Nepal-PROBLEMS AND PROSPECTS, NEPAL

Nepal was a resource poor country. Although it had made some progress since the 1950s, it still was well behind most countries in the world as of 1991. Among the issues it needed to address were changes in economic policy, international debt, low labor productivity, income distribution, and population growth.

In the economic policy area, the performance of public enterprises needed improvement. Most of the country's large-scale firms were in the public sector, and many of these enterprises either were protected or subsidized, which inhibited their efficiency. Most public enterprises also lacked a sound financial footing. More than fifty public enterprises dominated major sectors of the economy. These enterprises included energy, basic utilities, oil, telecommunications, water supply, cement, jute, tobacco, and sugar. Some of these enterprises, for example, the Agricultural Inputs Corporation and the Nepal Food Corporation, incurred losses year after year.

Foreign indebtedness was also problematic. Compared with many less-developed countries, Nepal's foreign debts were not very high. However, these debts were increasing. At the end of the 1980s, the value of merchandise imports was more than three times that of merchandise exports, a situation that could create future problems in the balance of payments. Many analysts believed that domestic borrowing for development expenditures would better serve development.

Labor productivity needed to increase to improve the well-being of the people. Nepal suffered, however, from technology deficits, as well as from shortfalls in its literacy rate, basic science education, and technical training. Although there had been some progress in raising the literacy rate, properly trained technicians remained in short supply.

Income distribution data on a large scale were not available. Nonetheless, some sample studies had been made. In 1990 Dr. B.P. Shreshtha found that 75 percent of the families accounted for less than 35 percent of income. A 1983 study by Blaikie et al. noted that more than 50 percent of the family landholdings in the Hill Region amounted to less than half a hectare. Only in the western Tarai Region were landholdings generally much bigger. In a country where 90 percent of the population was largely dependent on agriculture, few families had landholdings exceeding four hectares, largely because of the shortage of land.

The need for greater agricultural and labor productivity, as well as employment opportunities, to offset the demands of a growing populace was paramount. Of primary importance, however, were increased efforts at controlling population growth. With an annual growth rate of 2.6 percent, per capita resources were reduced--another obstacle to growth.

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For general background material on the state of the economy prior to 1970, Yadav Prasad Pant's Problems in Fiscal and Monetary Policy, Rishikesh Shaha's Nepali Politics, and Badri Prasad Shreshtha's The Economy of Nepal provide useful information. Pierce M. Blaikie et al.'s Nepal in Crisis details the status of the economy in the 1970s, although it focuses on the western and central parts of the country. Mahesh Chandra Regmi's books on Nepal's economic history are valuable for their perspective and insight into continuing problems. For more recent assessments of the economy, Badri Prasad Shreshtha's Nepalese Economy in Retrospect and Prospect, Babu Ram Shrestha's Managing External Assistance in Nepal, and the Far Eastern Economic Review's annual Asia Yearbook are helpful. Shrestha's book also details the extent of foreign assistance in Nepal and provides some data on expenditures in some of the development plans. Economic Survey, 1987-88 and Economic Survey, 1989-90, published by Nepal's Ministry of Finance, and Statistical Pocketbook, 1988 and Statistical Pocketbook, 1990, published by Nepal's Central Bureau of Statistics, provide the most current statistical data.

Yadav Prasad Pant and Badri Prasad Shreshtha, professional economists from Nepal, have held several posts in the government and have also written extensively about Nepal's economy. Although the aforementioned texts by Shreshtha and Pant's Problems in Fiscal and Monetary Policy are difficult to obtain in the United States, they provide useful information. (For further information and complete citations, see Bibliography.)

Data as of September 1991