Since returning from this year’s World Economic Forum meeting in Davos, I have been asked repeatedly for my biggest takeaways. Among the most widely discussed issues this year was artificial intelligence – especially generative AI (‘GenAI’). With the recent adoption of large language models (ChatGPT) there is much hope – and hype – about what AI could do for productivity and economic growth in the future.
But our world is dominated far more by human stupidity than by artificial intelligence. The proliferation of <a href="https://www.project-syndicate.org/onpoint/megathreats-remain-despite-moderation-of-pandemic-and-other-shocks-by-nouriel-roubini-2023-11">megathreats</a> – each an element in the broader ‘polycrisis’ – confirms that our politics are too dysfunctional, and our policies too misguided, to address even the most serious and obvious risks to our future.
These include climate change, failed states which will make waves of climate refugees even larger, and recurrent virulent pandemics that could be even more economically damaging than Covid-19.&nbsp;
Making matters worse, dangerous geopolitical rivalries are evolving into new cold wars such as between the United States and China, and into potentially explosive hot wars, like those in Ukraine and the West Asia.&nbsp;
Around the world, rising income and wealth inequality, partly driven by hyper-globalisation and labor-saving technologies, have triggered a backlash against liberal democracy, creating opportunities for populist, autocratic, and violent political movements.
Unsustainable levels of private and public debt threaten to precipitate debt and financial crises, and we may yet see a return of inflation and stagflationary negative aggregate supply shocks. The broader trend globally is toward protectionism, de-globalization, de-coupling, and de-dollarisation.
Moreover, the same brave new AI technologies that could contribute to growth and human welfare also have great destructive potential. They are already being used to push disinformation, deepfakes, and election manipulation into hyperdrive, as well as raising fears about permanent technological unemployment and even starker inequality. The rise of autonomous weapons and AI-augmented cyber-warfare is equally ominous.
Blinded by the dazzle of AI, Davos attendees did not focus on most of these megathreats. This came as no surprise. The WEF zeitgeist is, in my experience, a counter-indicator of where the world is really heading. Policymakers and business leaders are there to flog their books and spew platitudes. They represent the conventional wisdom, which is often based on a rear-window view of global and macroeconomic developments.
There is a very good chance that AI will indeed change the world in the coming decades. But the WEF’s focus on GenAI already seems misplaced, considering that the AI technologies and industries of the future will go far beyond these models. Consider, for example, the ongoing revolution in robotics and automation, which will soon lead to the development of robots with human-like features that can learn and multitask the way we do.
Or consider what AI will do for biotech, medicine, and ultimately human health and lifespans. No less intriguing are the developments in quantum computing, which will eventually merge with AI to produce advanced cryptography and cybersecurity applications.
The same long-term perspective also should be applied to climate debates. It is becoming increasingly likely that the problem will not be resolved with renewable energy – which is growing too slowly to make significant difference – or expensive technologies like carbon capture and sequestration and green hydrogen. Instead, we may see a fusion energy revolution, provided that a commercial reactor can be built in the next 15 years.&nbsp;
This abundant source of cheap, clean energy, combined with inexpensive desalination and agro-tech, would allow us to feed the ten billion people who will be living on the planet by the end of this century.
Similarly, the revolution in financial services will not be centered arounddecentralisedblockchains or cryptocurrencies. Rather, it will feature the kind of AI-enabled centralisedfintech that is already improving payment systems, lending and credit allocation, insurance underwriting, and asset management.&nbsp;
Materials science will lead to a revolution in new components, 3D-printing manufacturing, nanotechnologies, and synthetic biology. Space exploration and exploitation will help us save the planet and find ways to create extra-planetary modes of living.
These and many other technologies could change the world for the better, but only if we can manage their negative side effects, and only if they are used to resolve all the megathreats we face. One hopes that artificial intelligence someday will overcome human stupidity. But it will never get the chance if we destroy ourselves first.
©Project Syndicate
Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is author of <a href="https://www.littlebrown.com/titles/nouriel-roubini/megathreats/9780316284059/">Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them</a> (Little, Brown and Company, &nbsp;2022). <a href="https://nourielroubini.com/">NourielRoubini.com</a>

original

674x448

610x380

500x500

400x266

400x240

400x203

301x200

1250x600

1084x550

Artificial Intelligence vs Human Stupidity

For Nepalis, the year 2023 was marked by one scandal after another at home, while Nepalis found themselves in the middle of <a href="https://nepalitimes.com/news/nepalis-in-the-russian-army-want-to-quit">active conflict zones</a> across the world both unintentionally and of their own volition.&nbsp;
The year began with Pushpa Kamal Dahal being Prime Minister for the third time with a promise of better governance. Even the opposition UML gave him a vote of confidence. The new <a href="https://nepalitimes.com/banner/for-whom-the-bell-tolls">RSP party’s Rabi Lamichhane</a> was in and out of the Cabinet, and finally decided to stay in the opposition.
Dahal's preoccupation during 2023 was to hold his fragile coalition together, despite having the Nepali Congress (NC) as an ideologically opposite partner. His government was rocked by a <a href="https://nepalitimes.com/news/the-year-of-scandals">slew of corruption scandals </a>that led to the arrests of several senior officials across party lines, but the big fish eventually got away.&nbsp;
Nearly 800 Nepalis were promised entry into the US as fake Bhutanese refugees by government officials and traffickers. Property surrounding the Prime Minister’s residence was parcelled off to private buyers by the real estate mafia. Gold smuggling continues unabated at Kathmandu airport, and <a href="https://nepalitimes.com/here-now/crime-and-or-punishment-in-nepal">none of the kingpins ever get caught</a>.&nbsp;
Malaysian conglomerate <a href="https://nepalitimes.com/news/axiata-may-find-breaking-up-hard-to-do">Axiata exited Nepal</a> after selling its majority stake in Ncell to a Singapore-based Nepali-origin businessman, which experts say would not have been possible without the involvement of top bureaucrats, regulators and politicians.
Despite the finance minister assuring us that the economy is “on the mend”, it <a href="https://nepalitimes.com/editorial/nepals-golden-age">stagnated some more</a> in 2023. Revenue collection was lower than projected, exports are at a record low, and 90,000 workers and students left Nepal in December alone. The government has been slow to promote electric transport even as petroleum import continues to soar.&nbsp;
In March, Dahal’s coalition government introduced the transitional justice amendment bill in the House. But <a href="https://nepalitimes.com/news/nepal-tj-bill-protects-perpetrators-shortchanges-survivors">conflict survivors, victims and human rights groups said it ignored their concerns</a>, the Supreme Court’s directive and flouted international law on war crimes.&nbsp;
The earthquake in western Nepal on 3 November left 153 dead and two months later survivors are living in tents in <a href="https://nepalitimes.com/news/below-zero-at-ground-zero">sub-zero temperatures</a>. The disaster also exposed Nepal’s demographic shift: most fatalities were women from the poorest families since the men have migrated out.&nbsp;
Migration, as Nepali Times has highlighted in <a href="https://nepalitimes.com/editorial/50-diaspora-diaries-in-nepali-times">50 instalments of its Diaspora Diaries</a>, is now the central reality of Nepal. A majority of families have members who have left to work, study, or settle abroad, and Nepal’s economy is propped up by the money they send home. The search for jobs has also led Nepalis to some of the world’s most dangerous regions.&nbsp;
There are said to be at least 700 Nepalis in the Russian Army, families have not heard from many of them, and <a href="https://nepalitimes.com/news/from-frying-pan-into-fire-for-nepalis-in-russian-army">7 have been killed on the Ukraine front</a>. Nepali human traffickers have been supplying mercenaries to Russia by flying them to Moscow on tourist visas. Four Nepalis have been captured by the Ukrainian military. &nbsp;
The Hamas attack on 7 October killed 10 Nepalis who had gone to Israel under the government’s Learn and Earn program, while <a href="https://nepalitimes.com/news/hamas-releases-thais-but-where-is-bipin">Nepali student Bipin Joshi</a>, who was taken hostage, is believed to remain in captivity. Israel’s ongoing brutal bombardment of Gaza has led to the deaths of nearly 21,000 Palestinians, with the US helping Israel to block a UN ceasefire. &nbsp;
<a href="https://nepalitimes.com/opinion/borderlines/burmese-of-nepali-descent-flee-to-thailand">Burmese of Nepali descent</a> have taken refuge in Thailand because of suppression by the military junta which staged a coup in Burma in 2021. Nepalis trafficked by a Chinese organised crime syndicate to work in call centres in Burma also need to be rescued. &nbsp;
UN Secretary-General António Guterres visited Nepal ahead of COP28 in Dubai to draw attention to the climate crisis and the Himalaya, but the summit <a href="https://nepalitimes.com/editorial/unabated-greenwashing-at-cop28">failed to commit </a>to an immediate phase-out of fossil fuels. Nepal’s pledges at COP28 do not correspond to its lack of progress in switching to renewable energy, saving remaining forests and controlling air pollution.&nbsp;

Shristi Karki

More of the same in 2024?

The so-called experts referred to in the article <a href="https://nepalitimes.com/news/business-as-unusual">Business As Unusual</a> in the 22 September issue of Nepali Times by Ramesh Kumar, do not seem to have used their ‘expertise’ in making their observations. Their comments are thus simplistic and mutually contradictory.&nbsp;
If they were using a set of commonly accepted indicators and related verifiable data, their opinion could not be mutually so disparate. I know of no economist in Nepal worth the name who have defined the characteristics specific to Nepal economy and have come up with a theoretically defensible set of prescriptions for investment and economic development in the country.&nbsp;
Many of them masquerade as economists based on having acquired a degree, maybe, a PhD sometime in the past. Others after spending some time in the finance ministry as part of the musical chair of inter-ministry transfers in the bureaucracy.
Like most ‘observers’ in Nepal, these economists too dare to make profound-sounding observations based on what immediately meets their eyes.&nbsp;
For instance, this year they seem to be impressed by the size of the crowd visiting the NADA auto show in Kathmandu to claim that despite the nationwide clamour to the contrary, the economy is not really in a slump.&nbsp;
They are the mob economists who gauge the state of the economy by the size of the shoppers at New Road or Asan Tole.
Nepal's tragedy is that all governments headed by corrupt politicians have spent all their time and energy in defrauding the state and gullible citizens. Examples: massive scams like the <a href="https://nepalitimes.com/editorial/losing-our-moral-compass">Fake Bhutanese Refugee</a> (KPO and SBD governments), <a href="https://nepalitimes.com/here-now/crime-and-or-punishment-in-nepal">Lalita Niwas</a> (MKN and BRB governments) and recent <a href="https://nepalitimes.com/editorial/nepal-gets-gold-medal-for-corruption">gold smuggling</a> (PKD government).
Meanwhile the so-called ‘Planning Commission’ and other think tanks recycle what is already in writing. There is no accountability for their total lack of delivery from their writings.&nbsp;
Even at the cost of modesty, I must state that during my tenure in the government as a karmachari, I have had the distinction of innovating three major policy reforms: the institution of user groups, the <a href="https://nepalitimes.com/from-the-nepali-press/taking-away-forests-from-communities">forest user groups</a> and the mothers' groups and their Female Community Health Volunteers.
Together, these policies changed the face of our nation. &nbsp;As the saying goes, if you don't know where you are going, any road will take you there. That seems to be the fate of our planners, policy makers, self-styled economists and of course, corrupt politicians.
As things stand, as per recent agricultural survey, 62% of households remain in agriculture. A decade earlier in 2011, it was 71% whereas the sector's contribution to national GDP was only 34.3%.&nbsp;
The fact that only 12% farm households have had access to agriculture credit, &nbsp;a prime mover for development, and only 7% to agricultural grants, remains the most lethal of neglect to a sector on which so many people still depend.&nbsp;
This clearly suggests massive deprivation of a vast majority of the country's population through unemployment and underemployment, lack of sufficient land and their vastly unequal distribution.&nbsp;
While 4 million Nepalis plus a vast but unknown number <a href="https://nepalitimes.com/here-now/love-thy-neighbours">working in India</a> have migrated for income and employment, a 2018 survey showed that 900,000 people were actively looking for employment, and nearly 70% of them were in the age bracket between 15-34 years.&nbsp;
While Nepal's industrial sector remains miniscule, the irony is that sunflower, palm and soyabean oils remain the major export items. <a href="https://nepalitimes.com/news/nepal-doesnt-produce-its-2-biggest-export-items">Since none of those oilseeds are produced in Nepal</a>, it only shows that our investment regime remains totally divorced from even the rudimentary rule of economic development — the principle of comparative advantage. &nbsp;
The size of the crowd visiting the NADA auto show, is more the manifestation of the artificial nature of our industrial sector and remains the handiwork of <a href="https://nepalitimes.com/editorial/inconvenient-truths">corrupt and incompetent politicians, bureaucrats and an unscrupulous business community</a> working in cahoots to profit from loopholes.&nbsp;
Indian economist Jayati Ghosh who teaches at MIT, wrote about the impact of inequality in her own country in 2022, ‘The pandemic brought home to us a hard truth. Unequal access to incomes and opportunities does more than create unjust, unhealthy and unhappy societies—it kills people.’&nbsp;
Then, Nobel laureate economists, Abhijit Banerjee and Esthe Duflo wrote in 2020: ‘Although no one knows when the growth locomotive will start in a given country, if and when it does, the poor will be more likely to hop on the train if they are in decent health, can read and write, and can think beyond their immediate circumstances.’
Which kleptocrat politician, bureaucrat, unprincipled economist, or hardcore politician disguised as civil society leader has thought of our problems in these terms?
Bihari Krishna Shrestha is an anthropologist and a former government secretary.
<a href="mailto:biharishrestha@gmail.com" target="_blank">biharishrestha@gmail.com</a>

If you don’t know where you are going, any road will take you there

A Himal Khabar article last week set off a heated debate. Titled ‘Was Nepal better before?’, it showed that despite all the problems of the past four decades, the country had made remarkable socio-economic progress. But in Nepal’s polarised polity, monarchists argued that the country's present ills can be traced to the failure of multi-party democracy since 1990. Mainstream politicians, on the other hand, seemed relieved that things are not as bad as they look.&nbsp; Rabindra Mishra of the RPP tweeted: ‘Improvement at the speed of a turtle is only development for a society that is used to the velocity of a turtle. Development should be viewed holistically. Not just on the basis of some indicators.' Read also: <a href="https://www.nepalitimes.com/news/till-debt-do-us-part">Till debt do us part</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230630050624_2f88f8c36f0078a413e217577098ee7a4f3f528002b62857275f11aca3c5533a.png" data-media-id="editor_1" data-image-id="20230630050624_2f88f8c36f0078a413e217577098ee7a4f3f528002b62857275f11aca3c5533a" data-rendition-name="original" width="3000" height="1000" loading="lazy" alt="Now and Then NT"> <figcaption>A bus stop in Bhaktapur in June 2023 (left) and the same stop with a trolley bus in 1976 (right). Photos: GOPEN RAI (left), DANIEL W EDWARDS (right)</figcaption> </figure>  Mishra's party is for restoring the monarchy to ensure national unity, stability and development. Former king Gyanendra himself recently said that the country had made great progress during the 30 year Panchayat System, and Nepal could restore its past glory.&nbsp; But there were many others who argued that the partyless Panchayat was feudal and held the country back. Former Maoist ideologue Baburam Bhattarai posted: ‘Was Nepal better back then? Of course not, and it is better now. But it can be better still, and must be made better. Let us be future-oriented, not past-oriented.’&nbsp; A critical look at the past 50 years of development in Nepal tells a mixed story. In 1991, one in every two Nepalis was living below the poverty line. It is down to 15.1%.&nbsp; The Multidimensional Poverty Index (MDPI) based on health, education and quality of life also shows dramatic improvements. MDPI decreased significantly from 59% in 2006 to 17.4% in 2019.&nbsp; Read also: <a href="https://www.nepalitimes.com/here-now/nepal-s-tax-system-widens-rich-poor-gap">Nepal’s tax system widens rich-poor gap</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230630050628_47d9357bd364d0ca8c41c5261c9ef1d07a75782f25d75f3c975dcfd4b2edf185.png" data-media-id="editor_3" data-image-id="20230630050628_47d9357bd364d0ca8c41c5261c9ef1d07a75782f25d75f3c975dcfd4b2edf185" data-rendition-name="original" width="905" height="868" loading="lazy" alt="Now and then poverty NT"> </figure>  The Panchayat System was scrapped in 1990 after the People’s Movement, and the country replaced its absolute monarchy with a constitutional one. The Maoist conflict lasted from 1996-2006, and Nepal’s 240-year-old monarchy was abolished by the elected Constituent Assembly in 2008.&nbsp; Plotting Nepal’s development indicators on a timeline shows dramatic progress, but correlation does not mean causation. Average life-expectancy could have gone up even if Nepal had retained a constitutional monarchy. And Kathmandu’s rampant urbanisation and air pollution would probably be as bad if we still had a king. Per capita GDP was stagnant during the Panchayat, but started climbing in 1990, and by the time Nepal became a republic in 2008 it went up steeply. &nbsp;Since this was mainly driven by remittances, it would most likely have continued on that trajectory whatever system Nepal adopted after 1990. Per capita income is not an indicator of socio-economic equity, but it is a general measure of the average wealth of citizens. Nepal’s per capita income was $50 in 1960, when the world average was $459. Neighbouring India was at $83 and China was slightly higher at $89. In 1990, Nepal’s per capita climbed to $185, and it has now reached $1,399. What is noteworthy here is that the rate of income growth was very slow in the years before democracy during the Panchayat with an increase of just $94 (at constant 2015 rates) between 1960-90. “The argument that Nepal was better in the past is untrue,” says former Rastra Bank economist Keshav Acharya. “Nepal is behind many other countries for sure, but we have also seen progress in infrastructure, health, education, human development, communication, perhaps just not in public administration.” But, he adds: “The administration did not exploit people back in the Panchayat days, corruption was not as rampant. The opposite is true now with bureaucracy and political leaders apathetic to the people’s needs, widespread laxity and wrongdoing.”&nbsp; Indeed, even though family incomes in Nepal were lower in the second half of the past century, their needs were much less and most people lived in rural areas and were self-sufficient in food. However, Nepal’s progress in infrastructure was slow during the Panchayat. Although Nepal was the second country in Asia to install a hydroelectric plant in 1911 during the Rana regime, by the end of the Panchayat in 1990, Nepal was only generating 227MW.&nbsp; Read also: <a href="https://www.nepalitimes.com/news/nepal-india-power-play">Nepal-India power play</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230630050632_f101e04317e960dd5872e82a954a8668dc92d9a94345e1652adf8c860948d21b.png" data-media-id="editor_5" data-image-id="20230630050632_f101e04317e960dd5872e82a954a8668dc92d9a94345e1652adf8c860948d21b" data-rendition-name="original" width="1052" height="723" loading="lazy" alt="Now and then electricity NT"> </figure>  It actually took the Electricity Act of 1992 and the advent of domestic and foreign investment in hydropower for generation to take off. Installed capacity has now increased to 2,700MW, and another 3,000MW worth of projects are under construction. Access to drinking water and sanitation has similarly improved. Only 6% of Nepali had access to drinking water in 1960 which increased to 36% in the next three decades. But it has now reached 95%, even though only a quarter of them have access to quality drinking water.&nbsp; The defining factors in measuring progress of any country is average life-expectancy, maternal and child health. In some ways, Nepal achieved dramatic gains in reducing maternal, child and infant mortality rates while significantly improving its immunisation, even though the progress has stalled in the last decade or so.&nbsp; The infant mortality rate is down to 21 per 1,000 births today from nearly 200 in 1960. Maternal mortality is also down from 239 per 100,000 deliveries, down from 850 as recently as 1990. Read also: <a href="https://www.nepalitimes.com/here-now/the-geopolitics-of-nepal-s-water-and-electricity">The geopolitics of Nepal’s water and electricity</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230630050632_4caae25156a2b7a77aad3752f1390e69ea3966a70f243c96d396adf97807e87c.png" data-media-id="editor_7" data-image-id="20230630050632_4caae25156a2b7a77aad3752f1390e69ea3966a70f243c96d396adf97807e87c" data-rendition-name="original" width="939" height="713" loading="lazy" alt="Now and then drinking water NT"> </figure>  This represents one of the steepest declines in maternal-child mortality of most countries in the world, and is a direct result of improvement in female literacy, better road access for institutional delivery and the work of Female Community Health Workers.&nbsp; In 1971, only 14 out of 100 people in Nepal were literate. In 1990 this was up to 40% and now it is 76%. In 1990, the primary school enrolment rate was 76%, now it is at 97%. But the quality of instruction and the disparity between public and private schools is more prominent than ever before. Back in 1990, there was only one hospital bed for every 9,146 Nepalis. Today, the ratio has improved to 1,821 – even though access and affordability of quality care are still issues. In fact, out-of-pocket medical bills are pushing even middle class Nepalis into poverty. Nepal’s Human Development Index (HDI) last year was 0.602, up from 0.399 in 1990. HDI takes into account several developmental factors including life expectancy, literacy, per capita and quality of life. Increasing the representation of women, Dalits and other communities in socio-political leadership granted by the 2015 Constitution is another sign of socio-economic development in Nepal. Women make up 33% of the MPs and most of the deputy mayors across the country are female, even though many were proportionally elected or represent the quota system. Much needs to be done to achieve inclusion that reflects the true diversity of the country. One could argue that much of this progress would have happened regardless of which governing system was in place. Some consider the current progress to be a natural result of changes in the global economy and politics, technological advancement and contemporary changes. Economic and political analyst Dipak Gyawali thinks that the reason for the improvement in areas such as education, health and poverty is not the change in the system, but the remittances sent by Nepalis abroad.&nbsp; Read also: <a href="https://www.nepalitimes.com/here-now/state-sponsored-economic-crisis-ikcxxmnp">State-sponsored economic crisis</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230630050632_f12b0216cb12dd4d99e7abb007ae61cc1b88862c67644a49ebb017eb5e34c415.png" data-media-id="editor_9" data-image-id="20230630050632_f12b0216cb12dd4d99e7abb007ae61cc1b88862c67644a49ebb017eb5e34c415" data-rendition-name="original" width="940" height="865" loading="lazy" alt="Now and then Life expectancy NT"> </figure>  “There has been improvement in various sectors due to remittances, which have reached a quarter of the GDP, but political parties have created a false narrative that the improvement is due to the multiparty system,” says Gyawali, who served as Water Resource Minister in 2005. Even so, the contribution of an open society and an open market brought about by democracy cannot be ignored. Foreign employment itself became accessible following the restoration of democracy. During the Panchayat period, passports were difficult for ordinary citizens to get. &nbsp; “During the Panchayat period, those who studied abroad used to return to the country. Now the youth have no faith and hope for the country, it seems that only the youth who cannot go abroad live in Nepal,” says Gyawali. Economist Acharya blames it on self-centeredness of Nepal’s political leadership, saying that the feckless lack of accountability have led the public to believe that there has been no improvement whatsoever in the country, thus giving rise to populist politicians. He adds: “It is not that nothing is happening, but it appears to the public as if the future is hopeless because leaders are not accountable to the people." Statistics confirm that Nepal has made progress, but the pace of economic development has been much slower than in the neighbourhood. Nepal’s per capita income in 1960 was $50 while in then-East Pakistan it was US$85. Today, Bangladesh’s per capita income has reached $2,458. India is at $2,257. And China has outperformed all others from a mere $89 in 1960 to $12,556 today. Read also: <a href="https://www.nepalitimes.com/editorial/institutionalised-inequality">Institutionalised inequality</a>, Editorial

Now and then

In the past few weeks as Nepal faces trying times with falling growth and high inflation, Kathmandu has witnessed numerous seminars, conferences and workshops with the discourse revolving around the economy and investments.&nbsp;
The consensus that Nepal needs foreign direct investments (FDI) to grow was once again repeated, and the familiar litany of reasons about why it has not been able to. Policy advocates and regulators have understood that the lack of urgency is compounded by procedural inconsistencies and added to the already deficient investment environment in the country.
It is a welcome change from what used to be flippantly accepting things as given that there is now a sense of urgency, with procedural inconsistencies and lack of harmonisation between various Acts and regulations openly discussed.&nbsp;
Furthermore, the desire from government stakeholders to learn and attempt to be part of the solution is also beginning to happen. &nbsp;Whatever policy changes have been introduced in the past have been piecemeal and address the few rather than the entire industry, thus leaving dual regulatory approaches aimed at similar players. &nbsp;
To attract FDI in a competitive global market means Nepal has to demonstrate that it is serious about bringing in investments with a more consultative and collaborative approach with investors. &nbsp;A departure from procedural to a result-oriented focus is needed.&nbsp;
Read also: <a href="https://www.nepalitimes.com/editorial/invest-in-investment">Invest in investment</a>
To put issues in perspective, Nepal needs US$20 billion in investments to meet SDG (the UN’s Sustainable Development Goals) targets by 2030. If net-zero decarbonisation targets are to be met by 2045 another US$7 billion will be required annually.&nbsp;
Looking at our investment history and poor government capital expenditure, the gap is long and wide. &nbsp;Last week’s budget showed that in the nine months of this fiscal year, Nepal was able to book a lamentable US$9 million in FDI (equity) investments, a decrease of 98% from the corresponding period last year.&nbsp;
Nepal is in fact the lowest market in South Asia for FDI with 0.3% of the regional average. &nbsp;What is it that we can do to fill the gap?&nbsp;
First: we need to move away from the notion that Nepal only needs large investments. This has proven to be a mistake, and time series data have proven that smaller investments, in aggregate, make a larger impact to economies.&nbsp;
We talk about an ‘enabling environment’ but without the right tools. &nbsp;We place restrictions on interest on debt ceiling (Libor +5.5), without risk premium adjustments, we do not have an active secondary market for bond trading, nor do we have a yield curve, an integral part of the bond market. &nbsp;
Read also: <a href="http://archive.nepalitimes.com/regular-columns/Comment/making-nepal-fdi-friendly,853">Making Nepal FDI friendly</a>, Shyamal K Shrestha
In order to attract green financing, Nepal needs to develop its bond market. Billions of dollars of green climate funds are waiting to be tapped. Sovereign risk rating has been mooted, but to be rated in an adverse economic environment could further deteriorate investment potential due to a lesser than expected rating. &nbsp;
Hedging is another instrument that needs further research on. A commercial bank recently showcased the first risk hedging mechanism for an investment of $8 million. &nbsp;This can be the beginning to expand on its modality. &nbsp;&nbsp;
Subordinated debt instruments have been introduced, but on a special nod basis, this now needs to be institutionalised as it is the most applicable form of investments after equity in a market that has volatile forex reserves.&nbsp;
Viability Gap Funding has yet to be implemented and has been in active discussions for a few years now. &nbsp;This needs to come into effect to encourage solar installations in the country.
Moving forward, to attract FDI, Nepal needs to tap into the funds that are available for the growth of small and medium enterprises (SMEs) and climate change. &nbsp;Alternative investments such as Private Equity Venture Capital (PEVC) have been around in a structured manner in Nepal for nearly a decade now. These funds have blended finance components and have attracted climate funding as well. &nbsp;
Read also: <a href="https://www.nepalitimes.com/from-the-nepali-press/why-there-is-no-foreign-investment-in-nepal">Why there is no foreign investment in Nepal</a>
PEVC is a new asset class and can address the issues of penetrating into SME financing by incorporating environment, social and governance issues into their investment process. &nbsp;SMEs are the backbone of any economy, PEVC comes with the ability not only to scale up the enterprise with risk capital, but with the ability to bring technical know — how to enhance not only the enterprise, but also the entrepreneur. &nbsp;A differentiator from all other forms of financing available till date in Nepal.&nbsp;
Blended finance is a way of de-risking investments especially in frontier markets. <a href="https://bo2.com.np/" target="_blank">Business Oxygen (BO2)</a> is an example of blended finance with subordinated debt investments of IFC (World Bank Group) taking the lead and Climate Investment Funds along with FCDO as co-investors. &nbsp;
On a larger scale, the 216MW Upper Trisuli1 is another example of blended finance with IFC, a Korean consortium and local investments. &nbsp;So far, we see that development finance Institutions have been taking the lead in Nepal as their risk appetite is greater than commercial investors and they are eager to help develop the financial markets. &nbsp;
In order to be sustainable, we need to step on this and attract commercial capital from all over the world. To do this there has to be political will to make that pivot.&nbsp;
The recent budget has tried to address some issues in a cosmetic manner, and once again it lacks the overall approach to the problem. &nbsp;Nepal has outdone many countries in its macro-economic indicators, with sound forex reserves and a stellar history of debt payments to its creditors. This story needs to be propagated along with the drive for change to attract potential investors.&nbsp;
Read also: <a href="https://www.nepalitimes.com/opinion/guest-column/so-you-d-like-to-do-business-in-nepal">So you’d like to do business in Nepal?</a>, Ritu Pradhan Malla

Siddhant Raj Pandey

Alternative investments to attract FDI

First the good news: Nepal Rastra Bank (NRB) says Nepal’s foreign exchange reserves have increased from $9.54 billion in June 2022 to $10.5 billion in February 2023.&nbsp;
This is enough to pay for 9 months and 12 days of imports.&nbsp;
This is a result of a spike in remittances and a ban on the import of luxury items after<a href="https://www.nepalitimes.com/news/nepal-s-remittances-forex-reserves-drop"> reserves fell</a> last year.
The NRB’s Current Macroeconomic and Financial Situation Report of Nepal last week noted that imports went down by almost 20% during the first seven months of the current fiscal year. Remittance inflow is still <a href="https://www.nepalitimes.com/latest/more-remittance-more-than-remittance">Nepal’s economic lifeline </a>and it increased by 16.4% in the past seven months compared to the same period last year as foreign employment permits increased by 57%.
Nepal’s balance of payments has also reached a surplus of Rs132 billion, compared to a loss of about Rs274 billion last year, which could show that the economy is on the mend.&nbsp;
But this is the only silver lining as dark clouds gather on the global economy as bank collapses in US spread to Europe, and within Nepal there is a looming threat of mass defaults and depositors cheated by micro-finance lenders and cooperatives.
Read also:<a href="https://www.nepalitimes.com/editorial/new-year-challenge-to-new-government/"> New year challenge to new government</a>, Editorial
The bad news is that government revenue has plummeted, going down by almost 15% till February as compared to the previous fiscal year. Paradoxically, political uncertainty has meant that the government has been unable to spend much of its allocated development budget. &nbsp;
Revenue has gone down to Rs622 billion and the government incurred a shortfall of Rs150 billion in expenditure this fiscal year. This is in sharp contrast to a consistent increase in government revenue over the past decades.&nbsp;
High interest rates have discouraged investment, <a href="https://www.nepalitimes.com/here-now/kathmandu-s-unreal-real-estate-prices">real estate</a> transactions are half of last year, and the stock market is in a slump. Decreased imports have had a knock-on effect on economic activity.
“The demand for goods and services has decreased because of high interest rates, bringing businesses to a standstill,” says Shekhar Golchha of the Federation of Nepal Chambers of Commerce and Industry (FNCCI). Borrowings have declined, and borrowers unable to pay back loans has gone up. Bank loans to the private sector have only increased by 3.2% this year as compared to a 12.3% increase last fiscal year.
Golchha says a government stimulus package is required to save businesses from recession.&nbsp;
“We need policies to reduce interest rates and facilitate credit,” says Golchha.
Read also:<a href="https://www.nepalitimes.com/editorial/nepals-political-economy/"> Nepal’s political economy</a>, Editorial
Preoccupied with <a href="https://www.nepalitimes.com/news/post-presidential-politics">coalition politics</a>, the government is distracted. And the central bank says fears of a recession are exaggerated.&nbsp;
“Our economy was in a precarious position due to the depletion of foreign reserves last year,” explains Gunakar Bhatta of NRB. “But economic activity is increasing and the economy is on the mend.”
Bhatta argues that monetary expansion and credit extension will only lead to an increase in imports, which will send Nepal’s economy back to square one.&nbsp;
Economist Sujeev Shakya also dispels fears of a crisis. He says the private sector is blaming the government for their own business mismanagement.&nbsp;
”Some businesses are facing problems, but to say that the economy has gone into recession is to spread panic,” Shakya notes.
Former Finance Secretary Rameshore Khanal agrees, saying &nbsp;businessmen may be in trouble because of bad investment decisions in real estate and shares, and subsequently failing to sell those assets.
He cautions: “The NRB should not risk being generous with lending just to get businessmen out of trouble. Doing so will increase our imports as well as inflation.” &nbsp;
Read also: <a href="https://www.nepalitimes.com/banner/now-the-economy-stupid">Now the economy, stupid</a>, Editorial

First, the good news

In the wake of the Covid-19 pandemic, there is renewed attention around the world on 'unpaid care’ work and ‘care economy’. Still, a care economy is not considered a ‘productive’ sector and care work is seen as a ‘non-economic’ activity mainly performed by women. Unpaid care work is therefore excluded from mainstream development, undermining the value of unpaid care services provided within the households. The pandemic underscored the critical importance of care work – paid and unpaid. Care work did not and cannot stop even when everything came to a standstill, the value of skills involved in care work such as empathy, creativity, patience, and resilience are valuable, but usually taken for granted. The World Economic Forum in fact highlights these skills as some of the most important competencies for future business success in an increasingly automated and digitised world. Uncertainty in the labour market and the global economic recession has brought unprecedented uncertainty for women in countries like Nepal, with its gender gap in education, digital skills, and strong sociocultural biases. The pandemic heightened care needs for elderly persons, and health care services required for preventive and curative services, and it made women more vulnerable to violence at home.  <figure><img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230306030352_fc6367bc8ab27a546419035be1211740478eb54a3e9cd27c6cc23b3e62de872c.jpg" data-media-id="editor_0" data-image-id="20230306030352_fc6367bc8ab27a546419035be1211740478eb54a3e9cd27c6cc23b3e62de872c" data-rendition-name="original" width="1280" height="720" loading="lazy" alt="Care economy figure 1"></figure>  The household sphere consists of subsistence productive activities in which goods and services are produced mainly for household consumption, and reproductive activities for the next generation. Most of these activities are invariably performed by women and are unpaid. Essentially, the ‘formal market economy’ cannot function without the foundation work provided by the ‘care economy’ with its social, emotional and physical investment within households. Outside market activities in Nepal consist primarily of migration as a source of income for households. The modern industrial and commercial sector uses reproducible capital and services for profit. Migration provides a safety valve or an outlet for alternate sources of income that people embark upon at times of hardship, or for betterment depending on the pull and push factors. We can estimate the size of the care sector in Nepal’s economy by calculating how much time people allocate for unpaid work within the household. Time use data shows that women participate to a high degree in the subsistence and household care sector spending on average 35.6 hours and 52.1 hours per week respectively. Their contribution in subsistence work is 50.4% and household care is 72% compared to men. Women, on an average spend at least 7.5 hours per day on unpaid care work at home which is 2.5 times higher than men. In addition, Nepali women are increasingly entering the labour market for wages/incomes. Women’s participation has jumped to 45.5 hours and 38.5 hrs. per week in formal and informal sectors respectively, contributing 47.3% and 42.2% share of the work respectively — almost at par with men.  <figure><img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230306030352_b333a26d2ecb990a074203ee64df2c0bb6d31070ef2f51e0c35369b69928f304.jpg" data-media-id="editor_1" data-image-id="20230306030352_b333a26d2ecb990a074203ee64df2c0bb6d31070ef2f51e0c35369b69928f304" data-rendition-name="original" width="1280" height="720" loading="lazy" alt="Care economy table"></figure>  All activities undertaken in the market sphere within the formal and informal sectors, are considered ‘productive' modern industrial sectors that would lead to economic growth with profit and setting in competition in the market and contribute to the country’s GNP. The formal sector constitutes 17% of the total economy that represents market transactions providing a very narrow view of the visible economy, which is the formal market sector. In the informal economy goods and services are marketed, but are not formally registered and go undocumented and unaccounted by official statistics. It makes up 24% of Nepal’s economy and can include professions as diverse as drivers, rickshaw pullers, street vendors, petty businesses, micro and small enterprises, home-based workers. Beyond the informal is the household sector, constituting family farms providing subsistence, and care services providers. Family farm subsistence sector makes up 27 %, and the care sector makes up 32% of Nepal’s economy. Reproductive work is typically excluded from economic analysis considered not important for planning, resource allocation or growth. There is a tendency to view it as a ‘natural’ aspect of women’s roles and as not ‘work’ because it is unpaid. It is important to count the proportion of the population concentration in each of the sectors to see who is counted and excluded in the economy. Labour force data shows that only 16% of Nepal’s population is engaged in the market sphere (6% in formal and 10% in informal), and 84% of Nepalis engage themselves in the family farm and household care spheres. Among these population groups only a small number of women interact in the market sector undertaking formal or informal activities – they constitute less than half of their male counterparts (33% versus 67%). Women are concentrated at the bottom of the economy in the informal and unpaid care sector, but nevertheless provide basic production of goods and services essential for upkeep of families and the economy.  <figure><img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230306030352_087ab2e8035c6aa5e05899699572d8f839a5d4a2013240369f72dc03e291d625.jpg" data-media-id="editor_2" data-image-id="20230306030352_087ab2e8035c6aa5e05899699572d8f839a5d4a2013240369f72dc03e291d625" data-rendition-name="original" width="1280" height="720" loading="lazy" alt="Care economy Pie chart "></figure>  Using wage rates and number of hours worked by women and men are used to estimate formal and informal sectors by gender disaggregation shows that production of goods and services and unpaid care activities of women amount to Rs1.4 trillion and Rs1.3 billion respectively — making up 61% and 80% of women’s contribution respectively to those sectors (see table). The total value of unpaid care and domestic work is estimated to be between 6 % and 17 % of GDP, contributing more to Nepal’s economy than manufacturing. Analysis of three generations of national labour force surveys show potential volume of the care sector in the Nepalese economy which is quite alarming that it has the capacity to support 84% of the population in sustaining their livelihoods. The share of unpaid care work could equal 17% of Nepal’s GDP, which in 2017/8 amounts to Rs515 billion. This is nearly equal to the agricultural sector (21%) and above the industry (13%) in the gross product ranking. There is an opportunity to remove the care economy from a mere familial, social sector and transform it into a formal productive industry with these proposed measures: <ul><li>Formalise the care economy to become a paid sector where the economy can create jobs from currently unpaid activities. Most women in Nepal cannot access the labour market as they are expected to spend their time as homemakers taking care of the children and elderly. Formalisation of the care economy will mean reparation of the labour done by women, which will help in the movement to eliminate gender bias, sharing of care responsibilities and closing gender gap.</li><li>Formalisation of the care economy will require the state to assume the cost of taking care and nursing the most vulnerable people - those who cannot pay the market rates.</li><li>Treat households as family farm enterprises by bringing them under the state planning process and allocation of resources enabling them to fill emerging demand for green economy jobs and green growth.</li><li>Address structural factors built into the macroeconomic framework that systematically excludes women, marginalised groups of population and sectors that constitute the majority and larger part of the society from the development process.</li></ul> Bina Pradhan is a feminist economist with Federation of Business and Professional Women, Nepal. This article is based on larger research on Gender and Macroeconomics in Nepal, 2010/11 as a New Century Scholar.

Nepal's care economy

<div class="embed-block"><a href="http://archive.nepalitimes.com/issue/133">							<img width="762" height="261" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20230228150236/63fe11c39c7e80680e0da4f5jpeg.jpg" alt=""></a>
											Issue #133 21-27 February 2003</div>
The obsession of our leaders with Singapore is unmatched. Every prime minister we have had in the 30 years (some of them serial prime ministers) has promised to turn Nepal into a Singapore one too many times. Why not just build a Nepal that is just and fair for everyone?
Many readers are going through a withdrawal syndrome after the Ass formally stepped down, including the author his-self. This week we revisit one of the earlier <a href="http://archive.nepalitimes.com/news.php?id=4308#.Y_guAy8w1KM">‘Under My Hat’ columns</a> which takes a dig at our Singaporean aspirations.&nbsp;
Excerpts from <a href="https://himalaya.socanth.cam.ac.uk/collections/journals/nepalitimes/pdf/Nepali_Times_133.pdf">issue #133 21-27 February 2003</a> 20 years ago this week:
If, one day, we want to become filthy rich like the Singaporeans, it is pretty clear that we must institute stiff fines for all major and minor misdemeanours and also turn ourselves into a penal colony.
But let’s be realistic: do our army, navy and air force have the capacity to instill fines on every non-flushing Nepali? Sadly, the answer is an unequivocal “no”. So, unlike Singapore, which penalises offenders with fines, we must use positive enforcement by rewarding those who do things right. In Nepal, instead of taking money away from those who litter, we must give money to those who don’t.
Cash prize of Rs 2,000 for the lone pedestrian who actually used the overhead walkway at Bhotahity in the last fiscal year. To be presented at a public felicitation ceremony chaired by the Mayor of Kathmandu or the MP of Kathmandu, whoever is elected first.
The Honest Cop Award in Cash or Kind for the pre-embarkation security check personnel at Tribhuvan Intercontinental Ballistic Airport who doesn’t ask you to open your wallet during the mandatory body search and contribute generously to the Free Lunch Fund for Kathmandu’s Finest.
The columnist who adheres to the highest standards of personal hygiene by not grooming his nostrils in full view of the rest of his staff during the course of writing the above column. This award carries with it a permanent residence certificate for Singapore. Terima Kasi.
From archive material of Nepali Times of the past 20 years, site search: <a href="http://www.nepalitimes.com/" target="_blank">www.nepalitimes.com</a>

Singha Darbar, not Singapore

<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20230208140212/63e39fed9c7e80680e0d7013jpeg.jpg" alt="" width="960" height="640"/>Bishnu Poudel has inherited the Finance Ministry at a time when the country’s finances are in a shambles because of ill-advised and inept policies of his predecessor.The Nepal government is living beyond its means. Expenses are not in line with revenue. As of 11 January, the total expenditure of the Nepal government in the current fiscal year stands at Rs559 billion against revenue of only Rs398.7 billion. This year’s budget projected a 21% increase in revenue from last year. However, data as of November 2022 shows that revenue collection has actually decreased by 20%.Revenue therefore has not kept pace with increases in government salaries, allowances, and bonuses. If this trend continues, the newly elected 7-party opposition-less coalition government will be in serious trouble.Nepal’s imports decreased by 20.17% in the last five months compared to the same time period last year due to the Nepal Rastra Bank’s ban on luxury items to sustain dwindling foreign exchange reserves.Read also:<a href="https://www.nepalitimes.com/editorial/nepals-political-economy/"> Nepal’s political economy</a>, EditorialWith year-on-year inflation reaching 8.08%, ordinary citizens’ demand for goods and services has fallen sharply. Meanwhile, increased interest on loans to more than 15% as a response to rising inflation has discouraged investment.Nepal’s primary sources of revenue are remittances, tourism, and export. Tourism is still not back on track post-Covid due to the Russian invasion of Ukraine, and the country’s exports in the last five months decreased by 34.61% as compared to the same time during the last fiscal year. This country is running just on remittance money that Nepalis abroad send home — either through official banking channels or hundi.But Nepal cannot depend on remittance forever, especially as we need workers at home to stimulate the agriculture sector, manufacturing, construction and tourism, which in turn will create more domestic jobs.Moreover, in his third term at the finance ministry, doubts as to Bishnu Poudel’s budget discipline are not exactly unfounded. Despite the country’s inability to spend, Poudel during his first term as Finance Minister in 2015 introduced a budget that was 28% larger than the previous fiscal year and passed it through ordinance. And during his second tenure in 2020, he revealed a budget that was 12% bigger than the previous one.Read also: <a href="https://www.nepalitimes.com/banner/nepals-opposition-less-parliament/">Nepal's opposition-less Parliament</a>, Shristi KarkiAlthough the minister may have inherited a country facing financial ruin from his forerunner, his own record is not particularly stellar. He is also known for recklessly increasing spending by increasing salaries and social security allowances during his terms in office.But the finance ministry and the minister think they are beyond reproach and criticism.It might seem like a given, but the finance ministry needs to take the initiative to reduce the wasteful government expenditure. Minister Poudel must work towards bridging the communication gap formed between his ministry and Nepal Rastra Bank during Janardan Sharma’s tenure. Unlike his predecessor, Poudel cannot interfere with the central bank’s autonomy on monetary policies.Too many parties in this coalition government means that there are too many hands on the budgetary honeypot. This will not make the minister’s job easy— but he will now have to navigate the will of seven political parties and their affiliated special interest groups and not be swayed by unreasonable demands from all sides. In fact, the Minister needs to be prepared to go against the coalition in order to prevent any misuse of the budget.Read also: <a href="https://www.nepalitimes.com/banner/prospects-of-nepals-tourism-in-2023/">Peak tourism in 2023</a>, Ramesh KumarAs finance minister, Poudel also bears the responsibility of raising the morale of business institutions and people to encourage investment and stimulate the economy.All of this is not to say that there have not been positives. Nepal’s foreign reserves increased by 2.5% from July 2022 to November 2022, following the embargo on the import of luxury items — even as there had been fears that Nepal would become ‘the next Sri Lanka’.Likewise, Nepal Rastra Bank’s recent amendment of the Working Capital Loans Guideline to increase investment might ease the strain on the economy.But embargoes and directives can only take the economy so far. Now, Poudel needs to work not just towards undoing and repairing the mismanagement of the ministry, but actively work towards policy reforms in order to get Nepal’s economy back on track.The minister must thus focus on good governance, refuse to buy into the demands of special interest groups, and facilitate the protection and appropriate use of state resources.Read also:<a href="https://www.nepalitimes.com/editorial/new-year-challenge-to-new-government/"> New year challenge to new government</a>, EditorialRamesh Kumar

Now the economy, stupid

<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2023020814028/63e39f689c7e80680e0d6fedjpeg.jpg" alt="" width="3000" height="1688"/>In 1950, French mountaineers Maurice Herzog and Louis Lachenal climbed Annapurna I, the first ever eight-thousander peak to be climbed.The French team walked down to the Indian border, took a train to Raxaul, re-entered Nepal and trekked up to Kathmandu to be felicitated by Prime Minister Mohan Shamsher Rana.After being closed to foreigners for centuries, Nepal opened up to the world for the first time. Three years later in 1953, Tenzing Norgay Sherpa and Edmund Hillary catapulted Nepal and the Himalaya into the global limelight.But more than 70 years later, Nepal’s tourism sector has yet to take full advantage of the economic opportunities that the industry can provide for domestic job creation, production of local products and foreign exchange income.That Nepal’s tourism has not lived up to its potential to become the backbone of the country’s economy while it grows exponentially in the rest of the world — including in other mountain countries — proves that there are a lot of missed opportunities.Summing up summitsVisitors flock to Nepal for culture, wildlife and pilgrimage, but our unique selling points are the world’s highest mountains. Some 16% of tourists who visit Nepal come for trekking and climbing, and yet mountaineering opportunities have been woefully under-advertised.In fact, when Mt Everest does get into the international media, it is either for the ‘traffic jams’ on the summit or as the mountain of garbage. Lately, it is for how global climate breakdown is melting its glaciers. Apart from eight out of the 14 eight-thousanders in the world which are in Nepal, there are 326 mountains above 5,500m that are open for climbing in the country.Records show that in 1964, only 9,526 tourists entered Nepal, rising to 500,000 two decades later. But it took another 34 years for it to double and exceed 1 million in 2018.In comparison, 40 million tourists visited the relatively more isolated Tibetan region of China in 2018. Even Bhutan, which is four times smaller than Nepal in area, and has only 700,000 population, has priced itself on the higher side and got 315,000 tourists. Cambodia welcomes more than 6 million tourists annually, promoting its main attraction: the Angkor Wat temple complex.“2022 did not go as expected,” says Deepak Raj Joshi, former CEO of Nepal Tourism Board. “But 2023 can be much better because Nepal is a nature-based destination, has isolation-based activities – exactly what most people are looking for post-Covid.”Read also:<a href="https://www.nepalitimes.com/banner/visit-nepal-again/"> Visit Nepal Again</a>, Ashish Dakal<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2023020814028/63e39f6c9c7e80680e0d6feejpeg.jpg" alt="" width="786" height="621">Nepal launched its Visit Nepal 2020 campaign just as Covid-19 struck. Nepal Airlines jets still have its logo on their fuselage, and it is a reminder of a failed drive. Tourism is beginning to pick up again after a two-year slump, but the prospects for 2023 are not so sure.Even if the numbers pick up again, Nepal will not benefit as much as it should since it is selling itself too cheap. The tourist to Nepal spends an average of only $48 a day. Bhutan with its ‘high cost, low impact’ model, requires its tourists to spend $200-$250 per day in fees.Despite the unique ‘product’ that Nepal has in its mountains, wildlife and heritage, the country is just not benefiting as it should from the tourism industry which now contributes less than 2% to the national economy.In 2019, before the Covid-19 pandemic, income from the tourism sector was Rs60.8 billion, which made up only 4.6% of the country's total foreign exchange earnings.Tourism’s contribution to Nepal’s hard currency income reached its peak way back in 1981, when it made up 36.8%, up from 30.2% in 1965.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2023020814028/63e39f6f9c7e80680e0d6fefjpeg.jpg" alt="" width="796" height="772">At the time, Nepalis seeking to go abroad for work or studies benefited greatly from being able to exchange dollars for rupees before they left. Ironically, by the 1990s as more and more Nepalis pursued foreign employment their remittance replaced tourism as the major contributor to Nepal’s economy.Now, money that Nepalis abroad send home makes up two-thirds of the country's total foreign exchange income, while tourism, exports, foreign investment and development assistance, combined, contribute only one-third. Taking the annual average from 2010-2020, the tourism sector on its own made up only 5.2% of Nepal’s foreign exchange reserves.This is not to say that tourism has not contributed to the economies of localities within Nepal. The Khumbu region, for example has an annual per capita income more than five times higher than the national average. Trekking has transformed the economies of Langtang, Manang and Mustang, where locals previously depended almost entirely on agriculture or pastoralism.Indeed, the trekking and mountaineering sectors employ more than 18,000 guides, 50,000 porters and other service providers. In 2018, more than 8,000 mountaineers paid over Rs680 million in climbing fees and created jobs for more than 1,700 Nepali high altitude guides, who are now also hired by expeditions on mountains abroad.Before Covid, tourism was estimated to provide direct jobs for about 1 million Nepalis and indirectly benefit many more. But industry experts say that the potential for economic benefits should have been much higher.Read also: <a href="https://www.nepalitimes.com/banner/peak-climbing-season-in-nepal/">Peak climbing season in Nepal</a>, Nepali Times<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2023020814028/63e39f729c7e80680e0d6ff0jpeg.jpg" alt="" width="886" height="727">Climbing numbersTourism in Nepal has been impacted by major historical events in recent times: the decade-long insurgency from 1996-2006 and subsequent political instability hit arrivals hard. Mountaineers had just returned to Mt Everest after a deadly avalanche in 2014 at Base Camp killed 16, when the earthquake struck one year later.It was only in 2018 that Nepal was finally able to exceed its target of bringing 1 million tourists, and planners aimed higher to double it with the 2020 campaign.Nepal spent $2 million dollars in the run-up to the Visit Nepal 2020 campaign. Much of that money was wasted, most Nepalis who lost their jobs migrated overseas for work, many hospitality sector businesses closed down, and hotel projects were abandoned.Nepal did reap benefits from free promotion by films about mountaineering, including Nims Purja’s 14 Peaks, on streaming services like Netflix, when people were locked down worldwide during Covid.In 2021, as Nepal confronted a deadly second wave of the virus, foreign visitors dropped to 150,962. The biggest drop was in Chinese arrivals, who were starting to top the list of tourists.But in 2022, pent-up demand and post-Covid rebound has meant that the numbers were beginning to climb again — when Russia invaded Ukraine in February.The war has hit the incomes of source countries in Europe and Asia hard, and Nepal’s own economy has gone into a slump. At a time when tourism income could supplant depleted foreign exchange reserves and falling exports, the industry was again adversely affected.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2023020814028/63e39f759c7e80680e0d6ff1jpeg.jpg" alt="" width="2250" height="1266">But there was an uptick of arrivals in 2022. Numbers for January-November 2022 reached nearly 550,000, filling up hotels in Kathmandu and Pokhara with most running at near-full occupancy during Dasain. Still, experts argue that Nepal has not been able to build enough of a portfolio in the world market as a tourist destination. Besides, the Kathmandu gateway is getting bad publicity from bloggers and influencers because of its chaos and air pollution.“We have struggled to build a brand as a tourist country globally because of the lack of necessary tourism infrastructure inside the country,” says tourism entrepreneur Basanta Mishra. “This means our adventure tourism destinations are overshadowed by other global tourist attractions.”Nepal has been diversifying its adventure tourism brand from just trekking and mountaineering to white water rafting, bungee jumping, paragliding, ziplines, canyoning and other sports. But sustaining adventure tourism will be a tall order in the absence of proper infrastructure or promotion in the global market.“Nepal has never looked into its full potential as a tourism destination beyond the mountains,” says Suraj Vaidya who led the Visit Nepal 2020 campaign. “Even with mountain tourism, we have failed to look beyond EBC and ABC, when the far-western mountains have so much to offer.""We have to also look beyond Kathmandu, Patan and Bhaktapur. We need to look at Nepal as more than a two-season destination,” adds Vaidya. "But at the same time, we need to be careful about how we choose to develop destinations with historic significance so that we preserve and maintain the heritage that is so inherently ours.”The good news is that Nepal is seeing improvements in tourism infrastructure over the years, especially in the hospitality sector. In recent years, more than a dozen ‘star’ hotels as well as multinational hotel chains have opened up in Nepal, with more under construction. And although new international airports have opened in Pokhara and Bhairahawa, poor planning has meant that there is almost no prospect of international flights from there. Meanwhile, it can take up to 9 hours to drive from Kathmandu to Pokhara because of congestion and poor roads.But above all, Nepal’s tourism sector has not been a priority for planners even though they have never tired of giving speeches about its potential for decades.“Being the only European airline flying to Kathmandu, we hope to surpass 2022 figures,” says Serkan Basar, General Manager of Turkish Airlines Kathmandu. “Tourism Ministry and private sector should be in full cooperation for the betterment of the country as a tourist destination.”Joshi agrees: “Tourism cannot develop in isolation. There needs to be multi-level coordination between tourism institutions, concerned ministries, as well as diplomatic missions across the world to effectively maximise our tourism potential.”Should Nepal promote high-end tourism rather than just chase numbers of arrivals? There has been no discussion on carrying capacity for various trekking areas and mountaineering peaks.Given its topography, location and culture, Nepal should be able to sell itself. Still, promotion has been sloppy, ad hoc and inadequate — especially to China and India which are already replacing arrivals from Europe and the Americas.Says tourism analyst Rajiv Dahal: “Nepal’s policymakers do not yet understand that reviving the tourism sector is in the country’s best interest, and that tourism will not gain momentum unless its potential is fully explored.”Read also: <a href="https://www.nepalitimes.com/latest/nepals-airlines-fly-high-despite-turbulence/">Nepal’s airlines fly high despite turbulence</a>, Nepali TimesWith additional reporting by Shristi Karki