Not a bad year
In spite of a high-level promise not to hold public strikes during 2011 made at Dasharath Stadium in early 2011 in front of cheering crowds gathered to celebrate the start of Nepal Tourism Year, a series of bandas were announced and enforced as early as April. All these were mostly peaceful featuring, in some cases, music and dance on the main intersections of the capital city. Highways were mostly trouble-free unlike in past years when the probability of getting stuck somewhere due to an impromptu “chakka jam” was much higher. However, in the final few weeks of 2011, we proved that we had not lost interest or faith in the power of burning tyres.
The sad part of the story is the scores of photographs published in the media of tourists dragging carry-bags or taking a rickshaw ride to get to their destination. Most photos showed new faces, Chinese visitors in Pokhara and Kathmandu. Many of those were first-timers, exploring a mystical country. What impressions would they carry back home? How will they narrate the story of their escape from hectic life of Chinese mega-cities to this mountain country? These two days in the final leg of 2011 were certainly not good for the tourism industry that was otherwise doing well, although we might not quite achieve the million-visitor target set for the year.
The year 2011 has not been good globally. The growth outlook remained discouraging in general. The downside risks went up. The discourse has shifted from positive outlook to one of describing the situation exactly they way it is—in economic terms—depression.
It might not really be so, but persistent problems in the Euro zone leads one to think no better.
The US Congress refused to grant approval to a bill presented by President Obama on extending the borrowing limit for months leading to panic not just in the financial markets of the US but in countries as far flung as China. In spite of the repeated calls of urgency by the Treasury Department, the US Congress sat on the bill until the first week of August 2011 when it became almost certain that the US government would default on its debt obligations. Finally, a deal was struck and the Debt Ceiling Bill got through, but this did not prevent the credit-rating agency Standard and Poor’s from downgrading the credit rating of the US government bonds for the first time in history.
This was reminiscent of the budget episodes that our own country had to go through in the years following the election of the Constituent Assembly. However, unlike in the US, we seem to have learnt from our past follies. Until January 2011, all mainstream political parties were debating whether a budget presented by a caretaker party should be allowed to sail through parliament. That was when more than six months of the fiscal year had passed. Come mid-February, the situation changed. Parliament approved all the bills presented along with the budget in quick succession within a fortnight of the formation of the new government.
Come August, the present government saw no point in unravelling the budget presented by the earlier government and mustered all powers to get the same budget approved by parliament quickly. This was the realisation that implementation is more important than the fancy words used in
the budget. The realisation that a timely budget is more important than a self-defined better budget is perhaps one remarkable development of 2011.
The year 2011 began with the Nepal Tourism Year fanfare. In fact, much before the fanfare started, many in the tourism business had taken the government’s words for granted and geared up to cooperate and collaborate with it in taking the tourism industry to a new height. Hotels and resorts were renovated and capacity was added. In some places, new hotels came up. The first three months of the year witnessed a remarkable growth in tourist arrivals. Back in March, everyone believed that the target would be achieved. But with successive bandas in the month of April, the growth started receding. Even as the situation improved in the second half, the losses could not be recovered. In spite of the problems, the growth in tourism and its contribution to foreign exchange remained impressive in 2011.
Impressive rate of headcount poverty reduction remained headline news for days. Some simply did not want to believe it. Others questioned the validity. There were hardly a few takers as the headcount poverty was reported to be less than 13 percent using the same poverty definition as was used in the last Living Standards Survey. Even those who did the survey and used the best of the tools available were awed by the results. The agency then took time to review the results changing the yardstick used to measure poverty. They came with a new number, which is certainly an indication of improvement.
The Demographic and Health Survey results were equally astonishing. It showed not just improvement in the health indicators but a remarkable decline in the fertility rate to 2.6, barely a few points above the replacement rate indicating that Nepal’s population would very soon stabilise.
Many sceptics were surprised by the current government’s bold move to conclude a long-standing bilateral investment promotion agreement and a double tax avoidance agreement with India. Some saw it as an emergence of consensus on major economic policies that the country should pursue. It is certainly a good sign. Without additional investments in the economy, higher production growth cannot be achieved, and without growth, the equity agenda remains only on paper—insufficient and unfunded.
In the first few years of economic liberalisation, even the most die-hard liberals were against the foreign “thing” in the media, let alone media houses. However, in 2011 not just one but two media houses have joint mechanisms with foreign publications. What led to this change of mindset cannot be properly described now. We need to wait to see if there’s more to it than meets the eye.
Agriculture gave renewed hope in 2011. It is not just because of favourable weather leading to a monumental rise in paddy productivity and production (an all-time high of 5 million tons), maize and other summer crops, the rise of livestock and cash crops remains mostly unnoticed. But we are certainly heading to a production level that will contribute to higher exports in the near future. What is more remarkable is that the younger generation, which in the past thought agriculture was a profession not suited to their style, is coming back with innovation and zeal.
The current finance minister occasionally mentions with pride that most of the macro-economic indicators are positive. Only economists know how vulnerable they are. Macro-economic indicators are most often a paradox that one can take credit for during good times and blame others during bad times. This has been so in the case of inexplicable inflation that we have been facing for quite a few years now. Money supply and inflation moved almost in opposite directions for most of 2010 and parts of 2011.
However, the year 2011 ends with some satisfaction in terms of the balance of payments situation, foreign exchange reserves and liquidity in the financial sector. The culprit called “liquidity” became the biggest snag in the banking sector in the first half of 2011, and it has become so again. However, the definition has changed diametrically. In the first half, it was a shortage of liquidity that became a matter of public discourse; and now in the second half, it is an abundance of liquidity.
Strangely, it was Nepal Rastra Bank that got blamed on both occasions. One thing that has become clear is that when lending rates do not decline in spite of excess liquidity, bankers have a difficulty with their assets. We are in a situation where good borrowers have to subsidise bad borrowers. That’s not fair.
The year 2011 certainly did not remain good for the manufacturing sector. Growth remained stunted in spite of new ventures in cement manufacturing. Power shortages and security still remain challenges. Surya Nepal Garments closed. Several people have blamed trade union militancy for the closure. Others argue that the company escaped continued losses by blaming the trade unions.
Trade unions and employers associations definitely realised the need for a better industrial environment to protect industry and employment. They struck many agreements; but before they could get implemented, splinter groups of workers emerged to create troubles in major industrial hubs.
Notwithstanding the bleak outlook in the global economy, the number of youths leaving the country for jobs is increasing. Remittance is expected to remain robust for the foreseeable future. There’s much less that can be said about government’s development efforts, particularly in infrastructure. Project performance in every sector has become weak. The reasons are known very well, but there’s hardly any zeal in the system to correct it.
News about tax fraud took lots of space in the media in 2011. There has been some action, but the speed seems to have slowed down. The investigation has brought at least one good result—the month-on-month VAT collection growth rate in 2011 has remained very impressive.
Posted on: 2012-01-01 08:40
Post Your Comment
Today's Paper
The Kantipur in Print
FROM THE PAST 7 DAYS
ENTER KEYWORD OR DATE
FROM THE PAST 7 DAYS
ENTER KEYWORD OR DATE
Abin
All of them discussed the issue. The result was the same...and we have committed to continue discussions on the issue till midnight.
ADVERTISEMENTS
OUR PUBLICATION :
