Chandan Sapkota's blog

Wednesday, September 7, 2011

Improvement in competitiveness of Nepali economy in 2011-2012?

Seems like Nepal’s ranking in competitiveness has improved, according to the latest Global Competitiveness Report. Nepal’s ranking has improved by five position, reaching 125 (out of 142 countries) in 2011-12 from 130 in 2010-11 in the Global Competitiveness Index (GCI) 2011-2012. But, Nepal’s ranking is still the lowest in South Asia. Sri Lanka is the most competitive economy in South Asia. In South Asia, ranking of Nepal, Pakistan, Sri Lanka improved while that of India and Bangladesh declined.

The GCI comprises 12 categories – the pillars of competitiveness – which together gives a picture of a country’s competitiveness landscape. The pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.

South Asia	GCI 2011-2012		GCI 2010-2011	Change
South Asia	Rank	Score	Rank	Change
Sri Lanka	52	4.33	62	10
India	56	4.30	51	-5
Bangladesh	108	3.73	107	-1
Pakistan	118	3.58	123	5
Nepal	125	3.47	130	5

Switzerland tops the overall rankings. Singapore overtakes Sweden for second position. Northern and Western European countries dominate the top 10 with Sweden (3rd), Finland (4th), Germany (6th), the Netherlands (7th), Denmark (8th) and the United Kingdom (10th). Japan remains the second-ranked Asian economy at 9th place, despite falling three places since last year.The United States continues its decline for the third year in a row, falling one more place to fifth position. In addition to the macroeconomic vulnerabilities that continue to build, some aspects of the United States’ institutional environment continue to raise concern among business leaders, particularly related to low public trust in politicians and concerns about government inefficiency.

Top five countries	GCI 2011-2012		GCI 2010-2011	Change
Top five countries	Rank	Score	Rank	Change
Switzerland	1	5.74	1	0
Singapore	2	5.63	3	1
Sweden	3	5.61	2	-1
Finland	4	5.47	7	3
United States	5	5.43	4	-1

The bottom five countries in the ranking are Chad, Haiti, Burundi, Angola and Yemen.

Bottom five countries	GCI 2011-2012		GCI 2010-2011	Change
Bottom five countries	Rank	Score	Rank	Change
Yemen	138	3.06	n/a	n/a
Angola	139	2.96	138	-1
Burundi	140	2.95	137	-3
Haiti	141	2.90	n/a	n/a
Chad	142	2.87	139	-3

The report argues that “while competitiveness in advanced economies has stagnated over the past seven years, in many emerging markets it has improved, placing their growth on a more stable footing and mirroring the shift in economic activity from advanced to emerging economies.”

The People’s Republic of China (26th) continues to lead the way among large developing economies, improving by one more place and solidifying its position among the top 30. Among the four other BRICS economies, South Africa (50th) and Brazil (53rd) move upwards while India (56th) and Russia (66th) experience small declines. Several Asian economies perform strongly, with Japan (9th) and Hong Kong SAR (11th) also in the top 20.

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Nepal’s case:

Though the five position improvement in ranking looks like good news, it actually is regaining the same ranking as in 2009-2010 (though an improvement in overall score by 0.5 points). Also, the inclusion of new countries with lower competitiveness might have pushed down (or improved) Nepal’s ranking. In 2009-10, Nepal’s ranking was 125 out of 133 countries; in 2010-11, the ranking was 130 out of 139 countries; and in 2010-11, the ranking is 125 out of 142 countries. But still, this is an improvement over last year’s ranking.

Nepal is still a factor-driven economy but its macroeconomic environment is better than that of other factor-driven economies. Its labor market efficiency is below the standard of other factor-driven economies (given the series of labor unrest, it is expected). Nepal still has a long way to go to become an efficiency-driven and then innovation-driven economy.

In basic requirements (institutions, infrastructure, macroeconomic environment, and health and primary education), Nepal’s ranking is 121 out of 142 economies. In efficiency enhancers (higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, and market size), Nepal’s ranking is 127. In innovation and sophistication factors (business sophistication and innovation), Nepal’s ranking is 132.

Nepal’s macroeconomic environment is ranked as 50 most competitive out of 142 economies. Similarly, its market size is ranked 98 out of 142 countries. Innovation in Nepal is ranked 134 out of 142 economies. Nepal’s infrastructure ranking is the second worst, 141 out of 142 economies. Research has also shown infrastructure as the most binding constraint to growth in the Nepali economy.

The other rankings are: institutions (124), infrastructure (141), macroeconomic environment (50), health and primary education (115); higher education and training (129), goods market efficiency (125), labor market efficiency (128), financial market development (100), technological readiness (130), market size (98); business sophistication (125) and innovation (134).

In the survey of business sector, government instability is identified as the most problematic factor of doing business in Nepal. It is followed inefficient government bureaucracy, policy instability, corruption, inadequate supply of infrastructure, and restrictive labor regulation, among others.

Tuesday, September 6, 2011

Balance of payments surplus at Rs 2.93 billion in FY2010/11

The latest update from the central bank shows that Nepal had a balance of payments (BoP) surplus of Rs 2.93 billion in fiscal year 2010/11 after two years of negative BoP. BoP is an accounting record of all monetary transactions between a country (Nepal) and the rest of the world. The reasons for this positive news are an increase in government capital transfers and external loans and decrease in the current account deficit, which came down to to Rs 11.91 billion.

Nepal’s BoP is composed of three sections: Current account, capital account and financial account (there is ‘balancing item’ as well to account for statistical errors). Current account is the sum of balance of trade (exports minus imports of both merchandise goods and services), net factor income (such as interests and dividends), and net transfer payments (such as remittances, foreign aid, and pensions). This is the most important section in the BoP.

Trade deficit increased by 5.4 percent to Rs 330.34 billion during the year (almost two-thirds of it with India). Exports in 2010/11 grew by 6.1 percent while imports grew at a slower rate of 5.5 percent.

Remittance inflows amounted to Rs 253.55 billion, a growth of 9.4 percent over last year´s receipt. A total of 354,716 workers went abroad (an increase of 20.61% over last year). Imports from India increased by 20.5 percent (the previous fiscal year it was 33.7 percent).

FDI inflows amounted to Rs 6.44 billion last fiscal year. A total of 171 joint ventures were approved by the Department of Industry.

The country´s gross foreign exchange reserves increased by 1.2 percent to Rs 272.10 billion in mid-July 2011. The reserves were at Rs 268.91 billion in mid-July 2010.

The annual average inflation remained at 9.6 percent in 2010/11. Despite a 14.7 percent rise in food prices, the annual average consumer price index moderated because prices of non-food items and services grew at a low rate of 5.4 percent. Annual average salary and wage rate index rose by 18 percent in 2010/11.

Briefly:

Balance of payments: Rs 2.93 billion
Current account: –Rs 11.91 billion
Balance of trade: –Rs 330.34 billion (growth of 5.4%; exports grew by 6.1% and imports grew by 5.5%; exports amounted to Rs 64.56 billion and imports Rs 394.90 billion)
Net transfers (grant, pension, remittance and duty refund): Rs 307.86 billion (growth by 8.9%)
Remittance inflows: Rs 253.55 billion (growth of 9.4%)
FDI inflows: Rs 6.44 billion (FDI commitment was Rs 10.05 billion)
Forex reserve (as of mid-July 2010): Rs 272.10 billion (growth of 1.2%)
Inflation: 9.6%
Petroleum import: Rs 75.07 billion (almost Rs 10 billion higher than total export revenue)
Gold import: Rs 11.35 billion
Revenue mobilization: Rs 200.79 billion
Budget deficit: Rs 50.63 billion

Quick comments:

While it is good news that BoP is in surplus, there isn’t much to cheer about looking at the positive figure. The fundamentals of our economy have not changed to make a positive impact on economic growth, manufacturing sector and export potential. This is evident from the fact that trade deficit is continuing to increase (though at a bit slower rate). Remittances (precisely net transfers) helped a bit in reducing current account deficit (which came down to –Rs 11.91 billion from –Rs 28.14 billion the year before) and eventually BoP situation. A lot of previously unsettled transfers has taken place, pushing up the BoP account in the positive territory. Inflation has remained sticky at nearly double digit level.The monetary policy for last fiscal year targeted to attain a BoP surplus of Rs 7 billion, which was tagged as ambitious target.

The growth rate of exports was higher than that of imports not because of an increase in manufacturing capacity; it was increasing at this modest rate in previous years as well. The low imports growth last fiscal year was due to curb in gold imports. Again, nothing much to cheer about on this front as well except for the fact that BoP was in the positive territory.

The broader point here that is that despite a marginal increase in exports, which was higher than growth of imports, and balance of payments surplus last fiscal year, we still are in a deep trench. Our economic fundamentals have not changed. The same problems that have been plaguing our exports sector are obstinately persistent. Supply-side constraints such as intermittent blockades, labor disputes, and lack of adequate infrastructures (primarily road transport and electricity) are further eroding our competitiveness. These constraints are mostly exogenous in nature. They are making our exports uncompetitive and are also preventing diversification of exports basket.

That said, some endogenous factors such as the lack of entrepreneurship and innovation in exports sector, the ignorance about the rapidly changing and globalizing market, and the inability to embrace a change in restructuring production, marketing and distribution structures of firms are some of the other factors ailing the growth of industrial and export sectors.

Most of these are non-economic constraints. So, the set of solutions are political consensus on national agenda regarding export and industrial promotion, amicable settlement of labor disputes, and simplification of rules and procedures regarding construction of infrastructures directly related to these sectors. It should be aided by promotion of entrepreneurship in and restructuring of exports sector. Else, our exports and industrial competitiveness will continue to decline, resulting in a widening trade deficit, prolonging of BoP crisis, further slowing down of growth rate, and stagnating employment opportunities.

Monday, September 5, 2011

Can there be convergence between developed and developing countries?

The question addressed in this paper is whether the gap in performance between the developed and developing worlds can continue, and in particular, whether developing nations can sustain the rapid growth they have experienced of late. The good news is that growth in the developing world should depend not on growth in the advanced economies themselves, but on the difference in the productivity levels of the two groups of countries – on the “convergence gap” – which remains quite large. Yet much of this convergence potential is likely to go to waste. Convergence is anything but automatic, and depends on sustaining rapid structural change in the direction of tradables such as manufacturing and modern services. The policies that successful countries have used to achieve this are hard to emulate. Moreover, these policies – such as currency undervaluation and industrial policies – will meet greater resistance on the part of industrial countries struggling with stagnant economies and high unemployment.

Here is the full paper by Dani Rodrik. Convergence depends on bridging the productivity levels/gap. And exploiting it needs sustaining rapid structural change in the direction of tradables such as manufacturing and modern services.

Public investment efficiency in developing countries

Dabla-Norris et al. (2011) construct Public Investment Management Index (PIMI) that benchmarks the quality and efficiency of the investment process across 71 developing and emerging countries.

According to their findings, the 5 countries with the most efficient investment processes are middle-income (South Africa, Brazil, Colombia, Tunisia and Thailand), and the weakest performers (Belize, Congo-Brazzaville, Solomon Islands, Yemen, and the West Bank and Gaza).

Friday, September 2, 2011

Trade policy, domestic agri policy and food security

Excerpts from the WTO Director General Pascal Lamy’s address to the XIIIth Congress of the European Association of Agricultural Economists.

[..]Many factors have been cited as the cause of these repeated crises, some long-term structural factors, and others short-term, such as: biofuels, rising oil prices, changing Asian diets, declining grain stocks, financial speculation, and climate change and its associated risk. Some would add that food export bans have themselves been the cause of the price hike, in particular for certain commodities such as rice. And we could debate at great length what is a “structural” phenomenon and what is merely “cyclical.” For example, biofuels policies, in particular the production of biofuels from feedstock that do not lead to significant greenhouse-gas savings, are being put into question. Will these policies persist, or will they be abandoned in future? An open question.

[…]International trade, if properly instrumentalized, though should help us exit these repeated crises. And, to my mind, the Doha Round remains an opportunity for vital agricultural reform.

Domestic agriculture policies are vital

[…]no matter how sophisticated our trade policies are, if domestic policies do not themselves incentivize agriculture, and internalize negative social and environmental externalities, we will not be satisfied with our agricultural systems.

[…]Land management, water and natural resource management, property rights, storage, energy, transportation and distribution networks, credit systems, and science and technology, are all key elements of a successful agricultural policy and food security system.

Trade policy cannot address each and every challenge in agriculture. But, it can help us “exit repeated crises”.

[…]global integration allows us to think of efficiency beyond national boundaries. It allows us to score efficiency gains on a global scale by shifting agricultural production to where it can best take place. It can also allow for a more efficient sourcing of the inputs to agricultural production.

[…]The efficiency gains brought about by international trade are also vital in light of the environmental challenges that we face. As I often say, if a country such as Egypt were to aim for self-sufficiency in agriculture, it would soon need more than one River Nile. International trade in food is water-saving. And, with the impending climate crisis, international trade in food will rise further in importance as we come to the aid of drought-stricken countries.
[…]international trade was not the source of the food crises. If anything, international trade has reduced the price of food over the years through greater competition, and enhanced consumer purchasing power. International trade has also brought about undisputable efficiency gains in agricultural production.
[…]International trade in agriculture is less than 10% of world trade. Furthermore, whereas 50% of the world's production of industrial goods enters international trade, it is important that you know that only 25% of the world's agricultural production is traded globally. In the case of rice, this figure drops to 5-7%, making for a particularly thin international rice market. In addition, of the world's 25% of food production that enters international trade, the vast majority (two-thirds) is processed food, and not rice, wheat, or soya as some would like to claim. To suggest that less trade, and greater self-sufficiency, are the solutions to food security, would be to argue that trade was itself to blame for the crisis.
[…]It is because of how little international trade there is in rice, that rice prices reacted so dramatically to export restrictions. The limited international trade in rice made rice prices more, and not less, volatile. Deeper international commodity markets are less prone to crises.
[…]international trade, and indeed improvements to international trade rules through the Doha Round, would be only one component of better agricultural policy globally. Agricultural policy starts at home, and not at the international level. However, the reform of global trade rules and a better functioning international transmission belt for food, are vital components of an enhanced food security picture.

Agriculture has been treated differently and relatively more protected.

[…]the world's trade-weighted average industrial goods tariff is about 8%, in agriculture it is 25%. Not to mention tariff peaks, which in agriculture still rise up to 1000%!

Agriculture trade policy after the food crises and “land grabs”

[…]In response to the crises, some started looking further inwards, and we saw a whole host of export restrictions flourish. These export restrictions had a domino, market-closing, effect, with one restriction bringing about another, as the world started to anticipate a global food shortage.

[…]Yet others started looking further outwards in response to these food crises; namely, the world's net-food importing countries. Countries that are dependent on international trade to feed themselves. They asked that food export restrictions be immediately lifted. Surprising about this situation was that countries sitting on opposite sides of the export barrier fence all complained of the same thing — namely, hunger. And hence the phenomenon of the purchase of agricultural land abroad — dubbed “land grabs” by some, that we now witness. An attempt to overcome the problem of export restrictions by buying land abroad and cultivating it for the importing country's use. As though export restrictions would respect land ownership rights!

Safety-nets needed in case of high prices and volatility.

[…]But we must ask ourselves why there is such widespread resentment to trade opening, if such opening is indeed vital to global food security. To me the answer is clear. It is because we have yet to build robust safety-nets for the world's poor. Each and every government must turn its attention to this issue, urgently, in my view. In the absence of such safety nets, there will always be resentment at a time of crisis to a country's food supply going abroad.

Thursday, September 1, 2011

Update on poverty in South Asia, 2008-2010

A new ADB Economics Working Paper (by Guanghua Wan and Iva Sebastian) estimates the percentage and number of poor people living on less than $1.25 a day (PPP) in Asia (below I have included discussion on South Asia only). The report argues that despite the financial crisis and food and fuel price hikes, the number of poor people in Asia living below $1.25 a day decreased by 150 million between 2005 and 2008 (from 903.4 million in 2005 to 753.5 million in 2008). However, “the reduction was generally slower compared to the previous period.” In Asia, the HCR fell from 27.1 percent in 2005 to 21.9 percent in 2008.

Overall, three countries (Bhutan, Uzbekistan and Cambodia)in ~~South~~ Asia saw over 10 percentage points decline in head count ratio (HCR) between 2005 and 2008. In 2008, Nepal had the highest proportion (52.04 percent) of people below the poverty line of $1.25 a day. This has not changed much in 2010 (50.51 percent), according to the estimated figure. [Now, this stands in contrast to NLSS III findings, which showed that in six years time (2004-2010) absolute poverty declined from 31.5 percent to 13 percent, a 18 percentage points decline in absolute poverty. Note that the poverty threshold, measurement and years (income by ADB versus consumption plus access to basic services by Nepali government) considered by ADB and Nepali government are different.]

In total, HCR ($1.25 a day) in South Asia declined by 10.35 percent (from 42.48 percent in 2005 to 38.08 percent in 2008). This translated into a decrease in the number of poor to 513.93 million in 2008 from 550.17 million in 2005. For $2 a day, HCR in South Asia declined by 3.64 percent (72.82 percent in 2008 from 75.57 percent in 2005). India is home to the largest number of the continent’s poor, followed by China, Bangladesh, Indonesia and Pakistan.

Based on poverty estimates and survey, where appropriate, the authors estimated poverty figures for 2009 and 2010. They estimate that there were 658 million extreme poor in Asia, 18.7 percent of total population in 2010. The impressive growth rate in China and India and in East Asia contributed to poverty reduction. The paper argues that economic growth is a necessary condition to reduce poverty. Still, Nepal’s recent experience shows that you can reduce poverty with stagnating growth rate (a different variable was at play—remittances).

The estimated number of poor people between 2008 and 2010 decreased in all countries except for Nepal and Pakistan. Comparing estimated number of poor between 2009 and 2010, in South Asia, only Nepal saw an increase. As mentioned earlier, this is surprising given the results of NLSS III. If the ADB researchers use the latest data from NLSS III, I think they will get substantially different estimate for poverty in Nepal.

Number of poor (million) under the $1.25 Per Day Poverty Line
Country	2005	2008	2009	2010
Bangladesh	77.36	70.96	69.3	67.57
Bhutan	0.17	0.05	0.05	0.05
India	455.8	426.5	409	389.49
Nepal	14.82	14.99	15.05	15.07
Pakistan	35.19	29.88	30.68	30.61
Sri Lanka	19.67	1.44	1.41	1.3

Note:

For 2005, estimates are based on PovcalNet estimates. For 2008–2010, estimates in bold (Pakistan in 2008) are based on household survey data, while those in italics (India in 2010) are based on grouped data, and those underlined are based on PovcalNet adjusted using CPI for the poor. The rest are derived using the poverty elasticity approach.
For Bhutan, 2007 poverty rates were estimated from Bhutan Living Standard Survey 2007 and then used to project 2008–2010 values using the poverty elasticity approach.
For India, 2010 HCRs are derived from grouped data from Key Indicators of Household Consumer Expenditure in India 2009-2010 NSS 66th Round, and 2008 and 2009 estimates
For Pakistan, 2008 estimates are based on Pakistan Integrated Household Survey 2007–08.

Monday, August 29, 2011

Imprudent unions & weak industries of Nepal

This was published in Republica, August 27, 2011. For an earlier discussion on the same issue, please check this blog post.

Imprudent unions & weak industries

The economy is in such a mess that we really don’t need any more negative news to further dampen market confidence. The political instability, deteriorating industrial relations, power outages, misplaced government emphasis on cooperatives, and strikes have been already enough to discourage investors. Now, add to that list the troubles caused by perennially insatiable labor unions that are bickering with industrialists time and again over unjustified demands related to wage and compensation. The latest victim of the trade unions’ irresponsibility and misguided judgment is Surya Nepal Private Limited’s (SNPL) Biratnagar-based garment manufacturing unit, which permanently ceased production.

The blame squarely goes to the unruly and militant trade unions that think more about reaping short-term gains to its top echelons than the welfare of its members and its institutional sustainability. The irresponsible stance and acts of opportunist trade unions and its leaders have cost direct and indirect employment of over 2000 workers, mostly women. Worse, it has sent a very bad signal about market conditions. Investors, foreign and domestic, will now think multiple times before they commit to invest in Nepal, let alone in the manufacturing sector.

Established in 2004 with an investment of approximately Rs 700 million, SNPL’s garment manufacturing unit was producing popular international brands like John Players and Springwood. It was established at a time when the Nepalese garment industry was fast losing its market abroad. It was not only successful in capturing the rapidly growing Indian market, but also exported garments to the US, Canada, and the EU. Needless to say, it was also popular in the domestic market. Finally, we had a manufacturing firm that could compete in the international market and also be successful in the domestic market. This was the kind of manufacturing firm we needed to help reduce ballooning trade deficit— by increasing exports and at the same time supply goods to the domestic market to substitute imported garments.

Alas, the unruly unions cost us an established garment manufacturing firm that was providing hundreds of jobs, and contributing revenue and foreign exchange reserves. At one time the garment industry was the stronghold of our industrial sector. Now, this beleaguered sector is struggling to survive amidst loss of competitiveness and markets, mainly attributable to erosion of preferences following the expiry of Agreement on Textiles and Clothing (ATC) in 2005, and increase in cost of production due to inefficient production, power outages, frequent strikes and persistent labor unrest, which particularly intensified after 2006.

Previously, the political instability and labor union militancy in the industrial sector led to exit of multinational companies (MNCs) that have been providing hundreds of jobs and supporting numerous households. The Maoist-affiliated labor unions, through their idiotic demands, chased away Colgate Palmolive and Dabur Nepal, and briefly stopped Varun Beverage Nepal Ltd—the bottler of Pepsi—from operation, leading to withdrawal of planned investment of approximately Rs 1 billion. The trade unions have failed to acknowledge the fact that locking up management staff, threatening businessmen, smashing equipment in factories, opening camps inside industrial zones, seizing land and making a mockery of private property right, demanding compulsory donation, and having my way or the highway attitude will do nothing but erode whatever meager confidence investors have on the Nepalese economy. No wonder, Nepal is consistently ranked as one of the less investor friendly destinations to do business. Its hire and fire policies are one of the most rigid in the world.

There is nothing wrong in having strong trade unions that care about its members and the firms where they are employed. But, in our case it is not so. Two fundamental problems inflict our industrial sector: policy inconsistency and stance inconsistency. First, there is policy inconsistency on the part of government, especially with regard to the methodology of fixing wage and compensation of workers in the industrial sector. The Ministry of Labour and Transport Management (MoLTM) does not have a structured industrial conflict resolution framework. Most of the decisions are taken in an ad-hoc basis, leading to policy inconsistency. For instance, the latest industrial strike flared up after the MoLTM unilaterally revised wage and compensation to please some trade unions and its leaders. This was against the agreement between the major trade unions and industrialists and was also being looked upon by the Supreme Court. Most of the time settlement of labor disputes has happened at the whim of influential political leaders, union bosses and ministers. In SNPL’s case, persistent labor dispute over wage and compensation and demand for salary even for days not worked (the company says it followed ‘no work, no pay’ principle) culminated into lock up of management staff of the garment factory. This led to cancellation of existing and future orders and ultimately closing down of the factory.

Second, and the biggest culprit of all, are the trade unions and inconsistency in their stance on major labor issues. The top echelon of trade union has become a bunch of selfish opportunists that care more about sucking concession and donations from the industrialists to please their political masters than advocate the welfare of hardworking workers in factories. At times, the ego problem and governance issues within trade unions have led to union break-ups—the seeds of more industrial disputes. It has led to ever-changing wage and compensation demands of trade unions. Even if the industrialists agree to jack up wages and compensation, one or the other trade unions object to it. It leads to a war in pressing for higher demand, undo the agreements already sealed, and hoodwink workers by making false promise of wages increase if they go for strikes. The wage rates have been revised multiple times this year alone. The question is: What is the final deal and stance? Moreover, what is baffling is that the demands of unions are not matched by labor productivity (see ‘Union Strikes & Productivity’, Republica, 24 March, 2011). How can you increase wage and compensation if marginal labor productivity does not increase proportionally?

No matter how far the industrialists stretch their neck to reach out to unions for an amicable and sustainable solution, they are unable to do so due to the unruly and always unsatisfied trade unions and their bosses, who are bestowed with the blessing of crooked political leaders. The unions are so illogical that even when struggling factories want to close down operation after paying due compensation and swallowing ‘sunk cost’, they are arguing that investors can’t do that. This is utter nonsense. There is no relief from unions before opening, during operation and after closing down a firm. The trade unions should digest the fact that investors are here to do business, not charity. The unions are there because workers are employed by factories. The one-sided action of unions is leading to strike-unemployment cycle (see ‘Strike-unemployment cycle’, Republica, 17 December, 2009). The Maoist-affiliated trade unions are on the forefront of this destructive process.

The closure of the SNPL’s garment manufacturing unit sends a frightening message to potential investors and MNCs. This threat is never acknowledged by trade unions mired in money and politics. Worse, the government is under-acknowledging the situation right now. It will have a disastrous impact on the already stagnating economic activities. The unruly and uncompromising trade unions and their bosses should be held responsible for the loss of over 2000 jobs in the garment manufacturing plant in Biratnagar.

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