Monday, August 11, 2008

Time to focus on tourism and hydro sectors

Finally, the Nepali businessmen have realized (after decades of inefficient investment in the garment and apparel sector) that Nepal should focus on what it inherently is best at exploiting comparative advantage. The President of Nepal Chamber of Commerce (NCC) argues that for economic development the government should focus on four main areas:

(i) Development of hydropower (ii) Promotion of tourism and special incentives for its development (iii) Strengthening of economic diplomacy and (iv) Human resource development.

Is it a self-discovery of the best sectors needed for economic development? If it is, then thank God, it has been acknowledged now, though late. Enough of focus on the uncompetitive garment, apparel, and carpet sector, which have led the economy nowhere! Now, it is time to change direction and focus on what Nepal is best at harnessing its comparative advantage.

Nepal has notorious transportation system, which has always created supply bottlenecks (contributing to longer delivery time and increase in cost of production). Focusing on tourism and hydro sector would be relevant because these sectors do not require well paved roads. Tourism relies very less on road transportation, as tourists usually either take airway or hike up the hills. Hydro sector also does not require roads as much as the export/trade sector does. So, in the short run Nepal is better off focusing on these sectors. Meanwhile, in the long run it should construct well paved roads/transport networks along with the development in the trading sector.

More like self-discovery, agian:

We have always urged the government to provide incentives to farmers, focus on agro and herb processing industries and link farms with the market - both domestic and overseas - in order to develop rural Nepal and help people enjoy the fruits of development. We have also focused on capacity building of commodity associations so that they can better serve the markets.

Very sticky labor laws are a big, big problem in Nepal:

...our long-running demands like "no work no pay" and a "hire and fire" provision in the labor law continue to fall on deaf ears. Labor law reform has been shelved for now.