Document Type

Report

Publication Date

7-20-2023

Abstract

Nepal now enjoys a unique opportunity to positively transform the country’s economy and society. The economic activities fueled by remittance, supported by foreign aid, and aided by domestic economic activities such as tourism, trade, and services, including start-ups, are helping increase individual incomes. However, the earnings from remittances, which measure to about 25% of Nepal’s GDP, are spent on consumer goods and not on investments that can generate employment and raise the standards of living. The foreign aid is often donor driven and also not always well managed and wisely spent on national priorities. Further, it is frequently marred by leakage due to corruption. The domestic revenue and tax collection system is also rife with fraud and rent seeking by the political leaders and bureaucrats. As a result, only a fraction of the potential revenues goes to the state coffers. Furthermore, because some development funds are diverted to projects that are not well thought through, such as Pokhara and Lumbini Airports, projects fulfilling the real public needs often do not get addressed. Though these projects are not economically viable, investments are made to satiate fewer individuals' and political interests, the government is unable to fully spend the budget laid out for development activities in a timely manner. This situation has not only seriously impeded the rate of economic growth, but is also seen as posing a grave threat to Nepal’s economic health potentially similar to what Sri Lanka experienced in 2022 when the country became bankrupt.

In the past two and half decades, Nepal has seen an exodus of its young population to foreign lands. A large number of students and young professionals are moving to the countries in Oceania, Europe, Far East Asia, and North America while rural and generally less educated youth group is finding contract employment in Malaysia, Korea, and the Gulf region countries. By some estimates, in 2023, the permanent Nepali diaspora living in the more developed parts of the world is around one million, while the temporary foreign migrant workers number around three to three and half million at any time (Adhikari 2022).

Policy makers and scholars see this as a loss of once in a generation opportunity when Nepal could have mobilized its young generation to build the economy. If this trend of youth outmigration continues, development planners fear that the Nepali population will become older before the country becomes rich (Cosic, Dahal, Kitzmuller 2017). Its young and able-bodied citizens will be helping build other societies, while Nepal will have to support its ageing population and resulting decline in productivity while old-age pension amount will need to be drastically increased.

Nepal faces additional development challenges in many fronts that include lack of domestic manufacturing establishments, a weak export trade situation, an inefficient development planning and implementation, and rampant corruption and mismanagement in all sectors.

On the opportunity side, Nepal now has a more educated work force, a new entrepreneur class, and democratic government that can be easily influenced by popular demands. More importantly, even in the midst of the exodus of young people from the countryside, Nepal still enjoys the demographic dividend where the young people could be employed in productive sectors. Further, the participation of women in the workforce is increasing. The education sector has expanded drastically, and technology has penetrated the society pretty deep. The spectacular developments in Nepal’s two neighboring countries – China and India – can easily provide an impetus, inspiration, market, investment, and support for Nepal’s economic transformation.

As the Nepali diaspora gains ground in their adopted countries and achieves more experience, proficiency in technology and knowledge, and financial prowess, it can support and help Nepal in its development journey. Both the diaspora community, and political, professional, academic, and business leaders in Nepal recognize this potential. The diaspora group can help in technology transfer, forging business and trade linkages, educational and knowledge exchange, financial investment, and managerial expertise. The Nepali government can create a welcoming environment for diaspora investments and professional involvement.

Publisher

Association of Nepalis in the Americas

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