Transcript Impact Assessment: Evaluation Design

Development Issues and
Practices
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Session Coverage
Development? Development indicators
 GDP growth rate – issue very low growth rate and
consequences
 Poverty related issues – contribution of remittance at the
HH level – 1/3 of GDP
 Investment – government share and private share, FDI
and role of development partners
 Lack of proper identification of sectors for dev
 Trade and BP - paradoxical development
 Productivity – labour, land and capital (ROI)
 Macro indicators largely OK – FM but reality is different –
critical role of middle man (bichaulia)
 Emergence of urban cities – provisions for facilities
 Governance and institution building
 Crux of the issue – leadership - drivers of the nation –
manufacturers of constitutions
Disaster: Recovery, rehabilitation and reconstruction PDNA 2
selected opportunities
Development
What is development?
Changing meaning of development
Emergence of new problem calls for new definition
pre 1930s emphasis on growth
post world war - structuralisms, dependency, etc
emergence of environmental issue
MDGs
sustainable dev
climate change
Now emphasis on social development, inclusion,
human rights, good governance, etc
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Indicators
Indicators
variables that measure the changes or marker of
change.
basic features of indicators are:
 Objective
 Relevant
 Sensitive
 Specific
 Independent
 precise
 Cost effective
 Simple
 Easy understand and timely
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Growth rate of GDP
The GDP growth rate of Nepal is very low. Over years
it varies between 2.34 to 6 per cent of GDP.
Between 2005 to 2014 it was 4%.
Last year it was 4.6% and this year it is 3.4% (4.3%).
Population growth of Nepal is relatively high.
To create visible impact on the living of the people
Nepal must have 6 to 7% of growth rate.
Nepal expected to graduate by 2022 and inter group
of middle income country by 2030.
Requires at least 7 to 8% growth rate of GDP.
Doubling present level of GDP
(How to double the present level of GDP?)
Big challenge
(growth of developed coun1.8 in 2014 and 2.4 in 2015)
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Cont…
The composition GDP shows that Nepal is a traditional
rural economy.
As mentioned above the agriculture is the main
producing sector in Nepal.
However the growth rate of Agriculture sector is very
very low – 1.9 % in 2014/15
While the growth rate of non-agriculture sector is only
3.6% per annum.
 Industry sector 2.6%
 Service sector 3.9 %
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Income and Poverty
Although the statistical achievement in poverty
reduction is remarkable the reality may be different
Reduced from 42 to 21% (23.8) (MDGs )
But 50% are just above the poverty line – vulnerable
and a small event can push the population below
the poverty line at any time
Recent earthquack has pushed 3.5% of the total
population below the absolute poverty line.
75 lakhs out of 3 cror is under absolute poverty line
Within the last 4 – 5 years the remittance has reduced
poverty by 11%
But this is not solid basis of reduction vulnerable
The poverty level can increased at any time
Poverty level in Nepal is high one quarter of the
population
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Income and Poverty
Population growth rate as compared to other countries
is high 1.2% /annum (WB)
Per capita income is also low as compared to other
Asian Countries
Per capita GDP in 2014/15 is US $ 762
The absolute poverty line of Nepal is Rs 18000?? (US $
1.25)
Degree of inequality of income is also high
Poorest 20% of the population hold 8.3% of
consumption/ income in 2013 (WB)
Similarly the Gini Coefficient is 4.3
Recent earthquake, flood and land slide could have
further deteriorated the situation
The inequality must have increased
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Cont…
The World Bank has estimated that 7.5 million labour
force is added in Nepal, annually.
But Nepalese estimate is 5-6 million
In the recent years no major industry has been
implemented in Nepal
Hence, virtually there has been no significant number
of job is added in the Nepalese economy.
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Dependent Economy
Recently the remittance is Rs 2billion per day
30 % of GDP (1/3 of GDP) is contributed by the
remittance
Unfortunately a greater proportion - almost all used
for consumption
One study shows that 90% or the remittance is used
for consumption
Construction of houses in urban areas and expenditure
on consumption specially conspicuous consumption
It is not used for productive purpose – no investment
on manufacturing sector or capital formation
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Crux of the issue
Political instability is the crux of the development issue
Collusion government is the reason for the
disturbances negative consequences in all sectors of
the economy
every Nepali can make a long list of problems
related to the present government.
not committed leadership another important reason
not right leadership – basic objective is to grab
power and collect resources – corruption – one of
the most corrupted country in the Asian region
no good governance
state role on its regulatory and facilitatory is very
week or virtually non existence of government
government staffs are not neutral not committed
the national building
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Trade and BP
International Trade is one of important aspect of
development
However the performance of the sector is quite poor
The export earning can support the import of only one
item that is petrol
In 2003/04 import/export ratio was 39.0 and it is
gradually declined and by 2014/15 it is 10.7
The volume of import is increasing – the demand for
construction material is increasing as a result of the
natural disaster and increasing demand for housing
services in Nepal.
Further the increasing volume of remittance increased
the demand for construction materials
Similarly the demand for petroleum products is
increasing as a result of the increasing opening of
the transportation services in different parts of the
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country.
Trade cont….
However the balance payment position of Nepal is very
strong. Despite of continuous trade deficit Nepal
has huge surplus foreign reserve/exchange
Nepal has not been able to spend all the aid money.
Donors pointed out the poor absorptive capacity of
Nepalese economy.
In many cases, Nepal has not been able to spend
more than 50% of the donors allocated resources
Again the productivity of the major sector such as the
agriculture is very low
It has been estimated that the Labour productivity of
of Nepalese labour is the lowest in the Asia Pacific
region.
Similarly the ROI of the capital is very low.
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Cont…
In fact since the last of few decaded there has been no
significant industry established in Nepal (only few
consumer goods industries: cookies, confectionaries,
noodles
This implies the lack of capital investment, that is,
investment in the fixed capital is virtually nil.
Serious consequences – no production in the future
With such low productivity the agriculture sector
contributes 60% of labour force but in GDP it
contributes around 33%
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Cont….
The officially recorded inflation on the other hand is
low - 7.5 % per annum
 food inflation 9.5%
 non-food is
4.5%
However the ground reality is different. As mentioned
above the country has not been able to produce
more. Market is full of foreign goods especially
Chinese products.
If the cost of Nepalese product is Rs 2000 the same
Chinese product costs Rs 1000
Process of rising price in reality is very high
The economy is experiencing high inflation
Considering these complexities World Bank
characterized Nepalese developoment as
Paradoxical Development
Complex situation
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Examp of govt Development effort – budget
Weak program project implementation
Lack of targeted program
Institutional development silent
Management of critical socio-economic challenges
ignored: employment, trade promotion, energy,
productivity, food security, social security and
welfare
Ambitious program that could be inflationary
The economy will be overheated
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Education and Development
Education is main basis for development
However the sector involves several problems
 Education is not responsive to the market
demand: unproductive education
 Large number of students migrating for
education
 Loss of resources
 The proportionate allocation of resources on
science and technology is much lower than in many
developing countries
 This leads to the production of educated unemployed
mass
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Role of Private sector, NRN, CBO & INGO/NGO
Private sector is suffering from number of problems
(as mentioned in the previous slide).
Despites of these private sector (including HH)
contributes almost 70% of the GDP but it is not
included in the national income account.
Our GDP is underestimated
 Budgetary provisions for promotion of private sector
- no new tax,
- VAT threshold increased from 2 to 5 million
- job training for 50,000 workers
- tax relief for earthquake affected areas and
business
- incentives for export oriented products
- high priority for infrastructure
- involving private sector
in electricity transmission
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lines construction
Role of Private sector, NRN, CBO & INGO/NGO
However the participation of the private sector is very
poor
Commitments of NRN has not been materialized
The efficiency of CBO and NGOs is questionable.
INGOs are promoting their interest rather than serving
people
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Other Improtant Issues
Formulation of Constitution
Land locked is another
Low capacity utilization rate of industries
High cost economic - cost of production is high low
level of demand for domestic products
carteling in transportation and other services –
corrupted government unable to control.
Labour Stricks, band and hadtal disturbed the
production units
Loadseding all this increased cost of prioduction
Strong trade union put pressure on project to increase
wage and other facilities
The productivity in the rural areas declined because of
the outmigration and loss of active labour force.
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Recovery, rehabilitation and reconstruction
It has been estimated that the recent disaster –
earthquake, landslide annd flood caused a total loos
of $ 7065 million (about one third of total GDP)
Social sectors: $ 4086m (58 %) housing (3505m),
health ($75m), education ($ n313m), cultural
heritage ($ 19.2M)
Production sectors: $ 1781 (25%) Ag ($ 283m),
Commerce ($ 169m), Industry ($ 192m) and
Tourism ($ 812m)
Infrastructure $ 668 (10%) Electricity ($ 210M),
Communication ($ 87m), transport ($ 221m) water
and sanitation ($ 114m)
Other cross cutting: $ 529m (7%) governance (187m)
and environment and forestry ($ 340m)
Resource need for reconstruction $ 6695m
How to manage big
challenge
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Nepal has not been able to promote its niche products
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Selected Opportunities
Abundant resources
 Hydro, Ag, tourism and human resources
 Neighborhood of large and growing economies
Can provid tourism services to the emerging
middle income
Comparative advantages (trade and industrial
policies)
 19 products identified as niche products
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STATIATICS
Remittance to GDP 27.7% (2014/15)
Tourism income to GDP 2.2
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