Fatal State of Denial

Nepal is going through a fatal state of denial of possible economic crises in the near future. Contrary to the false assurance given by the concern authorities in Nepal, it's hard not to foresee the effect of global economic crisis on Nepalese economy in a most disastrous way due to their continuous denial and consequent lack of strategy and planning to cope with it.

Last weekend we spent some time with our family friends. During our discussion, what we pieced together compelled us to think that our country is opting for a serious economic crisis if not prevented in time. What is being presented here for discussion may only be a tip of iceberg or asteroid coming to hit us. The most direct and hard-hit area will be will be the dramatic short-fall of remittance from the labor market, which has been the only basis of survival of the Nepalese economy.

With the global economic crisis that started in the US now slowly trickling down to the other part of the globe, there already is a likelihood of construction projects closing down in the countries like United Arab Emirates and etc that have been importing international laborers from countries like India, Bangladesh, and Nepal. These countries will not only discontinue importing laborers, but will also send back the existing laborers. With this, Nepal will face double-jeopardy of not only loosing income from remittance, but also of having to manage and create employment opportunities locally. Countries like India can absorb its returning laborers, as its economy does not depend as heavily on the labor market. But for a country that survives solely on remittance from international labor market, Nepal is likely to face severe crises. With suddenly-shrunken retirement fund and an on-going recession, it is very likely that retired workers in developed countries like the US will resort to employment for survival, replacing migrated workers who will have to return to their respective countries. Will Nepal be able to create the employment opportunities it needs with its controlled and restricted economic policy? Another hard hit area will be the tourism.

With the global recession, the tourism business is likely to slack, as potential tourists from the developed countries are forced to work to gain back their lost retirement funds; there will also be cut-throat global competition to attract whatever limited tourism there will be in which Nepal would hardly have any chance, given their lack of even basic scheduled international flights, poor airport management, insufficient international marketing and on-going political disturbances. Nepal can hardly call itself as agricultural country with barely one third of the total land usable for agriculture, and with such a dense population. This has been an economically fatal assumption inherited from the past from century to century.

Nepal's financial and banking sectors are at fragile state, too, with the possibility of their collapsing any time due to over-dependence on its investment in the real estate business, almost repeating the same mistake that lead to economic crisis in the US. There's a rumor that the government will adapt a new policy of discouraging banks from investing in real estate. If the rumor is true, this might bring economic disaster in the country even faster. Unless the government creates alternative investment opportunities for banks and common people, this abrupt policy change might prove to be an economic suicide. The government's policy to discourage private schools, colleges and educational institutions will also result in great capital flight as those who can afford will send the students to study abroad, while investors flee.

What Nepal should embrace now is liberal open market policy that will attract foreign investors from all over the world, not the restricted economic policy that will scare even the local investors to flee to other countries. Rather than requesting foreign aid, Nepal should invite foreign investments that will bring not only the money but also the technologies, knowledge and skill in the country. Only this can save the country.

Posted on : 2008-12-16 20:30:25

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