NEPAL ECONOMIC FORUM ISSUE 44 | MARCH 2021

POLITICAL ECONOMY IN TRANSITION DOCKING NEPAL'S ECONOMIC ANALYSIS

DOCKING NEPAL’S ECONOMIC ANALYSIS

ISSUE 44 | MARCH 2021 FACTSHEETNEPAL FACTSHEET

KEY ECONOMIC INDICATORS

GDP (2021) *** USD 30.6 billion GDP growth rate (%)*** 0.2%

GNI (PPP, 2021) *** USD 3610 Inflation (y-o-y) **** 4.05%

Gross Capital Formation as of 2021, preliminary 50.2% Agriculture sector (% share of GDP)** 27.65% estimate (% of GDP) ***

HDI * 0.602 Industry sector (% share of GDP)** 14.27%

Rank 142 Service sector (% share of GDP)** 58.08%

*HDI figure from Human Development Report of the UNDP-2020 ** Based on Nepal Rastra Bank's 12 months data of 2019/20 *** Based on World Bank Data ****Based on 4 months' Data (2020/21) CONTENTS MARCH 2021 | ISSUE 44

CONTENTS

NEPAL FACTSHEET 1 EDITORIAL 4

1 GENERAL OVERVIEW 5 Political Overview 6 International Economy 8 2 MACROECONOMIC OVERVIEW 10

3 SECTORAL REVIEW 13 Agriculture 14 Energy 16 Infrastructure 17 Telecommunications 20 Real Estate 23 Education 24 Health 27 Tourism 29 Trade and Debt 31 Foreign Aid 34 Remittance 36 Environment 39

4 MARKET REVIEW 40 Financial Market 41 Capital Market 45

5 SPECIAL SECTION: POLITICAL ECONOMY IN TRANSITION 48

ENDNOTES 57 NEF Profile 61

Issue 44: March 2021 Executive Board Members: Publisher: Nepal Economic Forum Alpa B. Shakya Website: www.nepaleconomicforum.org Chandni Singh Shayasta Tuladhar P.O Box 7025, Krishna Galli, Lalitpur — Sudip Bhaju 3, Nepal Sujeev Shakya Phone: +977 1 554-8400 Email: [email protected] Advisory Board: Arnico Panday Contributors: Kul Chandra Gautam Nasala Maharjan Mahendra Krishna Shrestha Raju Dhan Tuladhar Prativa Pandey Sugam Nanda Bajracharya Shankar Sharma Sambriddhi Acharya Shraddha Gautam Sampada Shah Sneh Rajbhandari Sarik Koirala Tanushree Agrawal Senior Distinguished Fellows: Bibhakar Shakya Design & Layout: Giuseppe Savino Thuprai Solutions Suman Basnet [email protected] Senior Fellows: This issue of nefport takes into account Apekshya Shah news updates from November 16 2020 Ashraya Dixit to February 16 2021. Chandan Sapkota Diva Shrestha The USD conversion rate for this issue Mark Perrin is NPR 117.73 to a dollar, the quarterly average for this issue.

Reproduction is authorised provided the source is acknowledged.

The views and opinions expressed in the article/publication are those of the author(s) and do not necessarily reflect the official opinion of Nepal Economic Forum. Neither the organisation nor any person acting on their behalf may be held responsible for the use which may be made of the information con- tained therein. EDITORIAL

We all have had an eventful quarter as globally we saw economies start to stop with the advent of new COVID-19 variants. In the case of Nepal, the political turbulence continues with the dissolution and reinstatement of the parliament all in one quarter. It has been a year since the COVID-19 lockdown and restrictions began, and such turmoil makes it unlikely that we will see a full recovery soon. Economic indicators again do not seem to reflect ground reality, with bank deposits and the stock market continuing to swell. Contrary to multiple reports that forecasted a dip, remittance continues to soar.

Work at the Nepal Economic Forum has continued with us making it into the Top 100 think tanks from South and South East Asia and the Pacific Region in the annual list compiled by the Lauder Institute at the University of Pennsylvania. Our family of the advisory board, senior distinguished fellows, and senior fellows has grown with members added who bring in diverse experiences. Institutionally, we have consolidated the Himalayan Circular Economy Forum (HiCEF) and the Renewable Energy Center (REC) while adding new verticals including, Global Nepali Network (GNN), Centre For Private Sector Development (CPSD), Nepal and the World (NAW) and Centre for Digital Transformation (CDT). Similarly, the work at Business Policy Research Center (BPRC) and Doing Business in Federated Nepal (DBFN) is being redefined and restructured. We are looking forward to exciting days ahead with our expanding family and new adaptive ways of working in the days ahead.

For this issue of Nefport, we take a closer look at this political economy of transition, to take stock of current events and analyze what they mean for Nepal’s development. We have framed the analyses by looking at the current shifts in international politics which have also seen momentous shifts this quarter, starting with the presidency of the United States.

We would like to thank our contributors –and especially Apekshya Shah (Assistant Professor, Department of International Relations and Diplomacy, TU), Dr. Prashanth Parameswaran (Director of Research at Bower Group Asia), and Lisa Hanon (Development Director, British Embassy, Kathmandu, Nepal) for their valuable time to contribute to this edition of Nefport

We are working continuously on recalibrating this publication to make it more useful to our readers. We are also ideating on how we can make the extensive data, research, and analysis from the past 11 years to make it more accessible and useful. Please do provide us your comments and suggestions or click on our survey page.

Sujeev Shakya Chair, Nepal Economic Forum NEFPORT ISSUE 44 – MARCH 2021 5

GENERAL 1OVERVIEW 6 DOCKING NEPAL’S ECONOMIC ANALYSIS

POLITICALPOLITICAL OVERVIEW

Due to the internal conflict within the ruling Nepal Communist Party (NCP), this review period saw dramatic turnovers in the political scenario of the country. President Bidya Devi Bhandari, on the recommendation of Prime Minister KP Sharma Oli dissolved the House of Representatives and announced the dates for mid-term elections. This move received widespread criticism and was deemed unconstitutional by several political leaders and as well as, civil society leaders.

Following the dissolution of the lower house, cabinet members resigned, after which the government appointed officials to several Constitutional bodies, for which they were scrutinized again. Many political parties and civilians, especially the Dahal-Nepal led faction of the NCP led protests against the dissolution, while the Oli-led faction and his supporters organized mass gatherings and rallies in support of the Prime Minister.

The Supreme Court of Nepal reinstated the House of Representatives (HoR) after conducting hearings on the 13 writ petitions filed against the PM’s decision for over a month.

House of Representatives dissolved: and deemed unconstitutional, as the PM's move as unconstitutional. Those On 20 December, 2020, Prime current Constitution of Nepal does ministers who filed their resignations Minister KP Sharma Oli called for not give the Prime Minister any were closely affiliated to NCP co- the dissolution of Nepal’s parliament, power to dissolve the Parliament. As chair Pushpa Kamal Dahal and which was swiftly endorsed by many as 13 writ petitions were filed senior leader Madhav Kumar Nepal. President Bidya Devi Bhandari citing against the PM’s decision.1 Several Agriculture Minister Ghanshyam Article 76 (1) and (7), and Article 85 opposition political parties--Nepali Bhusal, Energy Minister Barshaman of the Constitution. The President Congress, Rastra Samajbadi Party, Pun, Drinking Water Minister Bina also announced the dates for the new Bibeksheel Sajha Party, as well as the Magar, Culture and Tourism Minister elections which were to be held: on Dahal-Nepal led NCP faction staged Yogesh Kumar Bhattarai, Education 30 April, 2021 and 10 May, 2021, demonstrations and protests across Minister Giriraj Mani Pokhrel, Forest a year ahead of schedule. The PM’s the country ever since the dissolution Minister Shakti Basnet, and Labour decision to dissolve the parliament of the Parliament. Minister Rameshwor Ray Yadav came after the Dahal-Nepal faction were few Cabinet members who of the Nepal Communist Party Seven ministers resigned over immediately resigned.2 (NCP) planned to move a vote of no parliament dissolution: Seven confidence against him. The NCP ministers from PM KP Sharma The Supreme Court reinstated the has seen a vertical split following Oli’s cabinet resigned following Parliament: On 23 February, 2021, the decision of house dissolution. the dissolution of the House of the Supreme Court of Nepal reinstated PM Oli’s move was widely criticized Representatives condemning the the House of Representatives (HoR) NEFPORT ISSUE 44 – MARCH 2021 7

that Prime Minister KP Oli had December, 2020. However, these began the hearing on the writ petition dissolved on 20 December, 2020. appointments drew widespread and issued a show cause notice to the A five-member constitutionalcriticisms as the officials were government seeking answers for the bench comprising of Chief Justice appointed bypassing parliamentary appointments.5 Cholendra SJB Rana, and Justices hearings, which is a mandatory Bishwambhar Prasad Shrestha, Tej process required by the constitution NCP’s Oli and Dahal-Nepal led Bahadur KC, Anil Kumar Sinha and for appointments made by the faction staged mass gatherings in Sapana Pradhan Malla conducted Constitutional Council.3 the Capital: Ever since the dissolution hearings on the 13 writ petitions filed of the House of Representatives, 4 against the PM’s decision for over a The House of Representatives February, 2021, the Dahal-Nepal month before giving the final verdict. Speaker Agni Sapkota had sent back faction called for a general strike Subsequently, the government the appointment recommendations across Nepal, after the government recommended the House session to since they were received after the administered oath to over 30 officials be summoned on 7 March, 2021. House was dissolved by the Prime appointed to several constitutional Minister. Sapkota filed a writ petition bodies unconstitutionally bypassing Officials of Constitutional bodies in the Supreme Court seeking the lower house. The cadres of the appointed by the Government: On invalidation of the unconstitutional Dahal-Nepal faction resorted to 3 February, 2021, the government appointments. He also sought action vandalism in several places during the administered oath to officials for against 39 dignitaries involved in strike. Meanwhile, Prime Minister KP different constitutional bodiesthis appointment including Prime Sharma Oli called for a rally of over including the Commission for Minister Oli, President Bhandari, 200,000 people in Durbar Marg, for Investigation of Abuse of Authority Chief Justice Cholendra SJB Rana, the very next day as a show of power. (CIAA) and the National Human National Assembly Chairperson The Dahal-Nepal faction, as a reply to Rights Commission, as per the Ganesh Prasad Timalsina and Chief Oli’s power show organized another recommendations made by the Secretary Shankar Das Bairagi.4 The mass rally on 10 February, 2021.6 Constitutional Council on 25 Supreme Court on 7 February, 2021

“ OUTLOOK The conflict between the ageing leaders of NCP has led to the instability of the entire political system in the country. The country has fallen victim to the bickering of PM KP Oli and NCP chair Prachanda and their struggle for power. Although the Supreme Court issued its verdict against the Prime Minister’s decisions and reinstated the parliament, the struggle for power between KP Oli and Pushpa Kamal Dahal is still ongoing in full throttle. It is clear that the average Nepali person has had enough of this, even though these types of shows are not uncommon in Nepal. At a time when the economy and health system of the country has been crumbling due to the COVID-19 pandemic, and the risk of the spread of the virus still a matter of concern, the decision to gather thousands of people as a show of power makes is clear that both the Prime minister and the NCP co-chair have no regard to the lives of the people and are only interested in seizing power. 8 DOCKING NEPAL’S ECONOMIC ANALYSIS

INTERNATIONALINTERNATIONAL ECONOMY ECONOMY

As the inoculation campaign against COVID-19 start rolling out across the world, there is a renewed optimism among the global economies. India and China, in particular, are expected to experience the highest economic growth this year. China has now become the biggest receiver of new foreign investment, the spot which had been previously taken by the United States. Likewise, Vietnam is emerging as a strong competitor in the global market for semi- conductor manufacturing.

Farmers protest in India: Six month billion, respectively. Nevertheless, towards the state. According to the since it began, the protest against the US still holds the number one deputy mayor of Moscow, the capital the recently proposed agricultural position in destination in terms of city with a population of 12.7 million, bill to remove price protection still total FDI.8 only 12,000 to 15,000 people are continues in Delhi. Farmers from getting vaccinated daily.11 Punjab and Haryana have demanded Countries start rolling out COVID the government rescind the new vaccines: Among several vaccines 2021 growth prospect: The agricultural laws. While the Indian that have been developed so far, International Monetary Fund (IMF) government promises that these laws the leading developers are Pfizer, has painted an optimistic picture are imperative in reforming the sector Moderna and Oxford. The former two for the global economy this year. It through modernization and increased have been given approval in the US, forecasts increased growth owing investment, the farmers are convinced the UK and Europe while Oxford/ to the combined effects of COVID that the state’s reform effort only AstraZeneca has been approved only vaccination and fiscal stimulus. serves the interests of corporations at in the UK and Europe. In India, Economic setbacks brought by the their expense. Their frustration also Covishield and Covaxin have been pandemic are expected to decline.. stems from the fact that the farming approved by the regulators, the former India and China, in this regard, are unions and leaders were not informed of which is the local name for the likely to grow the most this year. or consulted about the new bill.7 Oxford/AstraZeneca vaccine. On the Notwithstanding, employment across other hand, Covaxin was developed the world has a rather bleak prospect China is now the biggest receiver locally by Bharat Biotech.9 Two more in 2021 and will not be able to of new FDI: China has overtaken the vaccines developed by Janssen and return to the pre-COVID level; the United States to become the largest Novavax are still awaiting the green pandemic has displaced 225 million recipient of Foreign Direct Investment light from regulators upon the recent jobs as per the ILO estimation.12 (FDI). According to the UN figures, result from “large-scale trials”. Chinese firms experienced a 4% Vietnam pushes for digital growth: increase in new FDI last year while Likewise, China has introduced The Communist Party seeks to drive the inflow into the US shrank by Sinovac, CanSion and Sinopharm tech innovation in the country partially almost half in the same period. The vaccines which have been distributed by strengthening the manufacturing amount China and the US each to Asian and South American of semi-conductors. Its target to raise brought in last year, as claimed by the countries.10 Russia also has their own the share of digital/tech contribution United Nations Conference on Trade Sputnik V vaccine, however, relatively to the nation’s GDP to 20% by 2025 and Development (UNCTAD), few are taking the shots primarily and 30% by 2030 aligns with the were USD 163 billion and USD 134 due to the distrust among the people nation’s larger objective to graduate NEFPORT ISSUE 44 – MARCH 2021 9

from the lower-middle-income status to “diversify supply chains out of the investment of USD 475 million. by 2025 and become a developed China” after the world witnessed Furthermore, the Prime Minister is nation by 2045. For Vietnam, the the nation’s remarkable capacity to intent on acquiring investment in timing could not have been more apt effectively contain the pandemic. In semi-conductor manufacturing from with international companies looking fact, Intel, the US chipmaker, recently Samsung, but this remains to be into the country as a preferred choice supplied its Vietnam branch with decided.13 “ OUTLOOK The pandemic has already brought a shift in investment patterns among world economies. As in the case of Vietnam, foreign investors/companies have started to diversify their resources to countries that have fared well amid the COVID pandemic. Furthermore, the arrival of vaccines has given an optimistic outlook for the economic recovery across the globe. 10 DOCKING NEPAL’S ECONOMIC ANALYSIS

MACROECONOMIC 2OVERVIEW NEFPORT ISSUE 44 – MARCH 2021 11

MACROECONOMICMACROECONOMIC OVERVIEW OVERVIEW

Inflation rate remained relatively moderate in the first six months of the fiscal year 2020/21. While there was a massive decline in the number of workers applying for foreign employment in the review period, remittance inflow nevertheless increased. Accordingly, there was a substantial boost in Balance of Payment (BoP) surplus during this period.

Inflation: In the first half of the Remittance: There was a 11.1% (USD 11.91 billion). Nepal Rastra fiscal year 2020/21, the year-on-year increase in remittance inflow bringing Bank held forex reserves of NPR inflation remained at 3.56%. Last year the amount to NPR 495.31 billion 1318.66 billion (USD 11.2 billion) during the same period, the year-on- (USD 4.21 billion). In the same in mid-January 2021, an increase of year consumer price inflation (CPI) period last year, remittance inflow 7.5% from mid-July 2020. Reserves stood at 6.82%. The price of food and grew by a mere 0.6%. On the contrary, of banks and financial institutions, beverage increased by 4.27% and that the number of institutional and aside from NRB, contracted by 0.4% of non-food and service increased by individual Nepali workers applying to NPR 175.09 billion (USD 1.49 2.99% when compared to last year’s for employment abroad declined by billion). figures. On the other hand, the salary 77.6 % compared to the growth of and wage rate increased by 1.72% 17.7% in the previous year. Likewise, Government revenue and in the review month as compared to application for renewed entry went expenditure: The total government 10.04% last year. down by 68.9% in this period. revenue amounted to NPR 422.24 billion (USD 3.59 billion) in the Import-export: In the first six months Balance of Payment and forex first half of the FY 2020/21 while of the current fiscal year, the trade reserves: There was a Balance of the expenditure of the federal deficit contracted by 5.8% to NPR Payment (BoP) surplus of NPR government during the same period 600.45 billion (USD 5.1 billion) 124.92 billion (USD 1.05 billion), stood at NPR 415.75 billion (USD with imports decreasing by 4.8% and which is a 368.7% increase in the 3.53 billion) according to the exports increasing by 6.1%. More figure from the previous year. The Financial Comptroller General Office specifically, merchandise exports current account deficit stood at NPR (FCGO). Tax and non-tax revenues increased 6.1% while imports of the 49.53 billion (USD 422.7 million), each amounted to NPR 386.53 same went down by 4.8%. Despite lower than last year’s amount of NPR billion (USD 3.28 billion) and NPR the overall increase in merchandise 79.65 billion (USD 699.4 million). 35.70 billion (USD 303.23 million) exports, exports to China dwindled Similarly, capital transfer and net respectively. Moreover, the federal by 50%. Accordingly, this period FDI plunged by 8.1% and 37.2% government mobilized the total experienced relatively less export respectively. domestic debt of NPR 57 billion growth compared to the same period Gross foreign exchange reserves, on (USD 484.14 million): NPR 7 billion from last fiscal year, during which the other hand, increased by 6.6% (USD 59.5 million) through treasury there was a surge of 26.1%. to NPR 1493.75 billion (USD 12.69 bills and NPR 50 billion (USD 424.69 billion) from NPR 1401.84 billion million) through development bonds. 12 DOCKING NEPAL’S ECONOMIC ANALYSIS

“ OUTLOOK Although the trade deficit narrowed down to some extent, the export failed to grow as much as it did during the first six months of the previous fiscal year. BoP surplus, on the other hand, witnessed a massive surge in this period as the current account deficit contracted by some percentage points. The pandemic has brought a significant decline in the migration rate among the Nepali workers. v

NEFPORT ISSUE 44 – MARCH 2021 13

SECTORAL 3REVIEW 14 DOCKING NEPAL’S ECONOMIC ANALYSIS AGRICULTUREAGRICULTUREAGRICULTURE

The lifting of lockdown has stimulated exports of agriculture products as evidenced by the increased export revenue of the listed items in the first half of the fiscal year. Amid few developments taking place in this sector, local farmers have voiced their discontent against the government’s recent decision to allow FDI into the sector.

Opening up the agriculture phase of the Nepal Agricultural not do much to reduce the existing sector to FDI: The Government’s Market Development Programme trade deficit of the country.16 recent decision to entirely open up (NAMDP), under the Ministry of Nepal’s agriculture sector to foreign Land Management, Agriculture and Promoting Nepali tea in the global investment has been met with strong Cooperative (MoLMAC) of Province market: The government has recently resistance from small farmers and 1 along with the Swiss Agency for rolled out the Sustainable Export farmers associations. While the Development and Cooperation (SDC) Promotion Project of Nepali Tea in an government has justified their move on has begun. Also known as Sahaj, this effort to strengthen the competence the grounds of enhanced productivity four-year project aims to facilitate of Nepali tea and facilitate its through increased investment and the operations of agri-businesses in integration into the global tea market. technology transfer, those opposing the province by providing necessary Accordingly, the project aims to are sceptical about such promises. financial and technical support. ameliorate the tea quality by ensuring They are convinced that the so-called According to the program manager of a sturdy supply chain linkage using productivity improvement through SDC the second phase is expected to a tracing mechanism. The 36-month foreign investment would not “strengthen forward market linkages long project is expected to benefit not translate into an increased income and expand segments of vegetables, just the tea producers but also its avid or even employment for the local maize, cardamom and dairy value consumers.17 farmers. They are afraid that small chains”.15 farmers could be replaced by the Marijuana no longer a narcotic: The technology. Surge in agriculture exports: In the United Nations has recently voted to first half of the current fiscal year, decriminalize cannabis by removing Meanwhile, the proponents of FDI export revenue of agriculture products the narcotic label associated with the lament about the extreme lack of grew by 15.46%. This has been plant. Prior to this, in November, the investment in the agriculture sector attributed to increased “shipments European Union Court of Justice and its primitive characteristic. They of cardamom, tea and medicinal (ECJ) had also decided to remove are certain that without attracting and aromatic plants to India”. These cannabis from the list of narcotic foreign investment, the sector is shipments saw increase not only in drugs. Such turn of events have raised doomed to stay stagnant with no quantity but also in value ever since the possibility of exports of cannabis technological progress.14 the lockdown ended. However, based products in Nepal.18 according to the former commerce Agriculture commercialization secretary Purushottam Ojha, this efforts in Province 1: The second increase is inconsequential and does NEFPORT ISSUE 44 – MARCH 2021 15

“ OUTLOOK There have been several efforts to commercialize Nepal’s agriculture sector and enhance its productivity. While initiatives as such could strengthen the country’s comparative advantage in agriculture and bring in foreign currency into the country, the state needs to be mindful of the implications the so-called reforms could have on the local small-scale farmers. In this regard, the government must heed the suggestions/opinions of those who are directly affected by certain policies before hastily implementing them. 16 DOCKING NEPAL’S ECONOMIC ANALYSIS ENERGYAGRICULTUREENERGY

During the review period, meetings have been held to develop rules and guidelines for Nepali power producers to gain access to Indian markets, to strengthen and expand the power sector in the country, with an ambitious inter-continental pipeline project in the process, the energy sector has experienced positive changes, and Nepal now looks forward on building cleaner and sustainable sources of energy.

Meeting held to strengthen the investing in Nepal’s hydro and (NOC) denies any loss although it power sector cooperation between solar power projects, building more had been informed that the pipeline India and Nepal by investing in cross border transmission lines, and was attacked. The corporation further Nepal’s power projects, developing developing integrated power grids. clarified that it has been getting diesel transmission lines, and integrated The cooperation between the two in the expected amount regularly and power grids: The 8th meeting between parties set a positive example with those responsible for the attack on the joint steering committee and joint projects such as completion of South the pipeline has been arrested by the working group of Nepal-India co- Asia’s first cross-border 400 KV Indian police.20 operation in power sector was held Muzaffarpur-Dhalkebar transmission virtually in the presence of the power line, agreement on funding modality NOC to construct country’s second secretaries of both the neighboring for Gorakhpur-Butwal 400 KV inter-continental pipeline project: countries. The meeting assistedline for which the construction The second inter-continental pipeline in developing suitable rules and will commence soon, and the brisk project in the country, Siliguri- guidelines for allowing Nepali power progress on the 900MW Arun-III Charaali petroleum pipeline is set producers access to Indian markets, Hydro Electric Project19. to begin soon. Out of the total 50 development of energy banking km long pipeline, 15 km lies on the mechanism and development of cross- NOC uninformed of the diesel theft Nepali side and the remaining 35 km border high-voltage transmission lines. that happened 100 kilometers away in the Indian side. Once completed it The meeting also reviewed the progress from Nepal: Indian daily newspaper, will have the capacity to store 12,050 of the SJVN Ltd-developed 900MW Navbharat Times reported that kiloliters petrol, 28,050 kiloliters Arun-III Hydro Electric Project in over 1000 liters of diesel has been diesel, 450 kiloliters kerosene and 250 Nepal. The joint meeting further stolen from Nawijung, Bihar around kiloliters air fuel.21 helped in strengthening and expanding 100 kilometers away from Nepal the power sector cooperation by however, Nepal Oil Corporation

“ OUTLOOK With approximately 1 GW of installed capacity, hydropower provides almost all of Nepal's domestic electricity generation on the grid. The economy is experiencing a rise in power demand. According to a research22, the installed capacity requirement will reach up to 18,000 MW by 2025 which is more than double of what Nepal is producing now (6012GWh).23 Along with this, the government must hold meetings/talks to amend the power sector cooperation with other neighboring countries (apart from India) for development of energy banking mechanism, development of cross-border high-voltage transmission lines. NEFPORT ISSUE 44 – MARCH 2021 17 INFRASTRUCTUREINFRASTRUCTUREAGRICULTURE

During the review period, the Nepal government has taken responsibilities of many infrastructural and construction activities, to overcome the infrastructural gap highlighted by the COVID-19 pandemic. The participation between all three tiers (federal, provincial and local) of the government for various projects has also been highlighted. However, lack of co- ordination in implementation of the infrastructure projects and subsequent disputes are still evident and need to be overcome to bring effective results.

Ropeways to be constructed in with a capacity to store 40,000 Supplies has also begun preparations Bagmati: The Ministry of Physical kiloliters of petrol at Charaali-based to conduct a feasibility study for the Infrastructure and Development is 23 bigha land, is set to begin soon. dry port. The Indian government set to construct ropeways in different According to Manish Neupane, has agreed to construct an Integrated parts of the Bagmati Province Chief of the Nepal Oil Corporation’s Check Post (ICP) on the border, (Province 3) to ease transportation Charaali depot, the depot which which will be connected to the dry in the area. Minister Rameswar will be constructed will have the port by a railway line. The proposed Phuyal and his team is soon to capacity store 12,050 kiloliters of dry port and ICP will be spread over begin the study for the construction petrol, 28,050 kiloliters of diesel, 280 bighas of land.26 of the ropeways and cableways in 450 kiloliters of kerosene and 250 Indrasarowar, Makwanpur, and kiloliters of air fuel. The total budget Second cross-border petroleum Gosaikunda in Rasuwa and Dolakha. for the construction is set at NPR 10 pipeline project to move ahead: In According to the Minister, the billion (USD 84.03 million) for a January 2020, joint-secretaries of ministry has been engaged in various three-year period. The construction Nepal-India Joint Working Group discussion to develop detailed project of this petroleum pipeline will be held a meeting in New Delhi. The reports for the ropeways and will the second inter-continental pipeline team made a decision to construct a begin the work shortly. He believes project in the country.25 petroleum pipeline project at Nepal’s that the increase in power production request with cooperation from the in Nepal has provided a ground A dry port in the far west to be Indian side. Currently, the plan to for them to promote electricity- constructed: By considering Mumbai develop the second cross-border based transportation. Moreover, the city in India as a transit point for petroleum pipeline has moved a ministry is also beginning the study third country trade, Nepal has started step closer after the agreement of of feasibility for gravity ropeway that to construct a dry port in Dodhara, the delegation from the Indian Oil may run without any energy supply. Chandani on the western border Corporation arrived in Nepal for field Besides, the ministry also plans to carry with India. This is the shortest route study. The pipeline project has moved another study to see if the Hetauda- to the sea and is believed to provide ahead taking into consideration the Kathmandu ropeway, built 102 years increased access to Nepal in terms of demand for oil until 2034 as per the ago during the premiership of Rana increasing foreign trade and lowering Executive director, Surendra Poudel, Prime Minister Chandra Shumsher, costs. The dry port is also considered of Nepal Oil Corporation. After the could start operations again.24 to be the first business gateway to field study, a detailed project report India from Nepal’s far west. will be prepared by the mid-April in Petroleum pipeline to be constructed the coming year 2022.27 for Siliguri-Charaali area: The Moreover, the Intermodal Transport construction of infrastructure for Development Committee under the Obstruction in the infrastructure Siliguri-Charaali petroleum pipeline, Ministry of Industry, Commerce and expansion works in Kathmandu: In 18 DOCKING NEPAL’S ECONOMIC ANALYSIS

December 2019, the Department of each lawmaker directly elected from suggests that each project got NPR Roads confirmed that road expansion the 165 electoral constituencies 1.44 million (USD 0.012 million) on work would begin from early 2020. received NPR 60 million (USD 0.50 an average.29 Now that the dissolution However, even a year later, the project million). However, the decision to has been overturned by the Supreme is in limbo and the construction works allow the lawmakers to mobilize the Court, this can undergo some are obstructed. More specifically, amounts drew instant criticism due changes. However, it has not been the second phase of the Ring Road to the outsized role of lawmakers decided yet. expansion is indecisive due to ongoing in determining projects and their disputes over Swayambhu's road implementation. It also raises concern Sustainable Development Goals shrine and property encroachment over good governance in the country. Assessment shows infrastructure along the 8.2 km road from Kalanki to development not enough: National Maharajgunj. The locals of these areas Amid these criticisms, CIDP and Planning Commission (NPC) has point out that they are not against CDF were merged and renamed unveiled Nepal’s progress in attaining development, but they stand against Local Infrastructure Development Sustainable Development Goals the government for not exploring Partnership Programme (LIDPP). (SDGs). Under SDG 9:Industry, other alternatives to preserve the Along with these changes, lawmakers Innovation, Infrastructure, it has heritage and infrastructure that took were also made responsible for been assessed that the road density has years to build. These disputes have, consulting local governments to increased in Nepal, but is still low in thus, hindered the projects.28 select projects for the programme. comparison to other countries, along Beginning from early July 2020, the with the infrastructural gap. The Controversy regarding the Local federal government discontinued report further states that the growth Infrastructure Development releasing resources for projects under of industrial sector has remained slow Partnership Programme (LIDPP): LIDPP and decided to invest the in Nepal, and that there has been no The Federal Democratic Republic unused funds under the programme improvement in the industry’s share of Nepal releases two types of for COVID-19 response instead. in GDP. Moreover, as per the National funds to its Members of Parliament However, after the dissolution of the Planning Commission’s progress (MPs)- Constituency Infrastructure House of Parliament on December report, there is a clear lack of data base Development Programme (CIDP) and 2020, the KP Sharma Oli government regarding many important indicators the Constituency Development Fund released around NPR 6.56 billion including industrial infrastructure (CDF). The funds were distributed for (USD 55.71 million) for the highly clean technologies, etc. the developmental projects, and power controversial LIDPP to implement for its mobilization was handed over over 4,552 projects in 164 out of 165 to the MPs. During the FY 2019/20, electoral constituencies. The decision

“ OUTLOOK Infrastructural development is one of the pre-requisites of development in any country, and the same is the case in Nepal. However, even though the potential for development in Nepal through the investment in infrastructures has long been realized, it still faces many bottlenecks.

In the early months of the fiscal year, many construction and infrastructural works were halted due to the COVID-19 pandemic and its subsequent lockdowns. Despite all the hardships, the government has resumed its work in infrastructural development. However, according to a report published by National Planning Commission, the progress that should have been achieved in the sector is comparatively low. However, it should be noted that although there is the will to undertake the infrastructure projects, they are often paralyzed by political instability, poor decision- making, lack of data base and lack of capacity. For example, according to the list of projects compiled from the Annual Development Plans of the National Planning Commission, infrastructural projects have been ongoing for NEFPORT ISSUE 44 – MARCH 2021 19

more than 11 years. One of the many instances is that out of the total 80 bridges in the Postal Highway Project of the government, 78% of the work has been delayed due to design mistakes, political interference, weak contract management and negligence.30 This has aggravated the situation of unbalanced development, created wastages and has caused the sector to become dysfunctional.

Considering the strength and weaknesses in development projects, the way ahead for a strong infrastructure base would be the participation from both the government and the private sector, as well as a strong legal and policy foundation. Besides, it is also important to strengthen the local government to ensure monitoring and effective implementation of the projects. 20 DOCKING NEPAL’S ECONOMIC ANALYSIS

TELECOMMUNICATIONSTELECOMMUNICATIONS

The strong consumer demand, and liberal reformist policies of the Government of Nepal have been instrumental in the rapid growth in the Nepal telecom sector. The Government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework, that has ensured availability of telecom services to consumer at affordable prices. The Government has has introduced several reforms in the telecom sector and continues to be proactive in providing room for growth for telecom companies.

Figure 1: Telecom Operators Market Share

Source: Nepal Telecommunication Authority ‘MIS Report dated February 2021

The Nepal Telecommunicationa total of 20.1 million subscribers As shown in Figure 2, the internet Authority (NTA) recorded a decline (GSM & CDMA), while Ncell had penetration is largely driven by mobile of 9% in the number of subscribers 15.7 million GSM subscribers.31 broadband services which accounts (fixed and mobile) from 42,878,367 for approximately 60% of internet subscribers in mid-December 2019 Similarly, the growth in data/internet penetration while fixed broadband to 38,856,331 subscribers by mid- subscribers increased from 21.4 (wired & wireless) contributes to 22% December 2020. The tele-density million in mid-December 2019 to of internet penetration. of the country is currently at 128% 24.3 million in mid-December 2020, and 2.46% for mobile and fixed line a growth of approximately 14%. The Foreign currency recommendation: respectively. As shown in Figure 1, internet penetration rate as of mid- During mid-November and market leader Nepal Telecom recorded December 2020 stands at 81.5%. mid-December, the Nepal NEFPORT ISSUE 44 – MARCH 2021 21

Telecommunication Authority the company is set to launch the 4G Telecommunication infrastructure provided recommendation wireless home broadband service sharing: The government’s long amounting to approximately NPR targeting potential customers who term policy has been to bind the 56 million (USD 476,000) for do not have access to its Fiber to the telecom companies and mandate payment of bandwidth and other home (FTTH) and ADSL services. them to share telecom infrastructure service charges of different telecom The technology allows subscribers to to ensure better services. As per operators and NPR 122 million access internet services at NPR 900 the implementation, infrastructure (USD 1 million) for payment of (USD 8) per month using dongle or sharing policy companies will no telecommunication equipment. router equipped with SIM cards.32 longer establish their own resources, Nepal Telecom is also on the path to but will share infrastructures with Nepal Telecom to launch 4G testing 5G network during the current one another. Nepal Telecom has been wireless home broadband service: fiscal year. assigned with the responsibility of Nepal Telecom has announced that setting up an infrastructure company

Figure 2: Growth trend of voice telephone and data service penetration

Source: Nepal Telecommunication Authority ‘MIS Report dated February 2021 that will enable telecom and Internet government is set to implement the phone used inside the country, curb Service Providers (ISPs) to share Mobile Device Management System circulation of unauthorized or stolen infrastructure. (MDMS) in three months to control phones and as well as raise more the grey phone in Nepali market. revenues at the customs. Implementation of Mobile Device The government through the MDMS Management System: The system aims to keep track of every 22 DOCKING NEPAL’S ECONOMIC ANALYSIS

“ OUTLOOK The buzz within the telecom sector is the launch of 5G network. However, the huge investment and clarity on the spectrum to use for 5G services is seen as a major hurdle for the launch of 5G services. As per the directive of Ministry of Communications and Information Technology (MOCIT) Nepal Telecom may have allotted 5G equipment within the current 4G expansion project to make provision for rolling out 5G services.

The concept of telecommunication infrastructure sharing is expected to reduce capital flight as well reduce haywire establishment of towers, optic fiber and create business opportunity for incumbent operators. The policy is expected to reduce redundant infrastructures bring about uniformity in services and setup a level playing field for fair and healthy competition resulting in consumers accessing higher quality service at an affordable cost. However, sharing of infrastructure may be difficult as public procurement act may create major obstacles for private companies looking to upgrade technology thereby impacting service delivery. NEFPORT ISSUE 44 – MARCH 2021 23

REALREAL ESTATE ESTATE

The nationwide lockdown imposed by the government on 24 March, 2020, did not seem to inflict strain on Kathmandu’s real estate market. Although the market underwent some major shocks in the first few months into the pandemic, a gradual boom was noticed in the buying and selling of houses and plots of land across the country. The government has come up with rules to strengthen the land and renting policies.33

Boom in Kathmandu’s real estate No dual ownership of land: The standard regarding use of public market: Kathmandu’s real estate Ministry of Land Management, Co- land to make the existing provisions market has witnessed a boom amidst operatives and Poverty Alleviation has more systematic. As per the new the pandemic. According to reports, decided to end the dual ownership standard, public land can be used between mid-December to mid- of land. The dual ownership of land by government hospitals/health January, 76,532 houses and plots between the landowners and the facilities and community schools for of land were bought and sold across tenants has been a long standing 30 years depending on the need. The the country. The pandemic resulted problem in the country. The period may alter on the basis of its in lack of other investment avenues government will facilitate in resolving rationality and any non-governmental such as excess market liquidity, which the dual land ownership if both the organization or private sectors are not has prompted banks to offer loans in parties cannot reach an agreement.34 eligible.35 low interest rates. Lastly, the gradual revival of the economy and consumers' New standard for the use of savings are few of the major reasons public land issued: The Nepal behind the increase in real estate. government has introduced a new

“ OUTLOOK With the economic activities resuming to normalcy, it can be predicted that the real estate market will experience a boom in Kathmandu and areas adjacent to Kathmandu. The government has to come up with more policies to regulate the buying and selling of the assets. 24 DOCKING NEPAL’S ECONOMIC ANALYSIS EDUCATIONEDUCATION

This review period witnessed some remarkable development in the education sector of the country. After nearly 10 months of closing down, schools and colleges across Nepal have finally resumed physical classes. The National Examination Board (NEB) also published the much-awaited results of 2077’s Grade 12 examinations. Likewise, the Supreme Court paved the way for the Ministry of Education, Science and Technology (MoEST) to implement a new curriculum for Grades 11 and 12 after months of indecision. Moreover, the National Education Commission report, that the government had been withholding from the public for two years was made public without government approval.

Around USD 7 billion remitted abroad Supreme Court issued a fresh directive, MoEST itself, which finally made the as educational expenses: As the to implement a new curriculum for decision to incorporate mathematics global pandemic compelled countries grades 11 and 12 of the National as a compulsory subject that students to close their borders, number of School Curriculum Framework 2076. could choose instead of Social Studies students leaving abroad for education Private school operators were hesitant & Life Skills.39 sharply declined. However, the money to implement the new curriculum remitted for education expenses shot developed by the Curriculum Grade 12 Results Published: The up to almost USD 7 billion. As per Development Committee (CDC) National Examination Board (NEB) the Ministry of Education, Science citing problems despite repeated published the results for the Grade 12 and Technology, the number of directives from the MoEST. As per examinations on 1 February, 2021. students applying for No Objection the new curriculum, +2 students Owing to the Covid-19 pandemic Letters (NOC) decreased by 35% in would have to study six subjects followed by the nationwide lockdown, the first four months of the current in each grade with 3 compulsory the examination which was originally fiscal year compared to the previous subjects and 3 elective subjects out of scheduled from 20 April, 2020 was year. The data from Nepal Rastra 80. Private school operators had filed conducted from 24 November to 1 Bank (NRB) showed that NPR 6.80 a writ against the implementation December 2020. A total of 310,316 billion (USD 57.76 million) was of the new curriculum, after which students appeared for the regular remitted for students studying abroad the Supreme Court had halted examinations from 4,105 higher as educational expenses, food, and its implementation until further secondary schools that were turned accommodation expenses in the first decision.37 The dispute between the into exam centers all over Nepal.40 four months of the current fiscal private schools and the government year. Students who went abroad for created a lot of confusion as some Government of Nepal gave approval higher education usually work to pay institutions had started teaching the for reopening of Schools across their tuition fees and living expenses, new curriculum while others held on the country: After 10 months of however due to the pandemic and to the old curriculum. After months online operation, the Covid-19 loss of jobs it was found that Nepali of indecisiveness, the Supreme Court Crisis Management Committee parents had been remitting money finally passed the verdict in support of (CCMC) finally took the decision to from the home country to support the new curriculum on 13 January, allow schools across Nepal to resume their children.36 2021.38 However, there were concerns physical presence in classrooms and whether mathematics would be schools. The schools will have to Supreme Court allowed new a mandatory subject or not. The adopt appropriate health and safety curriculum for grades 11 and 12: The Supreme Court left the decision to the measures, and the District Covid-19 NEFPORT ISSUE 44 – MARCH 2021 25

Management Committee (DCCMC) exam and books’ fees up to secondary Commission public even after two are given the authority to close the level. Additionally, the rules mandate years after it being submitted. The institutions, if necessary.41 Earlier, schools to make provisions for report cost the government USD 20 the federal government had provided providing mid-day meals, school million to prepare and it was submitted guidelines to resume classes. They uniforms and other basic facilities to PM KP Oli on 15 January, 2019. As had also given the responsibilities for differently abled, Dalits, and per senior officials at the Ministry of of reopening schools to the local poor children. Similarly, the rules Education, Science and Technology, governments.42 With permission from also require local levels to arrange the ministry had refuted to make the the local governments, many schools residential facilities for those in need.. report public at the bidding of private had already started resuming in-person Local levels are also required to conduct schools and education mafias, as the classes since September last year. three-month literacy programs report made recommendations to The Private and Boarding Schools’ such as—basic adult education or convert all private schools into trusts Organization (PABSON) warmly traditional/non-formal education within the next 10 years.44 Regardless welcomed the government’s decision, through community learning centers. of the government’s hesitation, while the parent’s organization and Provisions for offering scholarships the commission, comprising of health experts are not too keen about as per the law is also drafted, which educational experts, government the decision as it might exponentially will be managed by a five-member officials, teachers, former education shoot up COVID-19 infections. scholarship management committee ministers and other stakeholders made headed by the chief of the local the 502-page long report public on 4 Compulsory and Free Education government. In order to monitor December, 2020. The publication was Rules 2020 framed: The government the implementation of the rules, an financed by two NGOs, the National published the ‘Compulsory and Free eight-member monitoring committee Campaign for Education and Global Education Rules- 2020’ in the Nepal would also be created, which would Action Nepal. The ministry accused Gazette aimed at implementing the be led by a secretary at the Ministry of the two organizations of violating its constitutional provision of free and Education, Science and Technology.43 copyright and sought for legal action compulsory education. As per Nepal’s against them. The ministry also wrote constitution, every citizen has the Government refused to make to 16 donor agencies of the NGOs right to receive compulsory and free National Education Commission including the UN, World Banks, education from the state up to basic Report public: According to officials UK Aid and the British Council level, comprising of grade 1 to 8 and at the High-Level National Education expressing its discontent over their free education up to secondary level Commission and the Ministry of support to report the publication.45 comprising of grades 9 to 12. The Education, the government of Nepal recently published rules prohibit allegedly hid the National Education community schools from charging Commission Report and refused admission fees, monthly tuition fees, to make recommendations of the “ OUTLOOK The Education sector was one of the hardest hit sectors by the Covid-19 pandemic. Schools being shut for almost 10 months took a hefty toll on the students, particularly those coming from public schools. While private school students had the privilege of learning through online classes, majority of public-school students were left in dark as the both schools and students lacked proper resources. The government’s decision to allow schools across the country to resume physical classes was welcomed by most of the schools. However, health experts have warned that this decision could further accelerate the spread of the virus. While the government has ordered schools to maintain strict health protocols and has given local bodies the authority to oversee and monitor these schools, it is uncertain whether the schools have been following the required health and safety measures or not. 26 DOCKING NEPAL’S ECONOMIC ANALYSIS

Meanwhile, the Oli government’s delay in publishing the High-Level National Education Commission’s report, and its strict actions against the organizations clearly shows the government’s deliberate attempt at hiding the report. The government’s hesitance in making the report public can therefore be seen as an indication that the private school cartels and political groups have a firm grasp on the government. NEFPORT ISSUE 44 – MARCH 2021 27

HEALTHHEALTH

The Government of Nepal has initiated the drive to acquire vaccines from India in addition to sending requests for vaccine procurement to other countries. The procurement process comes at a time when a new variant of the COVID-19 vaccine has been found in the United Kingdom which prompted the government to ban entry for passengers from the country. The sector has also been entangled by various challenging issues. One such instance is healthcare workers demanding risk allowance in government run hospitals in the country in addition to an alarming level of air pollution in the capital city of Kathmandu.

Government initiates vaccine will be vaccinated through the complained that the payment was procurement: The Nepal government COVAX program. The COVAX far less than what the government has written to the Indian government program has the world's largest and had fixed. Medical doctors receive requesting for the procurement of most diverse portfolio of potential salary from NPR 55,000 to 60,000 COVID-19 vaccines on December COVID-19 vaccines. WHO has asked (USD 467.17- 509.64) per month 2020. The government aims to the Government of Nepal to prepare in other public hospitals around the inoculate around 20% of the Nepali for vaccine rollout under COVAX in country while the salary in BPKHS population through these vaccines.46 the third trimester of 2021. Each dose is only NPR 34,500( USD 293.04) The government has requested the of vaccine under the COVAX scheme per month. Although the complaint Indian counterparts to procure is estimated to cost NPR 1,177(USD was lodged time and again, their plea adequate vaccines for Nepal while 9.9). The Government of Nepal has to resolve the issue were neglected.49 India procures the jabs for their own also expressed interest in procuring A similar incident occurred in population. Currently, there are five one million doses of the Covidsheild Kalaiya District Hospital too. The vaccines against corona virus which vaccine and 25 million doses of hospital's doctors, nurses, health are at various stages of human trials Sputnik V vaccine from India and workers and employees shut down in India - Oxford AstraZeneca and Russia respectively. 47 48 all services except the emergency Bharat Biotech are in advanced ward. The health workers staged a phase 3 trials. Besides India, the Health workers express their demonstration demanding COVID Nepal government has also sent discontent: Agitating doctors and risk allowance. The employees at the diplomatic notes to China, Russia, medical officers started a protest Kalaiya District Hospital took the the United Kingdom and the United on January 18, 2021 demanding drastic step of boycotting their duty States requesting for supplies of the COVID risk allowance at BP Koirala at the hospital after they did not COVID-19 vaccine. At the present Institute of Health Sciences, Dharan. receive the allowance for the past 10 stage, 15 different vaccines from The Medical Officers are seeking a months.50 various countries and companies salary on par with the eighth level from all over the world are now in the (NPR 38,784, USD 329.4) and a Air quality in Kathmandu deteriorates third phase trial. It has been reported COVID allowance while residential to hazardous levels: The air quality that in Nepal, children under 15 years doctors are demanding a risk in Kathmandu reached hazardous will not be vaccinated as the vaccines allowance. The agitated workers had levels on January 4, 2021, crossing produced so far have not been tested also warned of boycotting their duty the 600 mark to briefly make it the on those belonging to the age group. at the emergency ward. The health most polluted city in the world. Of the remaining population, 20% workers unsatisfied with their salary The air-quality monitoring station 28 DOCKING NEPAL’S ECONOMIC ANALYSIS

at Ratna Park recorded particulate exceeding AQI of 300 are considered January 6, 2021 in Maitighar Mandala matter pollution (PM2.5) levels of hazardous. The existing Kathmandu demanding that the government take 667 micrograms per cubic meter on Valley Air Pollution Management immediate actions to improve air the day. Peak PM2.5 concentration Action Plan has a provision through quality of Kathmandu Valley. The stood at 746 μg/m3 at Phora Durbar which authorities can declare a public demands of the protestors included air-quality monitoring station.51 health emergency whenever AQI eliminating tax on electric vehicles, According to Environment Protection exceeds 300. However, the government banning diesel vehicles, saving trees Agency (EPA)'s air quality index, air did not invoke the action plan. In in Nijgadh and combating the issue of quality level between 151 to 200 are response, dozens of environmental factory farm waste.52 considered unhealthy whereas levels activists staged a demonstration on “ OUTLOOK The COVID-19 pandemic has put severe stress on the health infrastructure of the country. It has laid bare a lot of gaping holes in various areas such as - policy, infrastructure and supply chain in the sector. The utmost priority in the sector is to ensure the efficiency of the critical supply chain of the COVID-19 vaccines, which should be procured and distributed in the given time frame. The Nepal government must also prepare themselves and develop the necessary infrastructures for the vaccine rollout under the COVAX scheme. The demands of the frontline workers in various public hospitals around the country must be dealt as primacy. In addition, an action plan to manage passenger flows from countries in which the new strain of the virus has been found must also be formulated and implemented. Apart from the action plan to control and combat the spread of the COVID-19, the respective government agencies must also look to improve the air quality of Kathmandu valley to avoid long term repercussions for its citizens. NEFPORT ISSUE 44 – MARCH 2021 29 TOURISMTOURISM

The pandemic and the travel restrictions globally have seen tourist numbers in the country lower than the times of the Maoist insurgency. With tourism prospects looking bleak due to COVID-19, many tourism projects now face uncertainty. The businesses in operation are facing a dilemma as to either close operations or issue drastic cost cut downs. The Government’s private sector refinancing policy has also been very sluggish, failing to provide respite to the ailing businesses. The Nepal Tourism Board (NTB) has meanwhile looked to expand its services to the provincial levels in the country.

Tourist arrivals in the country sees the government had to call off the expected to create almost 1,000 sharp decline: 2020 has seen the campaign in March 2020.54 jobs. According to the Ministry tourist numbers in the Nepal dwindle of Tourism of Gandaki Province, down by 80.78% from the previous Tourism projects face uncertainty: Pokhara and its surrounding districts year. 2019 had seen a total of 1.17 Many tourism projects in Pokhara attracted 400,000 international and million tourists who visited the are in jeopardy as a result of the 100,000 domestic tourists in 2018 country. According to the Department reduction in tourist influx in the generating NPR 30 billion (USD of Immigration, a total of 230,085 city due to the pandemic. The five 254.8 million) and contributed to tourists visited Nepal in the year 2020. star '45 keys Boutique Resort' in 10 %of the province's GDP. The The tourist arrival figure for 2020 Kaskikot, which has an investment possible disruption in the tourism is lesser than the number of tourists of NPR 450 million (USD 3.8 industry in the foreseeable future due visiting Nepal during the peak of the million) so far has postponed its to the pandemic has put these projects Maoist insurgency between 1996 opening to January 2022. Similarly, under severe stress. to 2006. The tourist arrival figures Pokhara's international airport, which for 2020 is similar to arrival figures was planned to be completed by NTB looking to expand services in 1986.The fall in tourist numbers December 2020 has also been delayed into the provinces: Nepal Tourism has meant a reduction of almost 90 following the outbreak, pushing its Board (NTB) has started preparation % of the annual NPR 75 billion completion date to July 2021. So to expand its services at the provincial (USD 637 million) foreign exchange far, Pokhara International airport level with the aim of decentralizing earnings in recent years.53 A survey has achieved 69 %physical progress. its services. The board has deployed conducted by NTB predicts that The construction of a 1,600 meter its staff to prepare a feasibility study there should be certain recovery by cable car from Dumre Thuladhunga report that is expected to recommend the second quarter of 2021. However, to Bandipur with an investment of the necessary preparations that need the situation has been exacerbated NPR 2 billion (USD 1.6 million) to be made to setup the offices. A total by the political uncertainty the is also under construction. The of NPR 10 million (USD 8.4 million) country is engulfed in right now. project has completed 50 %of of the board's yearly budget has been The government had launched the physical progress and it is aiming to allocated to setup the provincial Visit Nepal 2020 campaign with start operations by October 2021.55 offices. The NTB's revenue collection the target of welcoming two million The investors of Rupakot resort are this year has been poor due to the lack tourists within a year. However, due also investing in two projects--Old of tourism activities in the country. If to the rise in COVID-19 numbers, Village and Swing Park, which is the revenue collection remains dismal, 30 DOCKING NEPAL’S ECONOMIC ANALYSIS

the board is seeking budget from the hotels operating in leased properties higher debt portions. The HAN has government to setup the provincial have closed down permanently thus proposed to fix the maximum offices. The provincial governments while some have tried to cut back on limit at NPR 600 million (USD are also looking to establish their own operating costs by giving voluntary 5.09 million) or 50% of existing tourism boards. The provinces are retirements to its old employees.57 loans, whichever is higher for hotels aiming to establish the boards under operating for more than 3 years. It is a public-private partnership concept. Private sector refinancing policy also proposing a no-limits refinancing The offices setup by the NTB implementation sluggish: Tourism scheme for hotels which are in however, will remain directly under entrepreneurs complain that58 lengthy operation since 3 years. Nepal Rastra its jurisdiction.56 processes, lack of proper responses Bank's (NRB) Joint-Spokesperson and monitoring from the government has defended the sluggish pace of Stakeholders in the hotel industry have hindered the refinancing policy policy implementation highlighting look to renegotiate deal: A deal introduced by the government the time taken to evaluate the large between the Hotel Association Nepal, for the private industries. They number of applications submitted trade unions and hotel workers which highlight that the lack of monitoring in the first round of applications. ensured a uniform payout structure activities by the Nepal Rastra Bank NRB's spokesperson stated that the to prevent mass layoff expired on (NRB) and preferential treatment to implementation phase of the policy December 31, 2020. The concerned select businesses have rendered the has already begun and that the bank parties have been holding a series of scheme unavailable to a lot of the has also called for the second round talks to find a way to protect workers businesses. The maximum limit of of applications. The bank intends and at the same time, prevent hotels the General Refinance Facility under on taking forth the monitoring from going bankrupt. The hotels are the refinancing scheme is fixed at and evaluation part of the policy looking to implement a "no work, NPR 200 million per customer. The implementation post the completion no pay" system which would see president of the Hotel Association of the second round of applications. 59 them retain a minimum number of of Nepal (HAN) however, highlights staff and cut back on the rest until that this limit will not be enough the situation improves. Many of the for higher category hotels with

“ OUTLOOK The outbreak of the COVID-19 pandemic has meant a steep decline in the number of foreign tourists visiting Nepal. The Government called off the Visit Nepal 2020 campaign in March 2020 after the pandemic forced the government to close its borders and prevent immigration into the country's borders. The pandemic has put a further dent on several tourism projects with several of these projects pushing their completion date and opening date further into 2021 and 2022. With the Foreign Investment pledges to the country drying up, the Government is putting an effort into improving conditions of Foreign Investment into the country. However, the sluggish pace of the refinancing policies implemented by the government is putting the survival of several businesses in the sector under severe stress. NTB aims to expand its services by opening offices in each province meanwhile is a positive move in decentralizing the planning and execution of tourism centric plans and policies by the government. NEFPORT ISSUE 44 – MARCH 2021 31 TRADETRADEAGRICULTURE AND AND DEBT DEBT

For the second quarter of the fiscal year 2020-21, trade deficit narrowed down to 5.8%, owing to reduced imports due to the pandemic. The balance of payment (BoP) also recorded a surplus of NPR 124.92 billion (USD 1.06 billion). The country experienced a trade surplus with over 25 countries in the half year including US, UK, Denmark, Sudan, Anguilla, Yemen, Iceland, Chad, Mauritius, Monaco, Slovenia, Islamic Republic of Iran, New Caledonia, Bosnia and Herzegovina, Uruguay, Cambodia, Estonia, Greece, Tunisia, Bahamas, Brunei Darussalam, Congo, Dominica, Azerbaijan and the Maldives. The export earnings exceeded import expenses by NPR 1.73 billion (USD 14.69 million) in those countries. However, Nepal observed a trade deficit with 107 countries out of which the largest trade deficit was with India of NPR 236.22 billion (USD 2 billion).

Foreign trade scenario: Table 1 Exports to India witnessed a growth of 561.62 million) as against a decline of reflects the trade scenario of the second 8.4% and exports to other countries 4% in the corresponding period a year quarter of the fiscal year 2020/21. also grew by 4%. However, exports to ago. Imports from India increased by In the review period, merchandise China experienced a sharp decline of 3.5%, whereas, imports from China exports increased by 6.1%, with 50%. Similarly, in the first six months and other countries fell by 18.5% and total exports recorded at NPR 60.79 of the FY 2020/21, total imports fell 17.4% respectively. billion (USD 516.35 million). by 4.8% to NPR 66.12 billion (USD

Table 1: Foreign Trade Statistics of Q2 in the fiscal year 2020/21 (NPR in millions)

2018/19 2019/20R 2020/21P %Change Heading Annual Six Months Annual Six Months Six Months 2019/20 2020/21

Total Exports 97109.5 45412.5 97709.1 57279.7 60799.2 26.1 6.1

To India 62731.8 27538.9 70108.9 40143.9 43527.1 45.8 8.4

To China 2109.8 1110.8 1191.2 1016.6 507.9 -8.5 -50.0

To Other Countries 32267.9 16762.7 26409.0 16119.3 16764.3 -3.8 4.0

Total Imports 1418535.3 723937.5 1196799.1 694693.7 661245.4 -4.0 -4.8

From India 917922.2 466391.5 735294.8 423835.1 438829.7 -9.1 3.5

From China 205518.6 105523.9 181920.3 118252.8 96325.3 12.1 -18.5

From Other Countries 295094.5 152022.2 279583.9 152605.8 126090.4 0.4 -17.4

Total Trade Balance 1321425.8 678525.1 1099089.9 637414.0 -600446.2 -6.1 -5.8

With India -855190.4 -438852.5 -665185.9 -383691.3 -395302.6 -12.6 3.0

With China -203408.8 -104413.1 -180729.1 -117236.2 -95817.4 12.3 -18.3 32 DOCKING NEPAL’S ECONOMIC ANALYSIS

With Other Countries -262826.6 -135259.4 -253174.9 -136486.5 -109326.1 0.9 -19.9

Total Foreign Trade 1515644.9 769350.0 1294508.2 751973.5 722044.6 -2.3 -4.0

With India 980654.1 493930.4 805403.7 463979.0 482356.8 -6.1 4.0

With China 207628.4 106634.7 183111.5 119269.4 96833.1 11.8 -18.8

With Other Countries 327362.4 168784.9 305993.0 168725.1 142854.7 0.0 -15.3

Source: Nepal Rastra Bank. Current Macroeconomic Situation (based on annual data of FY 2020/21)

Top exports and imports: During garments, chemical fertilizers and registered a deficit of NPR 49.53 the second quarter of the fiscal year electrical goods declined. The three billion (USD 420.70 million) as 2020/21, exports of cardamom, most imported commodities are compared to a deficit of NPR 79.65 polyester yarn and threads, jute petroleum products, transportation billion (USD 676.54 million) in the goods, pashmina, herbs, ayurvedic equipment and parts, and other same period of the previous year. The medicines and noodles, among others machinery and parts, contributing balance of payment (BoP) recorded a increased. Additionally, exports of 9.9%, 8.4% and 5.0% to the total surplus of NPR 124.92 billion (USD woolen carpets, textiles, wires, zinc imports respectively. 1.06 billion) as compared to a surplus sheets and juice witnessed a fall. The of NPR 26.65 billion (USD 226.36 top three commodities exported Trade deficit: The total trade deficit million) in the previous year. includes--cardamom, polyester yarn narrowed down by 5.8% to NPR and threads and woolen carpets, 600.45 billion (USD 5.10 billion) as Cardamom and tea exports rise: contributing 6.2%, 6.0% and 5.8% compared to a decrease of 6.1% in the The export of cardamom and tea rose to the total exports respectively. same period in the previous year. The in the first half of the fiscal year. The Likewise, during the second quarter, export-import ratio increased to 9.2% Trade and Export Promotion Center imports of rice, crude soya bean in the review period from 8.2% in the (TEPC) reported an increase in the oil, telecommunication equipment corresponding period of the previous quantity as well as the export income as and parts, gold, medical equipment year. a result of rise in export of cardamom and tools, and textiles, among and tea. Around 4.7 million kg of others increased. However, imports Balance of Payment: In the semi- cardamom was exported to countries of petroleum products, transport annual results of the fiscal year including India, amounting to NPR equipment and parts, readymade 2020/21, the current account 3.81 billion (USD 32.36 million),

Figure 3: Foreign Trade Scenario for Quarter 2 of FY 2020-21

Source: Nepal Rastra Bank. Current Macroeconomic Situation NEFPORT ISSUE 44 – MARCH 2021 33

selling at a price of NPR 31,000 (USD Livestock and the health section Management Center, Department of 263.31 million) per quintal. The hike of Tarakeshwor municipality. Drug Management, Department of in cardamom price can be attributed Additionally, preventive sprays were Transport Management and 40 other to the continuous sale by the farmers. used in the bird flu affected areas. government bodies.62 Similarly, the tea export income rose from NPR 1.65 billion (USD 14.01 One-door system in agro-related US to support Nepal in increasing million) in the corresponding period foreign trade implemented: production of exportable goods: of the previous year to NPR 2.77 Government agencies related to The US has agreed to provide billion (USD 23.52 million) this the agricultural sector signed an technical support to Nepali producers year. According to TEPC, around 8.7 agreement with the Department of during the fifth meeting of Trade and million kg tea was exported this year, Customs for a one-door system to be Investment Framework Agreement indicating an increase of 2 million kg implemented on foreign trade. The (TIFA) Council.63 The technical from the first six months of last fiscal agreement will allow availing custom support is aimed at capacity building year.60 clearance services online. According of Nepali producers. There was also to the Ministry of Agriculture and an agreement for mutual coordination Nepal bans import of poultry Livestock Development (MoALD), to promote digital economy in Nepal. products after detection of bird the one-door system will make Although Nepal produces and trades flu: In the midst of the COVID-19 the customs clearance process 77 products such as: carpet, pashmina pandemic, the Nepal government has smooth and efficient by making it and travel goods with the US, Nepali barred the import of poultry products completely paperless. It will also producers have not been able to access after confirming the detection of promote transparency and good facilities that will help them produce bird flu infection, seen in a flock of governance in the trade sector. The those goods on a larger scale or Turkey ducks at Sanglekhola Fatung ministry also informed that the improve the quality of those products. in Tarakeshwor Municipality-7 of government agencies working on The press statement by the Ministry Kathmandu. 1,865 ducks, 622 quail the implementation of the one- of Industry mentioned that Nepal birds, 32 chicks, 25 Turkey, 542 eggs door system include Department of and the US will work hand in hand and 75 kg feed were disposed after the Customs, Department of Commerce to promote and enhance digital trade confirmation of bird flu.61 To control Supply and Consumer Protection, which will be a positive contribution the spread of bird flu, poultry products Department of Industry, Department to the economy. from different firms were sent for lab of Inland Revenue, Department of test. Poultry firms have been sealed Food Technology and Quality Control, by a joint team of the Department Department of Animal Services, of Health Service, Department of Plant Quarantine and Pesticide

“ OUTLOOK The country has witnessed significant growth in the export of agricultural products, owing to rise in shipments of cardamom, tea, medicinal plants and aromatic plants. Moving forward, the country should focus on improving agricultural productivity and quality of such products, as it can be seen that the demand for agricultural products from Nepal is high in international markets. Exporters of the country’s major agro-based commodities namely tea, coffee, ginger and large cardamom need to meet various technical requirements like fulfilling product specifications to comply with the importing countries’ health and sanitary standards.64 The government should provide technical training opportunities for farmers producing such products and also provide them subsidies for the same.

Nepal should also aim at effectively tapping into intra-regional trade in the South Asian region, as the world is moving towards forming free trade blocs. The country and respective ministries should prioritize on improving trade links in the South Asian region, instead of restricting trade relation. Some startling examples include high tariffs in agro products in Bangladesh; and as retaliation, Bangladeshi garments have faced similar treatment in Nepal. Thus, Nepal should move towards a higher level of economic integration, such as customs union or common market. 34 DOCKING NEPAL’S ECONOMIC ANALYSIS FOREIGNFOREIGNAGRICULTURE AID AID

The review period highlights that efficiency of mobilization and management of development aid as well as foreign investment in productive sectors are some of the most important financing strategies needed for Nepal. The country has received increasing amounts of loans and grants but has lagged behind in its efficient mobilization because of lack of capacity on the end of the government, which is why robust growth has not yet been possible.

Ministry of Finance and Asian 769.02 million) in the first four preparedness capacity.67 Development Bank sign agreement months of the current fiscal year. for grid modernization: The Ministry Out of this amount, 85.8% is loan Government of Nepal and World of Finance (MoF) Nepal and the assistance. With this the MoF has Bank sign a rural enterprise Asian Development Bank (ADB) reported that the share of foreign development project: The Nepal have signed a loan agreement for the assistance has increased six-folds as it government and the World Bank modernization of electric grids in the was NPR 15.67 billion (USD 133.09 have jointly signed a project worth country. The total investment cost of million) during mid-July and mid- NPR 9.41 billion (USD 80 million) the project is estimated at NPR 22.81 November in the last fiscal year.66 titled ‘Rural Enterprise and Economic billion (USD 0.19 billion) and out Development Project’ (REED). of this amount, ADB will bear NPR Government of Nepal and ADB The project aims to boost Nepali 18.25 billion (USD 0.15 billion) sign concessional loan: The Nepal agricultural sector by strengthening while the remaining NPR 4.56 billion government and ADB have signed a rural market linkages and promoting (USD 0.037 billion) will be invested joint concessional loan agreement of entrepreneurship while creating jobs by the Nepal Electricity Authority NPR 17.66 billion (USD 150 million) to support post Covid-19 recovery. (NEA). The primary objective to finance the ‘South Asia Sub-regional Through this project, the partnership behind signing this agreement is to Cooperation (SASEC) Airport between local and provincial improve the power transmission and Capacity Enhancement Project’. This governments, as well as rural producer distribution capacity of the country project is aimed to enhance the airport organizations and private-sector under the Electric Grid Modernization capacity by constructing parallel taxi- buyers will be facilitated which can Project. The Joint Secretary of MoF way extension, hanger apron, next add value, create jobs and foster Nepal believes that this agreement phase of design work of Tribhuvan sustainable inclusion. The project can also help make the power supply International Airport as well as the also aims to use labor-intensive ‘Cash sustainable and reliable, and develop construction of second terminal at for Work’ mechanism, to the extent and strengthen the capacity of Nepal. Gautam Buddha Airport. possible, in short-term public works.68 Furthermore, the electricity saved from the project can also be exported They have also signed an additional Asian Development Bank launched to other neighboring countries, which NPR 4.70 billion (USD 40 million) COVID-19 vaccine initiative: The can make a positive contribution concessional loan and NPR 1.17 ADB has launched a NPR 1.05 to the economic activities of the billion (USD 10 million) grant for billion (USD 9 billion) vaccine country.65 the implementation of Priority River initiative for its members in order to Basins Flood Risk Management provide rapid and equitable support Foreign assistance received in the Project. The project will contribute to its members, including Nepal. It is first four months of the current to improve flood protectionexpected that through this initiative, fiscal year: Nepal has received a infrastructure, enhanced floodthe government of Nepal will be able commitment of foreign assistance forecasting and response system, to launch and deliver effective as well worth NPR 90.54 billion (USD improve flood prevention and as safe COVID-19 vaccines.69 NEFPORT ISSUE 44 – MARCH 2021 35

Nepal gets support for green estimated that the cost of this recovery that the share of loans in total foreign recovery: The Nepal Government package would be USD 7.4 billion aid has risen due to improvements along with various development (NPR 0.87 billion).70 in aid absorptive capacity. Likewise, partners have agreed on a joint the share of multilateral aid has also statement of support to enable a green, Foreign aid disbursement in terms increased. The top five multilateral resilient and sustainable recovery of loans and grants: According to development partners are the World from COVID-19 in the country. This the progress report released by the Bank, Asian Development Bank, approach is termed as green recovery National Planning Commission titled European Union, United Nations and approach, and it will prioritize the ‘Sustainable Development Goal: IFAD. Two thirds of the aid received need for investment to protect lives, Progress Assessment Report 2016- by Nepal, has gone to productive secure jobs and livelihoods, as well 2019’, foreign aid disbursement as a sectors such as agriculture, industry, as build resilience and equity to proportion of commitment is 65.1%, transport and energy, while the rest enhance sustainability in a long term. with significant differences between is spent on health, education and This approach to recovery from the loans and grants. Grant utilization environment.71 pandemic is also in alignment with was only 29.9% compared to 70.1% Nepal’s 15th development plan. It is for loans. The report also revealed

“ OUTLOOK Although, Nepal has not been able to attract as much foreign assistance as other developing countries, foreign aid has remained a significant contributor to the country’s fiscal system. Nonetheless, the total flow of foreign aid in absolute terms has increased over the years, as signified by the rise in aid and loans during the review period.

The major challenge for Nepal remains on the part of its increasing absorptive capacity of foreign aid by investing it in productive sectors and more projects which can be completed as scheduled. For this, subsequent effective mobilization of the funds is also equally vital. Likewise, there are numerous policy and institutional issues that need to be addressed while adapting international agreements with respect to effective aid utilization. Moreover, it is also important to comprehend that multitude of projects left incomplete have further curbed the potential that could have been realized through the proper expenditure and mobilization of foreign aid. Due to these reasons, revision of foreign aid policy with respect to its utilization in the most judicious manner and in priority sectors has to be the first step. 36 DOCKING NEPAL’S ECONOMIC ANALYSIS REMITTANCEREMITTANCE

The review period depicts a positive picture of remittance sector in Nepal where remittance inflow has increased in comparison to the review period of the previous year. Moreover, many new initiatives are being undertaken considering how critical remittance is to Nepal’s economy. Hence, the need for labor migrants to be well-trained for the jobs for them to undertake in their destination countries.

Remittance increment by 12.6%: workers, has been cited as the reason for foreign employment also dropped In the first three months of the behind this increment. However, in by 78.6%.72 current fiscal year, Nepal’s remittance the review period, while there was an increased by 12.6%, amounting to increment in remittances, the number A snapshot of the country-wise labor NPR 258.86 billion (USD 2.19 of people applying for permission of approval from 16 November, 2020 billion). The country had witnessed foreign employment for the first time to 13 January, 2021 has been given a decrease of 5.1% in remittance decreased by 96.8%, while it had below. The data has been extracted during the corresponding period last decreased by 3.7% in the same period from the Department of Foreign fiscal year. Use of formal channels last year. Likewise, the number of Employment.73 for sending money by the migrant Nepali workers renewing their entry

Table 2. Country-wise Labor Approval from 16 November 2020 to 13 January 2021 Particulars Male Female Total Recruiting Agency 8006 1437 9443 Individual (New) 926 285 1211 Individual (Legalization) 852 80 932 Individual (Re-entry) 14934 664 16048 Total with re-entry 24718 2466 27184 Total without re-entry 9784 1802 11586 Source: Department of Foreign Employment

Decrease in the national poverty line as part of the government’s poverty their work permits in the country due to increase in remittances: The alleviation policies. Remittance to where they work, meaning they will progress report released by the National households has been one of the key not have to visit the government Planning Commission (NPC) titled contributors of economic growth offices in Nepal for the renewal of ‘Sustainable Development Goals: and transformation of less well-off their work permits. This saves them Progress Assessment Report 2016- households.74 time, money and effort. Besides, there 2019’ stated that the proportion are numerous cases where Nepali of people living under the national Workers allowed to renew labor migrant workers continue to work poverty line decreased to 16.7. The permits in destination countries: for their same employer even after target for 2019 was 17.1. One of From time immemorial, Nepali the expiration of their work permit the major reasons behind this has migrant workers have been employed and initial contract period. Due to been the increase in remittance and overseas. However, this is the first which, those workers who overstay as the expansion of local level services time that they will be able to renew well as their families are considered NEFPORT ISSUE 44 – MARCH 2021 37

ineligible to receive various financial ago and thus, needed a revision.77 all the training materials.79 However, support provided by the government effective implementation has to if the worker comes across any tragic The whole module has been divided be stressed for this module to be a incidents. Considering this, this new into two sections, namely, the basics success. initiative will bring down the number of foreign employment and its of Nepali workers overstaying their associated risks and country-specific Labor migration to South Korea not permits below.75 knowledge. The first section will certain yet: In light of the coronavirus impart information on the basics pandemic, last February, Nepal Along the same lines, the Department of foreign employment and will chapter of the Human Resources of Foreign Employment (DoFE) has consider--boarding flights, contacting Development Service, South Korea, assured that all applications for work respective persons when stranded at had requested its Nepali counterpart permits will now be handled online the airport and minimizing the risk not to send any workers as they could and for this, the online application of workplace accidents. Likewise, transmit the virus. This had indicated system is being upgraded so that even the second section will be specific to a first sign of trouble in labor Nepali missions can provide labor destination countries where they will migration to South Korea. Later, in permits to visiting Nepali migrants in get knowledge about the local culture, the same month, when South Korea their respective countries. Likewise, language, traditions and traffic rules, became an epicenter of Covid-19, the the DoFE has also brought online among others. Both of these sections migration of Nepali youths to South payment gateways on board to make are aimed to increase awareness Korea had been halted. Now, after a it possible for payment of insurance among the migrant workers and to year, the situation of labor migration premium online.76 prepare them for their work abroad.78 to South Korea still remains uncertain as the Director of the Employment Updated training to be provided to The new curriculum is planned to Permit System (EPS) Korea Section workers preparing to go abroad: The be implemented from 13 February, is of the view that the government Foreign Employment Board of Nepal, 2021. 60% of the training will be of South Korea has not removed the which is responsible for overseeing conducted through audio-visual ban on arrival of migrant workers. the overall training, now aims to medium. The Foreign Employment Although it has been ensured that implement a new training module Board has produced all education efforts are ongoing to allow Nepali for the Nepali migrant workers before and communication materials for workers to enter South Korea, they head to the destination countries. the trainers. After the training is situation appears bleak and thus, can This new module will be a part of the completed, the board also intends hamper the remittance sector in the updated curriculum as the current to create an online group for the coming days.80 curriculum was designed seven years trainers where they can have access to “ OUTLOOK In the beginning of 2020, COVID-19 pandemic and its subsequent lockdowns had envisaged the remittance inflows to plummet throughout 2020.

In Nepal’s case, Nepal Rastra Bank (NRB), Central Bureau of Statistics (CBS), World Bank, Asian Development Bank had projected a fall of over 15%, 18%, 14% and 28.7% in remittances for 2019/20 respectively based on the plunge in April 2020’s remittance earnings that had witnessed a massive drop to NPR 34.5 billion (USD 293.03 million) in April/May from NPR 79.2 billion (USD 672.70 million) in March/April.

Although remittance was projected to decline, the relative significance of remittance as a resource of external financing, especially for low-income and middle-income countries has evidently increased as shown in the review period. Nepal registered an increase in remittances in 2020 defying analysts’ predictions. Overall, the remittances totaled NPR 875 billion (USD 7.43 billion) in 2019/20, which was only 0.5% less than the previous year. Likewise, remittance inflows rose by 1.2% to NPR 337.72 billion (USD 2.86 billion) in the first four months of 2020/21 in comparison to a 2.8% decrease in the corresponding period of the previous year. 38 DOCKING NEPAL’S ECONOMIC ANALYSIS

Given this, it is important to note that remittance is one of the most important contributors to Nepal’s income. Considering this, one of the major priorities of the government of Nepal should be making foreign employment safer and more remunerative so that it can result in added benefits for the foreign workers as well as the nation as a whole. Maximizing employment and income gains from safe migration should be explored. Besides, Nepal also needs to explore and formulate concrete strategies to withstand such economic shocks caused by the pandemic. Moreover, there is also a need to enhance the financial and digital ecosystem by facilitating informed choices for migrants on the cheapest and most reliable methods of sending money home, as well as for the households on saving accounts so that this can increase financial inclusion as well. NEFPORT ISSUE 44 – MARCH 2021 39

ENVIRONMENTENVIRONMENT

As the temperature heats up in Nepal, the nation’s tourism and agriculture sectors are taking a big hit. The air quality of Kathmandu continues to deteriorate, and the city was recently ranked the worst in terms of air pollution level compared to other cities around the world.

Global warming uncovers mountain and diseases since low temperature up, is worse than in the afternoon.82 peaks: The rising temperature dampers the reproduction rate of has left Nepal’s mountains bare these pests. The warming temperature Use of pesticides increases amid due to the increasingly irregular has thus exposed their crops to greater change in climate: The climate snowfall. According to the regional numbers of pests.81 change impact on agriculture has been programme manager at ICIMOD, detrimental. The increased exposure the temperature of the country has Worsening air quality: From 4-5 of crops to new and resistant pests been rising at the rate of 0.6 degree January, Kathmandu Valley had the has in turn compelled farmers to use Celsius per decade. This has adversely highest Air Quality Index (AQI), more pesticides and this could worsen affected the hospitality and tourism indicating the harmful level of air as climate change progresses. Nepal industry – which has also been hit pollution contaminating the city. The has seen an annual increase in the the hardest by Covid-19. Likewise, pollution monitoring stations located pesticide imports of 15 % as a result the impact of receding snowfall has around the capital city recorded PM of commercial farming and climate been felt by the farmers as well, who 2.5 readings that overwhelmingly change impact. Majority of these heavily depend on melting snow to exceeded the cap of 25 g/m³, set pesticides are used on vegetables. The water their crops. Additionally, these by the World Health Organization Nepal government has done nothing farmers rely extensively on the region’s (WHO). It was further discernedμ that so far to actively check the excessive cold climate to protect their crops the air quality during the morning use of harmful pesticides.83 from getting destroyed by insects time, when businesses/offices open

“ OUTLOOK The impacts that have been felt due to climate change should alarm the authorities and push them to form sound policies to mitigate the heightening climate crisis. Furthermore, they should work towards controlling the air pollution level of the capital city through stricter regulations on issues like vehicular emissions and construction activities. 40 DOCKING NEPAL’S ECONOMIC ANALYSIS

MARKET 4REVIEW NEFPORT ISSUE 44 – MARCH 2021 41

FINANCIALFINANCIAL MARKETMARKET

The first six months of the fiscal year (FY) 2020/21 witnessed a recovery in the operating profit and net profit of commercial banks against the previous few quarters, as it declined by 0.6% and 5.5% respectively. In the first quarter of FY 2020/21, operating profit and net profit declined by 6.7% and 8.4% respectively. . By the end of the review period, the excess liquidity faced by commercial banks faced also declined to NPR 77.31 billion (USD 656.67 million) from more than NPR 200 billion (USD 1.69 billion) in November 2020, owing to internal borrowings by the government and increased demands for credit by businesses.84

Key Indicators: Some of the key and building and 12.2% is against period previous year, NPR 28 billion macroeconomic indicators as per collateral of agricultural and non- (USD 237.83 million) and NPR the macroeconomic and financial agricultural products. 30 billion (USD 254.82 million) situation report based on the semi- was mopped up through reverse annual data of the FY 2020/21 Loans of BFIs to agriculture, repo auction and deposit collection published by the Nepal Rastra Bank industrial, construction, transportation, respectively. (NRB) are highlighted below: communication and public sectors increased by 20.2%, 6.9%, 6.3% and Through the net purchase of USD Deposit and Credit Mobilization: In 6.9% respectively. In addition, during 2.12 billion from the foreign the review period, the deposits at Banks the review period, loans from the BFIs exchange market, NRB injected and Financial Institutions (BFIs) to the whole sale and retail sectors liquidity of NPR 251.02 billion increased by 9.2%, as compared to a and the service industry also increased (USD 2.13 billion) in the review growth of 6.2% in the same period of 9.5% and 11.9% respectively. period. Similarly, the central bank the previous year. In the total deposits, also purchased Indian currency (INR) the share of demand deposits, savings In terms of credit exposure, the term equivalent to NPR 241.31 billion deposit and fixed deposits stand at loan increased by 11.5%, overdraft (USD 2.04 billion) through the sale 8.5%, 33.6% and 49.2% respectively. loan increased by 13.4% and demand of USD 2.04 billion. As compared to mid-January 2020 and working capital loan increased by when the institutional deposits stood 13.6%. Also, real estate loan, which Foreign Exchange Reserves and at 45.1%, this year the institutional include residential personal loans Adequacy: As of mid-January 2021, deposits stood at 42.5%. increased by 4% and margin loans the gross foreign exchange reserve increased by a whopping 50.2% due stood at NPR 1493.75 billion (USD Likewise, private sector credit to increased activity in the secondary 12.68 billion), increasing by 6.6% as from BFIs increased by 11.4% as market. compared to NPR 1401.84 billion compared to an increase of 8.6% in (USD 11.90 billion) in mid-July the corresponding period of previous Liquidity management: In the first 2020. During the mid-January 2021, fiscal year. In the review year, private six months of FY 2020-21, the central of the total foreign exchange reserves, sector credit from commercial banks, bank i.e. Nepal Rastra Bank (NRB) the reserves held by NRB increased by development banks and finance mopped up NPR 241.34 billion 7.5% to NPR 1318.66 billion (USD companies increased by 11.3%, (USD 2.04 billion) through reverse 11.20 billion). However, reserves held 15.3% and 0.3% respectively. Of repo auction and NPR 151.80 billion by banks and financial institutions the total outstanding credit to BFIs, (USD 1.28 billion) through deposit other than NRB decreased by 0.4% 4 66.3% is against the collateral of land collection. In the corresponding to NPR 175.09 billion (USD 1.48 42 DOCKING NEPAL’S ECONOMIC ANALYSIS

million) from 175.71 billion (USD 226.36 million) in the same period own payment update in collaboration 1.49 million). The share of INR in previous year. with Rastriya Banijya Bank (RBB). total reserves stood at 23.7%. NT and RBB have jointly registered Fourth Quarter Performance a company named Digital Payment Based on imports of the first six Analysis of Commercial Banks: Company Ltd for the operation of months of FY 2020/21, the foreign As per the unaudited semi-annual the payment gateway. For the digital exchange holdings of the banking financial results of commercial banks wallet, RBB will be the settlement sector are sufficient to cover the of FY 2020/21, as shown in Table 3, bank, with the digital wallet prospective merchandise for 13.9 the operating profit of commercial operating separately. Currently, only months, and merchandise and service banks fell by 0.6%, while the net private sector payment gateways are imports for 12.6 months. The ratio of profit also witnessed a 5.5% decline in operation such as eSewa, Khalti, reserve-to-GDP, reserve-to-imports compared to the corresponding figure and IME Pay, among others. The and reserve-to-M2 stood at 39.7%, of the previous fiscal year. company will receive a go-ahead 105.2% and 32.2% respectively in from the central bank in February, if mid-January 2021. At the end of the first six months the company has completed all the of the FY 2020/21, NIC Asia Bank required procedure. Interest rates: The weighted average bagged the highest net profit of NPR 91-day Treasury bill rate remained at 2.94 billion (USD 24.97 million), Larger enterprises allowed to avail 0.87% in mid-January 2021, as against followed by Global IME Bank and refinance facility:Upon not receiving 3.17% in the corresponding month a Nabil Bank, both booking NPR 2.31 adequate applications from smaller year ago. Furthermore, the weighted billion (USD 19.62 million) and NPR business for subsidized loan facilities, average inter-bank transaction rate 2.01 billion (USD 17.07 million) as NRB invited new applications by among commercial banks stood at net profits. Also, during the review eliminating the provision that only 0.14% as against 1.76% in mid- period average Non-Performing Loans 70% of the total refinance facility January 2021 the previous year. The (NPL) stood at 1.7% as compared to should be provided to small enterprises average inter-bank rate of BFIs which 1.6% in the same period previous that demand up to NPR 1.5 million was considered as operating target of year. Furthermore, average cost of (USD 1274.10) in loans. In the first the monetary policy, stood 0.18% in funds was 5.3% against 9% in the round of applications, the central mid-January 2021. corresponding period previous year, bank invited applicants aiming to implying a 3.7% decline in the cost of provide a refinance of a total of Rs148 In addition, the average base rate of funds. This indicates that borrowings billion under this scheme. However, commercial banks fell to 7.18% in have become cheaper, which could demands only amounted to NPR 72 mid-January 2021 from 9.43% a year be attributed to efforts to revive the billion (USD 611.56 million) from ago. Weighted average deposit rate COVID-19 hit economy. big and small enterprises and NPR 23 and lending rate of commercial banks billion (USD 195.36 million) from stood at 5.0% and 9.09% respectively Similarly, the average base rate stood small ones. Therefore, in the new in mid-January 2021, as compared to at 7.2% during the end of this quarter, round of applications the provision 6.79% and 11.94% respectively a year the highest being 8.4% of Civil Bank for small enterprises has been ago in the same review period. and the lowest being 5.6% of Rastriya removed. However, micro and small Banijya Bank. enterprises will be accommodated as Balance of Payments: The current much as possible. account registered a deficit of NPR Key Developments 49.53 billion (USD 420.7 million) in A cap of 5% difference on deposit the review period, whereas last year in Some of the key developments that rates in various deposit accounts: the corresponding period, the current transpired in the financial market are As per an announcement from NRB, account deficit was NPR 79.65 as follows: banks and financial institutions billion (USD 676.54 million). The (BFIs) will not be allowed to have overall BOP too improved, registering Nepal Telecom (NT) to roll out a a difference of more than 5% in a surplus of NPR 124.92 billion payment gateway: Nepal Telecom various deposit accounts. The spread (USD 1.06 million), as compared to has submitted a proposal to the Nepal on interest rates on deposit accounts, a surplus of NPR 26.65 billion (USD Rastra Bank (NRB) to operate its except call deposits, will not be more NEFPORT ISSUE 44 – MARCH 2021 43

than 5%. This is due to the multiple banks can issue a prepaid card worth the aim of providing comfort to complaints put forward by depositors USD 500 to the general public, which the hardships brought in by the regarding low interest rates provided include individuals and organizations pandemic. The mid-term review by banks. The low deposit rates have annually for making transactions allows lenders to provide loan discouraged savers, as most of the on foreign goods and services. The restructuring and rescheduling commercial banks are offering interest commercial bank can deposit up to facilities to the borrowers by taking rates of 2% on savings deposits as USD 500 or its equivalent amount in minimal interest of 5%. Furthermore, against inflation rate of 3.79%. any other currency on the request of it also provides for special refinancing their customers. However, a particular facilities to hydropower companies NRB lays foundation for international user can only avail the service from with production less than 10 payment system: In a session during one bank. Additionally, the bank MW. Also, it allows foreign parent the Fonepay Digital Economy should submit the transaction details companies or group of companies Conclave, Maha Prasad Adhikari,the of the users on a monthly basis. that have investments in Nepal to governor of NRB hinted towards avail loans up to 60% of the value of development of an international Central bank introduces new their investment. payment system, as a proposal has provisions in the mid-term review been drafted and submitted to the of the monetary policy: The mid- central bank. The draft proposes a term review of the monetary policy system where Nepali commercial introduces various provisions with “ OUTLOOK The first six months of FY 2020/21 looked opportunistic in terms of digitization and innovation in the banking landscape of Nepal, which was much required. This can be seen as a silver lining to the COVID-19 pandemic, as it has pushed banks and financial institutions to become digital. The operating profit and net profit of the commercial banks is recovering steadily as compared to fourth quarter of FY 2019/20 and first quarter of FY 2020/21. The operating profit and net profit declined by 0.60% and 5.5% as compared to a decline of 6.7% and 8.4% in the first quarter. This implies that the economy is recovering post the pandemic. The excess liquidity is also declining due to the increasing demand for loans from the business sector as Covid-19 cases fall. Moving forward, banks should consider digitization as a focal point of strategies, given that its acceptance has increased multiple folds due to the convenience factor. Table 3. Second Quarter Result Of Commercial Banks - Unaudited As On FY 2020-21 (Figures in NPR Ten Million)

BASE RATE DEPOSIT LOANS AND ADVANCES OPERATING PROFIT NET PROFIT NPL (%) COST OF FUND (LCY) (%)

% % % PAID-UP RESERVE & % % BANK FY 20/21 FY 19/20 Change FY 20/21 FY 19/20 Change FY 20/21 FY 19/20 Change FY 20/21 FY 19/20 FY 20/21 FY 19/20 FY 20/21 FY 19/20 FY 20/21 CAPITAL SURPLUS Change CHANGE

2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR 2 QTR Nabil Bank 1,348.0 1,352.0 20,014.9 16,432.5 21.80 17,052.0 14,139.0 20.6 286.9 290.9 (1.4) 201.6 204.2 (1.3) 0.7 0.7 4.3 60.2 (55.9) 5.8

Nepal Investment Bank 1,424.9 1,215.4 16,635.7 14,995.3 10.94 13,811.0 13,260.4 4.2 233.1 238.1 (2.1) 158.7 166.6 (4.8) 2.8 2.9 4.7 6.4 (1.7) 6.6

Standard Chartered bank 857.2 577.7 8,350.9 8,054.1 3.69 5,312.5 5,429.3 (2.2) 104.4 175.3 (40.4) 72.8 122.7 (40.7) 1.5 0.2 4.1 4.8 (0.7) 6.1

Himalayan Bank 1,068.4 598.6 12,992.2 11,272.9 15.25 10,900.8 9,772.0 11.6 98.6 211.7 (53.4) 5.3 174.2 (62.5) 2.1 1.3 4.6 6.3 (1.7) 6.8

Nepal SBI Bank 895.6 483.7 10,324.7 10,464.7 (1.34) 8,852.5 9,423.3 (6.1) 73.3 141.3 (48.1) 1.5 100.1 (48.6) 0.2 0.2 5.9 7.1 (1.3) 7.5

Nepal Bangladesh Bank 849.5 446.9 7,009.0 6,312.4 11.04 6,092.7 5,793.5 5.2 133.9 122.6 9.2 4.1 80.8 16.5 2.4 2.0 5.9 7.4 (1.5) 8.0

Everest Bank 851.0 814.4 15,018.3 14,119.6 6.36 11,349.2 11,433.0 (0.7) 137.4 215.7 (36.3) 96.2 151.0 (36.3) 0.2 0.2 4.7 6.4 (1.7) 6.3

Bank of Kathmandu 965.9 488.2 9,335.3 8,920.7 4.65 8,532.2 7,689.3 11.0 102.8 126.2 (18.5) 70.9 88.4 (19.8) 1.5 1.5 5.1 7.3 (2.2) 7.7

NCC Bank 935.3 306.1 9,795.7 6,361.7 53.98 7,749.5 6,489.6 19.4 85.6 105.9 (19.2) 61.4 75.6 (18.8) 2.4 2.8 5.8 7.5 (1.7) 7.9

NIC Asia Bank 1,156.4 689.3 26,810.5 17,874.4 49.99 22,123.7 15,145.3 46.1 303.8 290.3 4.7 294.4 288.0 2.2 0.4 0.5 5.2 6.9 (1.7) 6.7

Machhapuchchhre Bank 905.3 246.2 11,823.7 9,752.4 21.24 10,392.9 8,754.7 18.7 115.5 123.5 (6.5) 114.8 119.9 (4.3) 0.8 0.5 5.5 7.6 (2.1) 7.6

Kumari Bank 1,387.8 350.3 12,272.9 8,067.5 52.13 11,473.9 8,092.5 41.8 174.1 113.4 53.5 121.6 80.3 51.4 1.1 1.0 5.8 7.5 (1.7) 7.9

Laxmi Bank 1,069.6 371.2 10,435.7 8,823.1 18.28 9,238.7 8,505.2 8.6 113.4 129.4 (12.4) 80.7 90.3 (10.6) 0.8 0.9 4.9 7.2 (2.3) 7.2

Siddhartha Bank 978.8 741.1 15,779.1 12,654.5 24.69 13,836.9 11,836.4 16.9 133.7 152.1 (12.1) 91.9 102.7 (10.5) 1.9 1.5 5.4 7.3 (1.9) 7.4

Global IME Bank 2,163.2 770.1 23,441.2 19,741.1 18.74 20,379.0 19,052.6 7.0 323.8 236.9 36.7 231.5 213.7 8.3 1.7 1.2 6.8 9.4 (2.6) 6.7

Citizens Bank International 981.7 343.8 10,517.8 7,559.3 39.14 8,787.6 6,909.8 27.2 116.2 95.6 21.5 87.5 68.8 27.2 2.4 1.0 6.4 7.9 (1.5) 8.2

Prime Commercial Bank 1,608.3 494.8 13,099.5 8,035.3 494.80 11,927.4 8,091.5 47.4 259.3 185.4 39.9 181.3 130.1 39.4 1.1 1.4 6.0 7.6 (1.6) 7.8

Sunrise Bank 948.8 391.9 9,240.7 8,215.6 12.48 8,696.7 7,558.8 15.1 135.6 134.5 0.8 94.9 94.4 0.5 1.1 1.7 5.1 7.1 (2.0) 7.3

NMB Bank 1,444.8 510.9 14,256.7 12,642.9 12.76 13,729.2 11,363.7 20.8 229.9 151.5 51.7 161.3 163.6 (1.4) 2.4 1.9 5.5 7.7 (2.2) 7.4

Prabhu Bank 1,134.7 418.6 16,202.5 11,550.0 40.28 12,605.7 9,471.6 33.1 214.7 150.4 42.8 151.9 108.6 39.9 2.1 3.1 5.0 6.3 (1.3) 7.2

Mega Bank 1,464.5 294.7 12,862.4 8,021.6 60.35 12,339.6 7,418.9 66.3 182.8 135.9 34.5 130.4 95.0 37.3 1.7 1.5 5.9 7.2 (1.3) 7.3

Civil Bank 800.3 148.0 7,684.1 4,774.6 60.94 6,583.1 4,776.2 37.8 27.00 44.60 (39.5) 20.3 31.6 (35.8) 1.7 2.7 6.9 8.2 (1.3) 8.4

Century Commercial Bank 903.4 145.2 8,379.4 6,124.8 36.81 6,925.2 5,950.7 16.4 63.4 91.1 (30.4) 46.6 65.0 (28.3) 1.7 1.7 5.9 7.9 (2.0) 7.9

Sanima Bank 968.1 300.7 11,024.1 9,930.0 11.02 10,164.2 8,871.3 14.6 150.5 162.4 (7.3) 106.3 114.7 (7.3) 0.6 0.4 5.2 7.3 (2.1) 6.8

Public Sector Banks

Nepal Bank 1,263.7 1,559.3 14,899.5 11,712.3 27.21 11,661.1 9,845.9 18.4 204.6 173.5 17.9 135.0 135.0 - 2.9 2.7 3.6 5.2 (1.6) 6.2

Rastriya Banijya Bank 900.4 1,389.6 24,149.7 23,090.3 4.59 16,268.7 15,079.8 7.9 124.0 145.7 (14.9) 91.9 108.2 (15.1) 4.2 4.8 3.3 4.0 (0.7) 5.6

Agriculture Dev. Bank 1,642.3 998.1 14,419.5 12,721.8 13.34 13,248.5 11,536.1 14.8 189.5 198.4 (4.5) 132.2 158.2 (16.4) 3.1 3.9 5.2 7.2 (2.0) 7.7

Total 30,917.9 16,446.8 366,775.7 298,225.3 23.0 310,034.5 261,690.4 18.5 4,317.8 4,342.3 (0.6) 3,147.0 3,331.7 (5.5) 1.7 1.6 5.3 9.0 (3.7) 7.2 NEFPORT ISSUE 44 – MARCH 2021 45 CAPITALCAPITAL MARKETMARKET

During the review period, the market has witnessed an extremely bullish trend with a record- high level of transactions. On a day-to-day basis, the secondary market set new records, as investors have turned towards the stock market owing to industrial operations being indefinitely shut or halted. Due to the IPO issued by Nepal Infrastructure Bank (NIFRA), the number of people opening Demat accounts has significantly increased. According to CDS & Clearing Ltd, there are currently over 2.8 million Demat accounts registered as of 19 February 2021 and over 10,000 accounts are being opened daily. Additionally, since the mid-term monetary policy did not revise the margin lending provision, the share market has continued to soar.

Secondary Market: During the 1,252.54 billion (USD 10.63 billion). finance sub-index (68.22%) and the review period, the Nepal Stock manufacturing and the processing Exchange (NEPSE) index went up As indicated by Table 4, in this sub-index (33.48%). The lowest by a whopping 48.47%, closing at review period, all the indices landed gainer during the review period was 23.50%, closing at 1,718.49 points. in the green zone, as the market has the hotels sub-index, recording a gain The total market capitalization remained bullish with high levels of of 6.98% only. reached NPR 3,584.76 billion (USD the transaction. The highest gainer 30.44 billion) while the total floated was the life-insurance sub-index market capitalization reached NPR (73.99%) followed by the micro-

Table 4. Key indicators Particulars November 18, 2020 February 16th, 2021 % Change NEPSE Index 1,741.81 2,586.01 48.47 Sub-Indices Commercial Bank 1,319.78 1,883.52 42.71 Development Bank 2,098.93 2,668.24 27.12 Hydropower 1426.44 1936.89 35.78 Finance 875.47 1,198.52 36.90 Non-Life Insurance 9,211.48 13,376.13 45.21 Others 1312.54 2057.03 56.72 Hotels 1,936.96 2,072.14 6.98 Microfinance 2722.8 4580.27 68.22 Life Insurance 10,750.71 18,705.68 73.99 Manufacturing & Processing 3,629.14 5,821.16 60.40

Source: Nepal Stock Exchange (NEPSE) 46 DOCKING NEPAL’S ECONOMIC ANALYSIS

Figure 4. NEPSE Movement Index

Source: Nepal Stock Exchange (NEPSE)

Primary Market: The primary issue Key Developments a commission of up to 0.1% needs market has been highly active with to be paid. Similarly, the maximum numerous public offerings. During the Commission for Stock brokerage threshold for mutual fund schemes review period, Initial Public Offering service revised: The Securities Board and other capital market instruments (IPO) of Nepal Infrastructure Bank of Nepal (SEBON) has revised the fixed at 0.15%.85 The revision of stock worth NPR 8 billion (USD67.95 commission rate of stockbrokers by up brokers’ commission comes in line million) was issued to the public. NIBL to 60%. The revision was held owing with the government's policy to boost Ace Capital was appointed as its issue to the reduced operating costs of the stock market. manager and CIT as the underwriter. brokerage companies, as the secondary The right shares of Citizen Investment market experienced a spike in online A subsidiary of Citizen Investment Trust (1:0.8284) worth NPR 1.359 transactions. A brokerage firm can Trust (CIT) to work as a securities billion (USD 1.15 billion) was also charge up to 0.4% commission in dealer: SEBON has permitted issued, with RBB Merchant Bank as transaction amount of up to NPR Nagarik Stock Dealer Company Ltd, a the issue manager. Similarly, public 50,000 (USD 424.70), 0.37% for subsidiary of Citizen Investment Trust offerings of Greenlife Hydropower transactions of NPR 50,000 (USD (CIT), to work as a securities dealer, Limited, Mahila Laghubitta Sanstha 424.74) to NPR 500,000 (USD with the help of maintaining stability and Ru Ru Jalabidhyut Pariyojana 4247.4), 0.34% commission for a in the stock exchange. Nagarik Stock Limited have also been issued. transaction between NPR 500,000 Dealer Company Ltd will be allowed (USD 4247.4) and NPR 2 million to buy and sell securities for itself Additionally, debentures of Nepal (USD 16,988.02). Besides, for as opposed to stockbrokers who act Investment Bank Limited worth NPR transactions between NPR 2 million on behalf of their clients. Nagarik 1.6 billion– ‘Nepal Investment Bank (USD 16,988.02) and NPR 10 million Stock Dealer Company has a paid- Bond 2084’ with a rate of 8.5% and (USD 84940.11), the brokerage firm up capital of NPR 5 billion (USD a maturity of seven years was also will charge a commission of 0.3%. 42.47 million) out of which 30% of issued. RBB Merchant Banking had For all transactions above NPR the shares will be issued to the general been appointed as its issue manager. 10 million (USD 84940.11), the public.86 The debenture of NMB Bank – investors need to pay a service charge ‘NMB Debenture 8%- 2084/85’ has of 0.27% to the brokerage company. been added in the pipeline. With regards to government bonds, NEFPORT ISSUE 44 – MARCH 2021 47

“ OUTLOOK Since expanding its arena to online spaces, the share market has managed to captivate the public’s interest and has created significant awareness among all social standings. This interest has led many youths, also including housewives and street vendors to invest their time and money in the secondary market. A record-high number of applications for the IPO issue of Nepal Infrastructure Bank was received, with 1,529,660 applicants applying for 181,286,720 units.87 The average market turnover in the three months of the review period amounted to around NPR 7 billion (USD 5.94 million), with the highest being NPR 10.6 billion (USD 9 million) on February 8, 2021. The lack of opportunities in other sectors and easier access to loans against shares triggered a bullish run. However, regulators have urged investors to be cautious. During the review period, on November 30, SEBON published a statement urging investors to invest based on capital preservation rather than rumors that float in the market. However, experts question the sustainability of the bullish run, as the share market is reflecting an opposite direction compared to the national economy. 48 DOCKING NEPAL’S ECONOMIC ANALYSIS

SPECIAL SECTION: 'POLITICAL5 ECONOMY IN TRANSITION' NEFPORT ISSUE 44 – MARCH 2021 49

NEPAL AND THE WORLD APEKSHYA SHAH Assistant Professor, Department of International Relations and Diplomacy

Recognized as a sovereign by the was adopted in matters relating to gaining independence India chose British crown in 1923, Nepal has trade and governance. to follow the security policy laid out been party to ‘the modern state by the British and Nepal found itself system’ the longest, compared to its Moreover, with the British Empire entwined with India’s security concern South Asian counterparts. Nepal extending diplomatic contact and once again. has shared an intimate relation with Peking only protecting its interest in foreign powers and entities as Nepali Tibet, Nepal found itself dealing with The 1950 treaty signed by the Ranas rulers long understood the effects and the colonial regime independently. in hope of Indian support was futile significance of inter-state relations for Losing territory to the Empire and in saving the regime. It instead not only survival, but also prosperity. the consequent Sugauli Treaty of hampered Nepal’s independent 1816 began Nepal’s diplomatic position due to which it remains as Unified under the Gorkha king relation with the British crown. a bone of contention between the in 1768, traditionally the country With the onset of the authoritarian countries. enjoyed an influential position in Rana regime in the 1870s support the Himalayan region with a strong of the British became crucial for the It was under king Mahendra that the army and sole rights to trade with ruling elite. They followed a policy of country made true efforts to move Tibet. The geographical size was appeasement and managed to keep away from India’s clout to pursue an also significant compared to other Nepal’s independence intact even if independent foreign policy through kingdoms in the neighborhood, and it meant accepting colonial doctrine diplomatic diversification, bilaterally strong socio-cultural affiliation with that impeded Nepal’s independent as well as multilaterally. By the end Indian princely states added more position on significant foreign policy of the regime Nepal had diplomatic leverage. Still, the repercussion of the issues such as defense. relations with over 90 countries. country’s landlocked position between larger entities—the imperialistic Reaching out: The Ranas were As the international system organized British to the south and the sleeping cautious of the prospect of an after the War, Nepal was in the dragon in the north, primarily shaped independent India as Nepali forefront to take advantage of the the outlook of the ruling class when it democratic forces taking shape in diplomatic opportunities—from came to foreign affairs. Nepali rulers Indian territory was a direct threat non-aligned movement to active understood the impact of big power to the regime. They were successful participation in the UN, Nepali and the limited ways Nepal could in bypassing the British bureaucracy leaders clearly understood the influence their actions. Thus, came in India and establishing its first significance of promoting a rule-based the famous yam between the boulders mission in London by 1934. The order to assert its sovereign status and analogy which has guided the policy practice of sending Gurkha recruits source foreign aid for development. makers for generations. for British army, well established by In an attempt to contain Indian the Second World War, helped Nepal influence the King had his policy laid Efforts to centralize and formalize get noticed among other powers out: play China card to balance the issues of foreign policy had already resulting in diplomatic relations neighbors off, remain neutral in case began under the first monarch and with the US in 1947 and France in of conflict between the two and secure a separate diplomatic mission was 1948. Along with diversification of third party support. However, as the given the responsibility of handling diplomatic relations, the country also Panchayat regime came to an end with relations with Tibet. Still, caution was applied for UN membership which the democratic forces coming to helm maintained, and a protectionist policy was granted in 1955. However, after of power in 1990, Nepal’s foreign 50 DOCKING NEPAL’S ECONOMIC ANALYSIS

policy came within the purview of states with unprecedented growth in diplomacy and leveraging the Nepali many actors and interest. the movement of people and goods, diaspora. But it was. Done without any coupled with rise in non-state actors consultation with other stakeholders, As the world entered a new liberal such as INGOS and media among and the document immediately era with the fall of the Berlin wall, others, has democratized foreign received flak from leaders and experts. efforts were made to organize the policy making and implementation to foreign ministry and more specialized great extent. Nepal occupies a very different place concepts in field of diplomacy such as in the world today, and that requires economic diplomacy was introduced With the advancement in technology collaboration among various state and along with opening of diplomatic and ease of travel, the diplomatic non-state actors working in the field relations and missions. practices itself have changed to have a more effective and holistic drastically. The foreign ministry is no outlook in foreign policy making and However, state actors and institutions longer the sole guardian of diplomacy. its implementation. Democratization soon became hostage to political And almost all major bureaucratic of foreign policy must be realized instability. The civil war that began agencies are involved in diplomatic and other domestic stakeholders, within six years of democracy made practices. The resident missions also besides the foreign ministry have to matters worse. By the time the war have their work cut out. be given attention within and outside ended in 2006, and a constitution the government. Clarity in the role was promulgated in 2015 to Moreover, diplomacy has transcended and functions of foreign ministry declare Nepal a federal republic the beyond state-centric approaches and other state agencies in regard to country had over 25 governments and actors, and influence of public international relations is also crucial. in place.. Politicization of foreign opinion have become predominantly Further, with the implementation policy agendas, indo-centric foreign clear with digital revolution. The rise of federalism in the country, more policy and frequent changes in of China and other regional actors actors are coming to the front, which government eroded the country’s have also altered the fate of the Asian also requires considerations. Foreign diplomatic standing. Blatant flouting continent and beyond. policy issues can no longer be captive of diplomatic protocols and loose to political interest. It requires more diplomatic practices of Nepali leaders In this context, Nepal has lost crucial professional approach and long term worsened the scenario. Spectators years to hone the country’s foreign vision. While the state continues to argue that the failure of Nepali leaders policy and diplomacy. During this play a leading role and should have the to look beyond the yam syndrome period, Nepal’s negotiations have control over issues relating to national also hampered Nepal’s position. suffered at all fronts. While Nepal’s security, there is a need to study relations with the world has only Nepal’s foreign policy and diplomacy Changed context: Commitment intensified into diverse areas, the in the context of a globalized world to a rule-based system, and support designated bodies for foreign affairs and analyze its diplomatic practices for policy coordination among have been neither effective nor to map out the areas/actors of countries after 1990 has exhilarated prioritized. significance with changing times. the globalization process making More discourse in forms of research foreign policy issues a significant part Government recently revealed a is also crucial to strengthen Nepal’s of state building. Intensification of new integrated foreign policy which relations with the world. diplomatic relations among nation includes newer themes like public NEFPORT ISSUE 44 – MARCH 2021 51

POLITICAL UPHEAVALS AND TRANSITIONS IN ASIA AND THEIR ECONOMIC CONSEQUENCES DR. PRASHANTH PARAMESWARAN Director of Research at BowerGroupAsia and a Fellow at the Asia Program at the Woodrow Wilson International Center

Political transitions can have Sadyr Japarov win after Sooronbay of choice for countries as diverse as significant economic consequences Jeenbekov was forced from power Micronesia, Sri Lanka and Timor- both within countries and beyond in a crisis including deadly protests Leste94. them, and Asia is no exception. In following rigged polls. While Japarov’s particular, three types of transition victory was expected, of critical Another example of note is that of – violent, sudden and managed – importance will be how he manages a Mongolia, where 41-year-old Oyun- each show some notable examples country mired in health and economic Erdene Luvsannamsrai took over as of significant economic implications crisis amid a precipitous drop in Prime Minister in January – making that bear watching for the rest of the remittances from labor migrants and him one of the world’s youngest year and beyond, for these countries with a long list of economic challenges premiers – following his predecessor’s themselves as well as the wider region including crime and corruption91. The resignation in response to protests over and world. role of outside powers, particularly the country’s Covid-19 response95. China and Russia, will also loom large Though his rise has sparked excitement Violent political transitions offer the in the country’s economic outlook, over the growing influence of the most dramatic examples of economic as will the future of its reputation as youth in the country’s politics, the impacts, and the February 1 coup in one of the relatively freer and more change of leadership could also have Myanmar by the country’s military is competitive political systems in significant economic consequences for a case in point. To be sure, growth, Central Asia92. the country, whether one looks at key which had peaked at an average of deals such as the Mongolia-Rio Tinto seven percent till 2016, had already Abrupt, non-violent political renegotiation over the Oyu Tolgoi shown signs of flagging amid the lack transitions can also have important mine or the pursuit of digitalization of economic reform88. Nonetheless, economic impacts. A case in point under the banner of “Vision 2050,” the coup is already raising fears about is that of the sudden stepping down a long-term development plan which further exacerbating the country’s of Japanese Prime Minister Shinzo he is known to support96. economic woes as investor hopes sour Abe last year, which has resulted and countries impose restrictions89. in growing anxieties not just about Managed political transitions can Myanmar’s history and contemporary whether his successor Yoshihide have more limited economic impacts, developments such as the Rohingya Suga will last beyond upcoming but even they are not entirely crisis – which saw refugees flee out elections expected later in 2021, insulated from them either. In the to neighboring states in South and but also how Suganomics may differ case of China, Asia’s largest economy, Southeast Asia such as Bangladesh from Abenomics in areas such as though President Xi Jinping is set to and Malaysia – suggests that an deregulation or whether the Tokyo continue on as China’s political leader unstable, military-controlled country Olympics will go on as planned93. for the foreseeable future, the future can have ripple effects across borders Looking further out, the key question of the Chinese Communist Party that can in turn affect aspects of their is whether Japan will revert back to (CCP),more broadly and more subtle economies including illicit drugs and the revolving door of prime ministers transition dynamics, will also be in labor90. that was the pattern until Abe took the spotlight since this is the CCP’s power in 2008. This could undermine centenary97. Given that the CCP’s Another example of violent political its economic position in Asia as the legitimacy still rests quite heavily on transition to watch is Kyrgyzstan, region’s largest overseas donor and economics, key economic agenda items where a January 2021 election saw leading investor, and key partner such as China’s new five-year plan for 52 DOCKING NEPAL’S ECONOMIC ANALYSIS

the economy and the development of of the city-state’s governance as it traditional status as a hub in the Asia- its dual circulation concept will also moves away from the Lee family Pacific region. be key to watch, especially since they that is recognized even among its could have impacts on wider regional elite99. Even though the shape of any To be sure, some of the economic geopolitical events such as U.S.- handover to the fourth generation of impacts of these political transitions China competition with the onset of leadership (4G) is still unclear, the are not yet clear, in part because the new U.S. administration under first among equals, Deputy Prime they are still playing out. Similarly, Joe Biden98. Minister Heng Swee Keat, has raised the rest of 2021 and 2022 may offer concerns about the future prospects a series of shocks when it comes to Another key example of managed of the ruling People’s Action Party political transitions as well, whether political transition to watch is in (PAP), following 2020 polls where the it be in the case of countries still Singapore, where the transition away opposition made its largest inroads in settling their politics such as Nepal, or from current Prime Minister Lee the country’s history and is bringing ongoing popular protests against the Hsien Loong – the son of the city- some different economic ideas to the government in cases like Thailand or state’s founder Lee Kuan Yew – has table100. This could not only shape simply quite unknown countries such produced anxiety about the future Singapore’s economy, but also its as North Korea. NEFPORT ISSUE 44 – MARCH 2021 53

WOMEN'S ECONOMIC EMPOWERMENT LISA HANON Development Director, British Embassy, Kathmandu, Nepal

As a relative newcomer to Nepal, I We know from evidence that us that one third of households are am intrigued by its history. I believe opportunities for significant policy headed by women,98% of the workers a good way to understand the present reform and opportunities to catalyse employed in agriculture are women, and gauge the future is by looking economic growth are most fruitful and I know from the UK’s Rural at the past. Those who know me, during these economic and societal Access Programme (RAP), which also know I am passionate about the transitions. So, were the various builds roads in remote places, that place of women in every country I’ve changes also the platform for women’s some fantastic women are employed worked in, none more so than Nepal. economic empowerment? as road builders. RAP has provided 21 million working days over its long Commentators tell me that Nepal I know from my British history that history and women have taken a 40% has undergone significant economic the First World War (1914-1918) led share of those days - earning equally and political transitions in the past 30 to women’s economic empowerment with men. years. And that woman have always in Britain. With millions of men played a significant role during the away from home, women filled The legislative environment in Nepal process. While these things are never manufacturing and agricultural is also, in large part, equally conducive. linear, often, they tell me, it was hoped positions on the home front. Others The interim Constitution of 2007 that a political transition would lead provided support on the front lines officially enshrined provisions of to an economic one, one that would as nurses and as doctors. For the first gender equality, inclusion, and rights benefit everyone. time, women were employed in arms against discrimination and created a production, the civil service, and quota of 33% women representation Prior to the Covid-19 pandemic, while served in the forces itself. After the war, at the national and local level. Its poverty rates were falling dramatically, although women reluctantly returned successor continued that and expressed GDP growth did not follow a similar to their previous domestic roles to a commitment to end gender trajectory. While neighbours were make way for the returning men discrimination. So, the question is racing ahead, Nepal’s average annual who needed jobs,, their contribution why did these transitions not lead to growth during the conflict years of to wartime economy could not be a gender balance in the structure of 1996-2006 was 4%, since the end of ignored., By 1918 women over the the economy? Why are women civil conflict it has only grown by 0.5%. age of 30 were able to vote, and by servants still in the lower grades? And 1928 the age of suffrage fell to 21. I why has increased representation of I have also been told that during the reap the benefits today because of the women in elected position not yet led armed conflict, women were not only women of those times who struggled to political empowerment? Why has a victims, but they were also active to change the place of women forever. political and economic transition not participants. Breaking the stereotype Without them women like me would resulted in economic empowerment prevalent in the society, they also took never have risen to the higher ranks of for women? Why do I frequently sit up non-traditional roles by joining the civil service. on panels where women are absent? the Maoist army and acting as head Why am I told by the organisers that of households in absence of men. Living in Nepal, I can see some they have to ‘work with what they’ve Previously, Nepali women had also parallels. With the increased got’? established themselves as key actors migration of men for work, the of socio-political changes during the number of women headed households I am informed this is a structural Rana regime. They were actively has increased. The 2016 Nepal societal problem. Amongst other redefining the roles of women. Demographic Health Survey tells things it goes back to education. 54 DOCKING NEPAL’S ECONOMIC ANALYSIS

Women are less likely to have at least democracy. And yet, societal norms programmes are supporting the some secondary or higher education often limit the voices of women or economic and social transition which than men, some girls are excluded leaves them unheard altogether. Nepal is undertaking. We work in altogether. The role of women in the partnership with the government, household,, expectations for marriage But, there are grounds for Nepalis to civil society, business etc. to support and children, caste, ethnicity etc. all be optimistic. The legal framework Nepal’s moves towards federalism and play a role in limiting the opportunities is slowly enabling more women to economic growth. and aspirations. It’s a self-fulling participate in the political process. prophecy: . if a woman expects Some are even in leadership positions. The UK’s legal base for our global nothing, she is never disappointed. The government has introduced assistance requires us to ‘have regard Neither is her family. Neither is her gender policies and programmes in to the desirability of providing government. But as such, she will be government bodies, and women are development assistance that is likely trapped in a spiral of low expectation also taking steps toward leadership in to contribute to reducing poverty in of herself, forced on her by external the private sector. Women who were a way which is likely to contribute to cultural factors. In sheer economic previously trail blazers for women’s reducing inequality between persons terms, is this the best use of a valuable rights and who were successful in of different gender’. We cannot act resource? acquiring higher positions are now in without it. good company with others. Women Women, of course, face many are in the streets and on social media. History tells us that the UK reached challenges in the UK in their A collective voice is growing. This somewhat of a tipping point in aspiration for equality. But unlike enhanced leadership has the potential women’s rights and economic after the FirstWorld War in Britain, for a paradigm shift in development of empowerment after the First World Nepali women appear to have more Nepal. Women and men are creating War. Change was quick and decisive. hurdles to overcome than their British the need and urgency to alter the I wonder if Nepal is approaching a counterparts. perception of the public and male similar tipping point or whether it will political leaders, towards women be a gradual transition. Whichever, it It’s clear that the voice of women leaders. is for the people of Nepal to decide. is critical. According to some My view however is that progressing commentators, a citizen’s ability to The UK has a longstandingwomen’s empowerment is not only the express themselves is the single most relationship with Nepal and we are right thing to do, it is the smart thing defining element of a functional proud to call Nepal our friend. Our to do. NEFPORT ISSUE 44 – MARCH 2021 55

LONG TERM VIEW OF POLITICAL TRANSITIONS SUJEEV SHAKYA Chair, Nepal Economic Forum

In Nepal, we do not plan for the continue to drive the economy fueling key factors. First, the demographics: long-term. We are often stuck consumption, real estate prices and 70% of Nepal’s population is under between thinking about the afterlife construction. Social indicators have 35 years of age. Second, it is located or not being able to think beyond shown progress, be it education, between China and India both of the upcoming week. Therefore, our health, women empowerment or which are predicted to be two of the politics, culture and economy too physical infrastructure. world’s largest economies in 2030. lacks a long-term view. Third, Nepal has been the biggest Nepali economy has continued beneficiary of digital transformation, Nepal’s economic history can be to bounce back despite natural and access to technology will be divided into three phases starting disasters, blockades, disruptions by biggest comparative advantage in the in 1950. In the first ten years that political parties or more recently the next decades. followed, Nepal saw seven Prime coronavirus pandemic. The resilience Ministers. This period was followed of the Nepalis indicate that economy There are only few things that may by the party-less monarchy till the cares little abou politics. impact the economic growth and 1990, with two Kings and 14 changes make political transitions difficult. in Prime Ministers. In 1990, Nepal One of the major transformations First, the overflow of religious entered into a complicated multiparty for Nepal has been breaking away jingoism from India to Nepal. democracy. This period saw all types from the dependence on India. Till Politicians and rulers have long used of permutation and combination the 1990s, trade and migration were the Hindu ideals as a tool to promote of politics including a ten-year limited to India. But now, there are privileges, patriarchy, suppress women insurgency and 24 Prime Ministers in about four million Nepalis across empowerment, push division of labor 31 years. the world who sent back $9 billion and increase discrimination. Second, in 2020 alone. Similarly, just before the attitude of viewing foreigners as Each change of Prime Minister meant the pandemic hit, a record number of only tourists and resisting the idea of much reshuffle in bureaucracy. With young Nepalis went to study abroad them investing in Nepal or adopting changing ministers and head of with 60,000 Nepali students going the country as their own through constitutional bodies, institutions in to Australia alone, contributing $1.6 marriage or otherwise. Children of a Nepal never gained stability. billion to the Australian economy in Nepali woman married to a foreigner 2019. are still denied Nepali citizenship or Till date, uncertainty remains the inheritance rights. There is also deep only constant in Nepali politics. Looking Ahead: Looking ahead, sense of resistance when it comes to To understand Nepali politics, it it is important to take a long-term providing work permits, long term is important to understand how view. For instance, the recently leases on properties and citizenship the society functions, how culture released document by National based on naturalization to foreigners. influences and what role religion Planning Commission looks at Nepal plays. Despite the unstable politics, graduating to middle income country The Long Term Drivers: The key the economy has continued to move with per capita of 2,900 in 2030, and long-term drivers of the economy can forward. From 1990 to 2020, the to a high-income country in 2044 be grouped into five areas in which economy has grown ten folds and with a per capita of 12,100. Therefore, Nepal Economic Forum will continue major social-economic indicators the economy is slated to grow despite to engage. First, the acceptance of have shown progress. Remittances the challenges that the country faces. climate change as reality therefore that does not form part of GDP The growth is also because of three moving toward a circular economy 56 DOCKING NEPAL’S ECONOMIC ANALYSIS

where there is an acceptance that Third, Nepal needs to take advantage drivers have to be led by the private growth cannot always be linear and of the network of Global Nepalis: sector with strong internal governance natural resources are finite and not four million spread across the world and regulation by the government infinite. and estimated five to six million in following international standards and India. While Nepal is connected norms. There has to be departure It will also be important to understand with the world, it needs to accept from cartels and protectionism and Nepal’s fragile ecological ecosystem the concept of the world as a global openness towards international and push for smart renewable energy village and build its relationship with investments and knowledge transfers. solutions for growth rather than other countries accordingly. Travel traditional ways of generating energy for Nepalis should not be limited Nepal has meandered well through through large projects. jobs or migration. Just like Nepalis political transitions using mostly a need to be open to foreigners settling reactive approach, the track needs to Second, Nepal’s gains have been and investing in Nepal, proper change towards pushing a more pro- visible through ICT products which mechanisms should also be placed for active approach towards economic comprises 37% of the exports. This Nepalis to invest outside Nepal and growth that negates the impact of digital transformation shall be the open their own companies, branches political transitions. backbone of Nepal’s transformation. and businesses. Finally, the economic NEFPORT ISSUE 44 – MARCH 2021 57 ENDNOTESENDNOTES

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96. Bolor Lkhaajav and Julian Dierkes, “With New PM, a New Generation Taking Charge in Mongolia,” The Diplomat, January 27, 2021: https://thediplomat.com/2021/01/with-new-pm-a-new-generation- taking-charge-in-mongolia/.

97. Willy Wo-Lap Lam, “Xi Jinping Boosts the Party’s Control and His Own Authority,” China Brief, January 12, 2021: https://jamestown. org/program/xi-jinping-boosts-the-partys-control-and-his-own-authority/

98. Ana Swanson, “Biden on ‘Short Leash’ as Administration Rethinks China Relations,” New York Times February 17, 2021: https://www. nytimes.com/2021/02/17/business/economy/biden-china.html.

99. Chan Heng Chee, “Singapore in a Time of Flux: Optimism From the Jaws of Gloom,” IPS-Nathan Lecture III, July 15, 2020: https://www.youtube.com/watch?v=ikC-x0yMmik&ab_ channel=InstituteofPolicyStudies%28IPS%29%2CSingapore.

100. Channel News Asia, “Singapore Votes 2020: The Political Debate,” July 1, 2020: https://www.youtube.com/watch?v=8uOdz-Weivo. NEFPORT ISSUE 44 – MARCH 2021 61 NEFNEF PROFILE PROFILE

Nepal Economic Forum (NEF) is a premier private sector-led economic policy and research NEPAL organization that seeks to redefine the economic development discourse in Nepal. ECONOMIC FORUM Established in 2009 as a not-for-profit organization under the beed umbrella, NEF is a thought center that is working on strengthening the Nepali economy through various activities that promote the growth of an efficient and inclusive private sector.

NEF has been featured in the list of Top Think Tanks in Southeast Asia and the Pacific in the Global Go To Think Tank Index Reports since 2016.

Over the past decade, NEF has produced seminal work across many areas. Some of its widely quoted work are around Political Economic Analysis and Economic Impact Assessment after the 2015 Earthquake and 2015-16 Blockade. NEF’s reports on the Cartel Economy have led to rethinking of how government and society engages with the private sector. NEF pioneered policy discourse around business opportunities through Doing Business in Federated Nepal, and produced a map tracing opportunities throughout Nepal. NEF also successfully generated awareness and promoted public discourse on key issues of Nepali economy through Business Policy Research Centre, NEF’s core program.

NEF has a strong social media presence with higher number of followers and engagement across Facebook, Instagram, LinkedIn, and Twitter compared to similar institutions in Nepal.

NEF is led by Founder Chair Sujeev Shakya, who is regarded as one of Nepal’s leading thought leaders and go to person to understand the complex relations of Nepal’s business, economy, politics and society. The organization functions under the guidance of an advisory board comprising of eminent people and also supported by honorary Senior Distinguished Fellows and Senior Fellows. The NEF Fellowship Program is a sought after one year fellowship program that enables young people to pursue further studies in educational institutions of repute and careers in esteemed organizations

NEF BROADLY WORKS UNDER THE FOLLOWING AREAS:

Business Policy Research Center (BPRC) consolidates NEF’s activities into a hub BPRC that takes a holistic approach to the issues; generates dialogue between the public and private sectors on economic development concerns, and acts as a platform for information dissemination. To bridge the gap in credible research and leverage beed’s engagement with private sector, BPRC has been working to generate awareness and promote public discourse on key issues of Nepali economy. The products of BPRC are as follows: Nefport: Quarterly economic analysis publication Neftake: Periodic blog that covers wide range of issues Neftalk: Platform for policy discourse Weekly Economic Update: Weekly overview of major economic headlines in Nepal Did You Know: Factual overview of relevant economic activities in Nepal 62 DOCKING NEPAL’S ECONOMIC ANALYSIS

Himalayan Circular Economy Forum (HiCEF) is one of the functional outcomes of the Himalayan Consensus Summit that aims to mainstream alternative development paradigms. HiCEF intends to initiate and foster discourse on the concept of circular economy, explore existing circular economy practices and investment opportunities for knowledge dissemination and replication, identify policies related to the circular economy and sustainable businesses and identify ways for its effective implementation, create a repository of such information and disseminate the information events and to create an inventory of sustainable initiatives working with the potential of replication in the Himalayan region. For this, the focus area will be predominantly Nepal but also look at initiatives in Bhutan and Himalayan India.

Renewable Energy Centre (REC) aims to be the premier platform for mainstreaming renewable energy issues by engaging multiple stakeholders to articulate discourse that will shape national-level energy politics. Engage strategic stakeholders in Nepal, from the concerned sectors towards thinking and acting towards promoting the use of renewable energy, conduct discussions in the public space relating to renewable energy.

Centre for Private Sector Development (CPSD): The Centre for Private Sector Development (CPSD) will focus on private sector-led development by supporting the growth of small and medium enterprises. For this, CPSD will work in the areas of skills development, capacity development, financial management, providing business development services for private enterprise’s operation and growth. Similarly, it will also focus on reforms that are required at the policy level and administrative level of the government to facilitate the ease of doing business in Nepal.

Global Nepali Network (GNN): Through the Global Nepali Network (GNN), NEF plans to connect Global Nepalis across the world irrespective of their citizenship. This will be a platform to share ideas, thoughts and connect to professionals and entrepreneurs that do not enjoy the political organizations, elections, and speeches but love their connection to Nepal or Nepalis. GNN envisages work on providing a platform for knowledge exchange, to share employment and business opportunities, host network events physically and virtually and develop programs for creating knowledge repository, disseminate information on Nepal especially relating to art, culture, literature, history, and matters of common interest. Centre for Digital Transformation:

Center for Digital Transformation (CDT): The Center for Digital Transformation (CDT) will address cross-cutting themes related to digital adoption and revolution in emerging and frontier markets of Asia and Africa. The main purpose is to create a platform for dialogue among technologists, policymakers, academics, businesses, regulators, financiers, and more. Some of the cross-cutting themes that we will address include: digital innovation and transformation, governance and politics, resources and finance, law and society, and security and privacy.

Nepal and the World (NaW): Nepal and the World will operate to study Nepal’s foreign policy and diplomacy in the context of a globalized world and support public debates in the field of foreign affairs especially in relations to the economy. It focuses on analyzing Nepal’s foreign policy making and diplomatic practices to map out the areas/actors of significance to its international relations that will push economic growth and transformation. NEFPORT ISSUE 44 – MARCH 2021 63

Doing Business in Federated Nepal (DBFN): Nepal Economic Forum has been engaged in the discourse of federalism in Nepal since 2009. It has conducted multiple policy discourses, done assessments and produced publications on doing business in Nepal in the context of federalism. Hence, through the Doing Business in Federated Nepal (DBFN) vertical, NEF shall continue to engage itself in fostering a conducive business environment in the federated structure, supporting local businesses and empowering local bodies in governance. For this, NEF intends to open national chapters in each of the seven provinces of Nepal to promote localized efforts.

NEF operates in domain of Development Consulting (devCon) in conjunction with beed management. It works with a variety of bilateral, multilateral, national and international institutions in the areas of policy research, economic analysis, value chain analysis, enterprise development, sectorial studies and public private dialogue.

We are striving to ensure financial sustainability for NEF to complement the support it currently receives from beed management and the Open Society Foundations. If you are interested to support NEF, please do get in touch with [email protected] NEPAL ECONOMIC FORUM

P.O.Box 7025, Krishna Galli, Lalitpur - 3, Nepal Phone: +977 1 5548400 [email protected] www.nepaleconomicforum.org