Thursday, November 16, 2017

Economics: Execution of economic policy reform to leverage Economic Growth in Nepal

The advent of federalism in Nepal has planted a new seed of hope for political stability, good governance and sustainable economic  growth among Nepalis. In this scenario, following 3 sectors need urge to reform for proper execution of economic policy with the help of economic liberalization in order to leverage Nepal’s economic growth.

A. Reform in private sector:

Privatization is the major instrument to institutionalization of economic liberalization. The central government has to play an important role as regulator and facilitator by lessening restrictions and fostering privatization. Moreover, the following key points should concern and seek for way forward by all stakeholders for private sector reform.

  • Privatization Act 2050 was introduced to improve socio-economic conditions and the financial position of the government. But in fact, the act was more focused on improving the performance of the public enterprise sector rather than private sector.
  • Government plunged into open and liberalized economy for development of private sector. However, instead of better exploitation of these facilities, private sector interested in creating market monopolies with the help of cartels and syndicates such as sectors like transportation and education. So, the government should strictly enforce Acts such as the Competition Promotion and Market Protection Act, 2063 and Consumer Promotion Act, 1997 to protect the rights of consumers by controlling monopolies and restrictive trade practices.
  • Ideal privatization is the key factor to reform in private sector.

B. Reform in trade sector:

World Bank’s Doing Business 2017 report ranked Nepal at 107. The report highlights the huge prospects of growing entrepreneurship and ease of doing business in Nepal. In this perspective, following key points might be helpful to reform in trade sector.

  • Newly formed Federal States should promote domestic industries by prioritizing domestic and foreign investments.
  • Assess the effect of Goods and Service Tax (GST) imposed by Indian Government and plan to mitigate it’s adverse effect on Nepal’s trade.
  • Fully implement Automated System for Customs Data (ASYCUDA) at Nepal’s Customs Office to speed up clearance process of goods and prevent smuggling.
  • Proper implementation of Special Economic Zones Act for export promotion

C. Reform in financial sector:

The financial system is considered the brain of an economy. Financial liberalization helps improve the financial system by increasing the availability of funds, risk diversification and increasing investments. Here are key points regarding reform in financial sector.

  • Implement ICT for real-time information as well as shifting towards digital economy. IT systems such as e-governance, e-commerce, e-trade should develop rapidly to thrive in the global digital economy.
  • FDI inflows are increasing in recent days – from $55.8 million in FY2016 to $127.5 million in FY2017. Similarly, Millennium Challenge Compact (MCC) worth $500 million foreign grant was just signed between the USA and Nepal on September 14, 2017 and so on. Hence, maximum utilization of grants helps Nepal to reform financial sector.


Not only these, Nepal can get advantage from global initiatives such as Belt and Road Initiative (BRI), BBIN Motor Vehicle Agreement for infrastructure development, promote trade and tourism and other sector’s development. Moreover, the government should primarily focus on the execution of economic policy reforms to leverage economic growth and promote sustainable economic development.

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