ECONOMIC ISSUES IN NEPAL
Part I:
Introduction
According to the 2019 Gross Domestic Product per capita report, Nepal had a GDP per capita of $1,071.051. The World Bank Report of 2019, rated Nepal as a low-income country with an estimated population of 8.1 million poor not able to afford necessities (Pokharel, 2015). The report indicated that over 10% of Nepalese children under the age of 5 are undernourished, and poverty is more pronounced in rural regions. This study seeks to take stock of poverty conditions in the rural community of Ramechhap through adept research on causes and strategically provide better methods that offer a solution to poverty. Evidence-based case studies conditions in the rural community of Ramechhap will provide a precise and idealistic mechanism for building cohesive and equitable policies that are pillars to progressive development in Nepal.
Driving Force of Poverty in Nepal
Poverty in the rural community of Ramechhap in Nepal has been attributed to poor development models that demand a comprehensive approach through reforms in economic policies aiming to achieve lower middle income as of 2030. According to the Country Economic Memorandum (CEM), a systemic assault for discerning the vicious poverty cycle amongst the poor is necessary to balance employment opportunities and the cost of labor exports (Pokharel, 2015). Various key factors have played a role in delimiting Nepal from obtaining a stable economy and high income per capita, similar to neighboring nations. These factors are not limited to political issues, but also geographical. Nepal is a landlocked nation that relies on its economic rivals for exports and imports. The country experienced extractive regimes through its political mileages; therefore, it hindered the development of physical and human capital marked by the illiteracy of up to 90% by 1951 (Pokharel, 2015). It has become prone to natural catastrophes that include two successive earthquakes of extreme magnitudes, which affected over 8.1 million Nepalese living in Kathmandu’s capital city. The natural calamities that have hit Nepal have led to a loss of physical resources and natural habitats.
Gender Inequality is another factor that limits Nepal from attaining collective and inclusive end to poverty. Studies show that men are likely to prosper in Nepal than women, whereby education institutions favor males and limit girls from obtaining enlightenment (Pokharel, 2015). The country is also witnessing the poor implementation of progressive laws that have failed to protect citizens by allowing backward practices such as illegal and skewing marriages enforced on girls who are school going. Yet the government has taken concern about these practices, which have devoured public progress in terms of equality. In terms of political systems, Nepal has witnessed a bumpy transition of political leaders from monarchies, multiparty democracies, and unsuccessful governance (Pokharel, 2015). These factors contribute to Nepal’s slowed economic prosperity, and the country’s unfavorable geographical location has worsened the situation.
Additionally, Pokharel (2015) says that Nepal has faced dire consequences of ineffective policies that have existed for over 45 years, resulting in weak performances in agriculture, public investment, capital growth, and low productivity in the economy’s significant sectors. There are several underlying factors fueling poverty amongst Nepalese, including regional and ethnic inequalities, poor governance, and lack of essential infrastructure for the rural community of Ramechhap. The marginalized rural community of Ramechhap has increasingly faced poverty, including poor health, education, and overall well-being. The privatization of public resources has also become a factor that hinders the distribution of finances within Nepal. The country is witnessing the worst level of privatization of government resources by the wealthy and few who use amass government wealth opportunities.
Nepal is struggling with global challenges of disparity amongst rich and poor, reflecting on extreme income disparity that relatively ranks higher in the worldwide chart. Nepal has a high-income Gini coefficient of 49.42 relative to global statistics, which means a significant deviation occurs between household income distributions (Chaudhary, 2018). The larger the income Gini coefficient, the larger the inequality levels and subsequent trapping of citizens in spiteful poverty set. According to a report by Oxfam International, Nepal had a Palma ratio indicating a disparity in resource distribution amongst individuals. It was marked by the high income of 10% wealthiest citizens against low income in 40% of needy individuals. Chaudhary (2018) states that poverty has continued in Nepal due to high inequality rates in wealth distribution amongst citizens, whereby the wealthiest Nepalese had a whopping $1.5 billion, which could pay half of the nation’s spending on social protection.
Additionally, Nepal’s inequality is experienced not only in terms of financial parameters but also in public assets such as land and resources that are meant to have equal proportionalities. However, due to poor integration of government policies in protecting individual ownership rights of lands, large chunks remain for the rich. It is disheartening to observe that, amongst 66% Nepalese dependent on the land for agriculture is denied this opportunity. A study reveals that 7% of rich Nepalese owns almost 31% of land for agriculture, a situation that has raised the cost of living for poor citizens (Chaudhary, 2018).
Strategies for Poverty Mitigation in Nepal
The Tenth Plan has strategized on various means of reducing poverty by 30%; however, constraints exist in the processes (Chaudhary, 2018). Therefore, achieving a maximally stable economy is a stride that will seek impetus and deliberate efforts, such as a change in policy and institutional development of laws.
Nepal government rolled out the Tenth Plan, which was evaluated and tested to reduce poverty in Nepal and has undergone improvement since its inception. The role of the Tenth Plan is to help Nepal achieve a remarkable reduction in poverty through the next set of five years. It aims at the marginalized communities through integral poverty reduction systems that mainstream development to the rural community of Ramechhap. Poverty Reduction Strategy Plan (PRSP) focusses on social inclusion, committed to implementing projects that will support the delivery of both social and economic services and infrastructure (Chaudhary, 2018). Cognizant of Nepal’s inequality, the Tenth Plan has put more emphasis on community participation, demanding that private sectors employ the minority and State’s role in development in redefined to limit the involvement from the intervening over resource allocation. The Plan works under the core pillar of Framework that offers a strategic implementation outline. Macroeconomic Framework is the first scheme for poverty reduction that emphasizes public policies and institutions that promote growth (Chaudhary, 2018). The Plan provides a platform for assuring public and private investments to prevail, given the conducive environment.
Nepal has experienced political instability, social disorder, and violence, not to mention a series of natural disasters. This prevailing condition necessitated for the Tenth Plan to incorporate macroeconomic Framework that facilitates poor-oriented economic growth in the rural community of Ramechhap and equal resource allocation. The macroeconomic equilibrium could be achieved through reliable fiscal jurisprudence, efficiency in public resource allocation, and sustained monetary stability (Chaudhary, 2018). The government plans to improve poor rural dwellers’ lives through a change in policies of expenditure that would dictate State financial systems. The government of Nepal supports domestic borrowing among nationals who are guaranteed funds for development. Tenth Plan will also amend land policies by increasing access to the marginalized communities in the rural community of Ramechhap, Nepal. Since 66% of the population depends on agriculture for a living, Nepal has strategized using the Tenth Plan to create an irrigation sector that would promote sustainable agriculture. Tenth Plan aims to boost the rural community of Ramechhap electrification, improvement in forestry, and road development in the remote rural community of Ramechhap. The government aims to provide improved access to information through inclusive telecommunication systems established within the rural community of Ramechhap. Social Sector Development section of the Plan focusses on providing equal education and health programs to the communities irrespective of their ethnic backgrounds (Pokharel, 2015).
Moreover, Chaudhary (2018) says that drinking water and sanitation of the rural community of Ramechhap have been supported through engagement with the NGOs, CBOs, and private entities to plan, design, and implement management systems in water supply and sanitation programs. The government has developed the Poverty Alleviation Fund, whose role is to strengthen programs targeting end poverty, including the Broad-based financial and human development. To bring growth to the public, the Plan aims to develop an integrative system whereby the local communities are involved in program development, which is known as decentralization. The Plan provides an opportunity for people to participate in governance through monetary federalization to community levels. Lastly, the Plan will support target programs such as integrated development programs that focus on infrastructure development. It will facilitate group programs by ensuring access to resources, skills, and opportunities to enhance income generation. Women’s group and empowerment programs have become part of community poverty-alleviation programs that engage in income-generating processes, non-formal education, and skill training. Moreover, technology services have been improved in agriculture and livestock sectors to ensure food availability in famine-hit rural Ramechhap, and the government occasionally offers cash grants for food and supplies. The Poverty Reduction Strategy Plan has helped to improve the lives of Nepalese through integrated schemes in the rural community of Ramechhap that are economically deprived.
Part II:
Challenges in Microenterprise Development amongst Poor Communities
Unfavorable policies and lack of SMEs support programs are the barriers for microenterprises that aim to expand to large businesses. Poor people in developing nations lack reliable support from governments in rebates, loans, and strong financial policies. Lack of support and unfavorable policies amongst the developing nations has led to the unsuccessful development of SMEs. Moreover, political leaders who aim to become wealthy through private organizations have set high borrowing (n.a, Lecture Notes). Selfish politicians in developing countries continue to support the implementation of unfair trading and loan policies. Lack of financial support top SMEs have minimized their ability to achieve sustainable economic growth to form large enterprises.
Development policy tools besides microfinance useful for promoting medium-sized businesses in the developing world
The development of small and medium enterprises require strategic approaches to allow for growths into large businesses and integrate poverty alleviation mechanisms. Governments have improved policies for private financial sectors to provide support to small and medium-sized enterprises. Governments have provided a conducive environment for all business entities within a specific country that would allow for the gain of equal market shares. Small businesses have improved through cross-cutting approaches that emphasize government implementation of market policies and stakeholders’ provision of favorable business environments. Individual businesses require frameworks that are suitable in the management of financial growth for small and medium-sized enterprises.
The privatization of State-owned banks will help restructure financial systems for improved monetary development for SMEs. Governments enhance auditing and accounting standards through policies that stipulate how each financial institution performs fiscal reporting. SMEs are supported through improved monitoring of functions and capabilities that strengthen legislative provisions in a specific country. Frameworks have proved valuable in loan recovery, which allows the banks to adhere to certain limitations when giving loan services (n.a, Lecture Notes). Reforms are necessary for the banking sector through restructuring in private development banks to improve access of funds to medium enterprises. Therefore, the healthy growth of financial entities and medium enterprise sectors will demand transparent and supplementary accountability in regulatory Frameworks. Governments should also reform rural development banks to support SMEs’ local economic growth in impoverished communities within developing countries.
An expansion to the national development and poverty reduction schemes will allow SMEs to thrive in developing countries. Poor communities in SMEs will find the opportunity to engage in national programs for inclusive policy development in terms of growth. Developing nations will achieve significant growth if their governments provide support, which would be in the form of market information and regulatory standards of operation. SMEs would flourish when access to innovative technology from the government is guaranteed. Governments to protect SMEs through financial policies that are coherent with the regional and global standards. Governments support SMEs’ practices by the provision of spillovers of knowledge that will help in the management of SMEs. Enterprises that have acquired crucial management skills have reaped off benefits such as foreign direct investment. Support policy frameworks have been availed for SMEs to seek expansive growth in terms of revenues. Lastly, SMEs would be improved through a change in behaviors to facilitate public understanding of their contributions to the direct investment. The development in SMEs to large enterprises demands concerted efforts from both the government and private sector in facilitating the implementation of policies and management in finances.
References
Chaudhary, M. K. (2018). Economic Planning and Poverty Alleviation Strategies in Nepal. Research Nepal Journal of Development Studies, 1(2), 47-61.
n.a (2020) Lecture Notes
Pokharel, T. (2015). Poverty in Nepal: Characteristics and challenges. Journal of Poverty, Investment and Development, 11.