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World Bank Document A WORLD BANK COUNTRY STUDY Public Disclosure Authorized NEPAL Development Performance and lProspects Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DECEMBER 1979 NEPAL Development Performance and Prospects This report is based on the findings of a mission to Nepal in May/June 1979 consisting of: Yukon Huang, chief of mission John Borthwick, general economist Dean Jamison, human resource economist Sonya Kandel, industrial economist Shyamal Roy, agricultural economist John Tillman, general economist South Asia Regional Office The World Bank Washington, D.C., U.S.A. The World Bank issues country economic studies in two series. This report is a working docu- ment and is, as such, part of an informal series based wholly on materials originally prepared for restricted use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practitioners throughout the world. A second, more formal series entitled World Bank Country Economic Reports is pub- lished for the Bank by The Johns Hopkins University Press, Baltimore and London. Titles of these and all other bank publications may be found in the Catalog of Pubitcattons, which is available free of charge from World Bank, Publications Unit, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. This report is a free publication. A small charge may be made if airmail postage is required. The views and interpretations in this report are the authors' and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Copyright © 1979 The International Bank for Reconstruction and Development/The World Bank The World Bank enjoys copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, permission for reproduction of any part of this report is hereby granted provided that full citation is made. Currency Equivalents Before October, 1975: US$1 = Nepalese Rupees (Rs) 10.56 Rs 1 = US$0.094 = Indian Rupees (IR) 0.726 From October, 1975 - March, 1978: US$1 = Rs 12.50 Rs 1 = US$0.080 After March, 1978: US$1 = Rs 12.00 Rs 1 = US$0.083 Fiscal Year Nepal Fiscal Year - July 16 to July 15 NEPAL: DEVELOPMENT PERFORMANCE AND PROSPECTS TABLE OF CONTENTS Page No. List of Tables and Charts Country Data Map PREFACE ........... ................................... i POSTSCRIPT ......... .................................. i - ii SUMMARY AND CONCLUSIONS .............................. i - vii I. THE FIFTH PLAN (1975/76 - 1979/80) AND THE DEVELOPMENT OUTLOOK ........................ 1 Macroeconomic Performance ........................ 1 Development Performance ......................... 4 The Need for a New Push ......................... 8 The Sixth Plan .................................. 10 II. DEVELOPING PHYSICAL RESOURCES ........................ 12 A. Agriculture ..................................... 12 Towards a Strategy ............................ 13 Strategy Implementation: Regional Programs ... 14 Marketing and Distribution System .... ......... 19 B. Industry ........................................ 22 Constraints to Industrial Development ... ...... 23 Government Objectives, Strategy, and Policies . 24 Improving the Efficiency of Existing Industries 24 Efforts to Expand the Productive Base .... ..... 26 Improving the Industrial Policy Framework ..... 27 C. Tourism ......................................... 29 D. Energy .......................................... 30 The Rural Energy Problem ...................... 30 Electric Power Generation ..................... 31 E. Transport ....................................... 32 [II. DEVELOPING HUMAN RESOURCES ........................... 35 A. Population ...................................... 35 Current Situation ............................. 35 Demographic Outlook ........................... 36 Policies and Programs ......................... 38 B. Education ....................................... 40 Development Issues ............................ 41 C. Health and Nutrition ............................ 44 Health Problems ............................... 44 Delivery Systems .............................. 46 Directions for the Future ..................... 47 D. Conclusions ..................................... 48 TABLE OF CONTENTS (Cont'd.) Page No. IV. A MEDIUM-TERM MACRO-FRAMEWORK ........................ 51 Growth Potential ................................. 51 Investment Requirements ......................... 52 Government Current Expenditures .... ............. 53 Budgetary Prospects ............................. 54 Balance of Payments Prospects .... ............... 56 Private Consumption ............................. 57 A Long-term Perspective ......................... 58 V. EXTERNAL ASSISTANCE NEEDS ............................ 61 Review of External Assistance .... ............... 61 Priorities for External Assistance .... .......... 63 ANNEX I: Food Balance Projections ANNEX II: Health-related Programs of HMG CHART I: Nepal - Structure of the Education System, 1979 CHART II: Administrative Structure of the Ministry of Education, 1979 CHART III: The Education Pyramid - Nepal, 1977/78 STATISTICAL APPENDIX LIST OF TABLES AND CHARTS Page No. TABLES I-1 Fifth Plan Public Investment Performance, 1975/76-1979/80 ....... ...................... 4 I-2 Sectoral Distribution of Development Expenditures - Fourth and Fifth Plans 6 I-3 Nepal - Summary Food Balance - 1976/77. 8 II-1 Terai - Foodgrain Production .15 II-2 Production Costs, Paddy and Whieat, 1976/77 19 11-3 Road Programn- Development Expenditures .33 III-1 The Size and Age Distribution of Nepal's Population: Alternative Scenarios .37 III-2 Projected Income Per Capita .38 III-3 Knowledge and Use of Contraceptives: Nepal and Other Asian Countries ..... .............. 39 III-4 Education Indicators - Selected Countries (1976) .40 III-5 Health Indicators: Selected Countries.44 IV-1 National Production and Expenditures - 1978/79- 1983/84 ........... .......................... 53 IV-2 Government Budget, 1978/79-1983/84 .............. 54 IV-3 Balance of Payments, 1978/79-1983/84 .57 IV-4 Projected Decline in Percentage of Population in Absolute Poverty .58 V-1 Estimated Total Aid Dishursements, 1977/78 61 V-2 Sectoral Distribution of Aid Disbursements (1974/75-1978/79) .62 CHARTS I Nepal - Structure of the Education System, 1979 70 11 Administrative Structure of the Ministry of Education, 1979 ...... .................... 71 III The Education Pyramid: Nepal, 1977/78 ..... ...... 72 Page 1 of 2 pages COUNTRY DATA - NEPAL AREA POPULATION DENSITY 140,797 sq. km. 13.3 million (mid-1978) 94 per sq. kn. Rate of Growth: 2.2% (from 1970 to .9 7 7 )a/ 331.0 per sq. km. arable land POPULATION CHARACTERISTICS (1977) HEALTH Crude Birth Rate (per 1,000) 45 Population per physician 39,000 Crude Death Rate (per 1,000) 19 Population per hospital bed 6,630 Infant Mortality (per 1,000 live births) 150 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP ° of national income, hignest quintile % owned by top 10% of owners lowest quintile *- % owned by smallest 10% of owners ACCESS TO SAFE WATER_(_1975) ACCESS TO ELECTRICITY (1975) % of population - urban 81% % of population - urban) 3 0 - rural 5% - rural) NUTRITION (1974) EDUCATION (1975-1976) Calorie intake as % of requirements 95% Adult literacy rate % 19% Per capita protein intake 50 Primary school enrollment X 60% (grams per day) b/ GNP PER CAPITA in 1977-: US 5110 GROSS DOMFSTIC PRODUCT IN 1976 ANNUAL RATE OF GROWTH (%, constant prices) US $ Mln. % 1965-75 GDP at Market Prices 1548 100.0 2.0 Gross Domestic Investment 155 10.0 Gross National Saving 78 5.0 Current Account Balance - 3 - 0.2 Exports of Goods, NFS 124 8.0 Imports of Goods, NFS 201 13.0 bl OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1i,, _ Value Added Labor Force-C V. A. Per Worker US $NMln. % Mln. % US $ Agriculture 996 68.0 5.9 93.0 169 Industry 132 9.0 0.1 2.0 1,320 Services 337 23.0 0.3 5.0 1,123 Total/Average 1,465 100.0 6.3 100.0 232.5 GOVERNMENT FINANCE CENTRAL GOVERNMENT Rs. Mln. % of GDP 1975/76 1976/77 1977/78 1978/79 1976/77 Current Receipts 1,097.2 1,302.2 1,559.3 1,688.0 7.5 Current Expenditure 654.1 784.1 815.0 991.5 4.5 Current Surplus 443.1 518.1 744.3 696.5 3.0 Capital Expenditure 1,224.6 1,486.4 1,792.9 2,049.7 8.6 External Assistance (net) 489.5 538.1 830.7 1,019.3 3.1 Note: All conversions to US dollars in this table are at the average exchange rate prevailing during the perioe covered. a/ Currently estinated at 2.6%. b/ For these items, source is World Development Reports 1978 and 1979. c,/ Total labor force; unemployed are allocated to sector of theirnormal occupation. Not available. Page 2 of 2 pages COUNTRY DATA - NFPAL MONEY, CREDIT AND PRICES 1975 1976 1977 197P 1979 (Million Rs outstandins mid-Julv) Money and Quasi Money 2,064 2,524 3,223 3,772 4,517 Bank Credit to Government (net) 286 480 750 966 1,154 Bank Credit to Public Enterprises 569 567 511 869 1,108 Bank Credit to Private Sector 783 716 864 1,072 1,304 Money and Quasi Money as Z of GDP 12.5 14.5 18.6 General Price Index (1973/74 - 100) L16.8 115.9 119.0 132.3 136.8 Annual Percentage changes in: General Price Index 16.8 -0.7 2.7 11.2 3.5 Bank Credit to Government 104.3 67.8 56.3 28.9 19.5 Bank Credit to Public Enterprises 341.1 -0.4 -9.9 70.1 27.5 Bank Credit to Private Sector 11.5 -8.6 20.7 24.1 21.6 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (1977/78) a/ 1975/76 1976/77 1977/78 USS Mln. % (Millions US$) Exports, f.o.b. b/ 98.3 93.9 88.8
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