepal.” News Alerts. 20 Dec. 2007. The Earth Times. 12 Nov. 2008 <http://www.earthtimes.org/articles/show/161952.html>.

2. Khan, A. R. “GLOBALIZATION: ASSESSMENT OF CHALLENGES FACING NEPAL.” UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT. United Nations. 12 Nov. 2008 <http://www.unctad.org/en/docs/poedmm124.en.pdf>.

3. “Nepal Country Overview: 2008.” June 2008. The World Bank. 12 Nov. 2008 <http://www.worldbank.org.np/wbsite/external/countries/southasiaext/nepalextn/0,,contentmdk:20094195~menupk:148707~pagepk:1497618~pipk:217854~thesitepk:223555,00.html>.

4. “Nepal Data Profile.” Sept. 2008. The World Bank. 12 Nov. 2008 <http://ddp-ext.worldbank.org/ext/ddpreports/viewsharedreport?report_id=9147&request_type=viewadvanced&wsp=n&hf=n/cpprofile.asp>.

5. “Nepal.” The World Factbook. 6 Nov. 2008. Central Intelligence Agency. 12 Nov. 2008 <https://www.cia.gov/library/publications/the-world-factbook/geos/np.html>.

6. “Nepal’s per capita income grows by 9 per cent.” News Alerts. 13 June 2007. The Earth Times. 12 Nov. 2008 <http://www.earthtimes.org/articles/show/72177.html>.

7. “Openness to Foreign Investment.” 2005 INVESTMENT CLIMATE STATEMENT — NEPAL. 2005. United States State Department. 12 Nov. 2008 <http://www.state.gov/e/eeb/ifd/2005/42093.htm>.