Presenting a paper entitled ‘Toward a New Framework for Nepal’s Trade and Industrial diversification’ at the International Conference on Key Trends in China-Nepal-India Relations and New Development Strategy for Nepal in Kathmandu on Friday, former finance secretary Rameshwor Khanal said that the two neighbors – India and China – will, sooner or later, ask for transit rights. “Nepal should start homework right now to make sure that transit agreements would be in its favor,” he added.
As the need of the hour is to diversify trade for a self-reliant economy, Khanal also proposed promoting energy-intensive industries, developing cross-border energy market and economic corridors along north-south transit routes, and promoting high value niche products and specialized services for trade diversification.
“Nepal has failed to diversify trade and transit even though each periodic plan – after the second periodic plan – has been emphasizing on trade diversification, export promotion, foreign investment promotion,” Khanal said, adding that the country is still harping on trade diversification after six decades of the planned development practice.
Nepal started planned development practice from 1956 when over 95 percent of its trade was with India. Trade with Tibetan Autonomous Region of China was confined to border region and most of it was bartering. Nepal had little to export to outside world then.
With foreign assistance, particularly from the then Soviet Union and China, critical manufacturing factories that aimed at import substitution were established in the decade following 1956. But following the calibrated reforms of 1985-86, policy reforms spanning all sectors of the economy were implemented between 1990 and 1992, he added. “The reforms led to trade diversification, growth of manufacturing sector, export growth, and some of the positive changes could also be seen lasting until 1998.”
However, overall development policy did not support the Trade and Industrial Policies started during the economic reforms of post-1990.
Lack of continuity of reforms, weak institutions, and above all no infrastructure support held back the growth, Khanal said.
Commenting on his paper, CEO of Investment Board Nepal Radhesh Pant said that finance is not the problem for infrastructure development in Nepal. “Finance is the least of the problems,” he said, giving examples of how foreign investors have been eager on putting money on Nepal’s infrastructure development ranging from hydropower projects to cement factories.
Nepal needs huge investment in infrastructure development to meet the gap that can fuel economic growth, according to former member of the National Planning Commission (NPC) Swarnim Wagle. Hailing Chinese approach to development, Wagle said that quick delivery of aid without strings attached is also key to infrastructure development in Nepal.
In his paper on ‘Asian Infrastructure Investment Bank (AIIB) and Infrastructure Construction in South Asian Countries’, Prof Dai Yonghong, Director — Center for Myanmar Studies in Sichuan University and Deputy Director — Center for Nepal Studies in Sichuan University, highlighted benefits of Nepal as a transit economy. “It will help strengthening sub-regional cooperation between Sichuan-Tibet and SAARC, adjusting the area of cooperation, establishing Sino-Nepal FTA, and build Nepal overland trade route,” he said, adding that it will also strengthen infrastructure development in border areas, apart from expansion of trade preferences and encourage investment, and expanding tourism cooperation, innovation and tourism business one-stop service mode.
