Transcript Dr Shiva Sharma

Manufacturing & Poverty Reduction in Nepal
Shiva Sharma
National Labour Academy-Nepal
Email: [email protected]
Concept- Link with Poverty
i.
ii.
iii.
iv.
Contribution to GDP, Growth
Employment
Wage & Salaries-level & share in output
Backward linkage
• Domestic raw materials
• Value added Vs. Total Inputs
• Import intensity of manufacturing products
v. Regional distribution: share of manufacturing
employment by Regions.
Table 1: Sectoral Contribution to Gross Domestic Product (in %)
Sectors
Agriculture
Mining
Manufacturing
Electricity, gas and water
Construction
Trade, restaurant & hotel
Transport & communication
Finance and real estate
Community & social services
GDP at factor cost
GDP by Major Groups
Agriculture
Industry
Services
1980
50.9
0.3
5.6
0.3
7.9
10.5
7.1
10.2
7.3
100
1985
51.2
0.4
5.7
0.4
8.5
10.3
6
9
8.6
100
1990
49.5
0.4
5.7
0.6
9.1
10
6.2
9.1
9.3
100
1995
41.7
0.5
8.4
0.7
9.8
11.3
7.7
9.7
10.1
100
2000
39.1
0.5
9.5
0.8
10
11.2
8.5
10.1
10.7
100
2004
39
0.6
8.8
1.9
11.1
10.5
7.8
10.1
10.2
100
50.9
14
35.1
51.2
15
33.8
49.5
15.9
34.7
41.7
19.4
38.9
39
20.7
40.3
39
22.3
38.7
Source: Economic Survey, MOF (various issues).
a. 90s fastest growth; due to export oriented industries; liberalization,
b. From 5% in 80s to 9% in 90s
c. Share declined in recent years
Labour force
Pop. Census :
2% in 1991, 9% in 2001
Manufacturing Census (97-2002)
a.
b.
c.
d.
e.
Number of Industry decline by 9.7 %
Employment declined by 2.5 %
Wages went up by 57.5 % ( Inflation ?)
Share of wages in output from 7.4 to 6.7%
Share of wage cost in total value added
from 18.6% in 1997 to 19.6 in 2002.
Table 2 : Composition of Merchandise Trade (Share in %)
Items/Year
Exports
Primary Goods
Manufactured Goods
Others
Imports
Primary Goods
Capital Goods
Manufactured Goods
1980
1985
1990
1995
2000
2004
69.5
30.1
0.5
56.2
42.4
1.4
17
82.7
0.2
12.9
85.2
1.9
16.4
75
8.7
19.9
71.8
8.3
16.3
43.9
39.9
18.2
45.2
36.6
21.2
44.4
34.5
16.3
39.2
44.6
21.4
40.7
38
20.8
46.7
32.2
Source: NRB Quarterly Economic Bulletin (various issues).
a. Manufactured goods export from 30% in 1980 to 70% in 2004
b. Import share of capital goods stable- not much growth in
manufacturing, not much industrial deepening
Table 3 : Major Merchandise Export Items (Rs in Million)
Commodities
(1) Woolen Carpets
(2) Readymade Garments
(3) Pashmina
(4) Veg. Ghee
(5) Pulses
(6) Thread
(7) Tooth Paste
(8) Jute and Jute Goods
(9) Major Commodities Total
(10) Exports, Total
(9) as % of Total Exports
(1) and (2) as % of Total Exports
1985
249
471
NA
NA
109
NA
NA
304
1133
2741
41.3
26.3
1990
2331
1423
NA
NA
213
NA
NA
160
4127
5156
80
72.8
1995
7718
5139
NA
NA
457
NA
198
317
13829
17639
78.4
72.9
2000
9842
13942
3544
2743
1057
1169
2263
1104
35664
49823
71.6
47.7
2004
5589
9545
1434
2959
855
1637
1479
1883
25381
52724
48.1
28.7
Source: Nepal Rastra Bank.
a. Share of woolen carpets and readymade garments down from 73 to 29 in 2004
b. Pashmina also in decline
c. (a) & (b) imply decline in jobs. Some 300,000 jobs at risk
WTO Opportunity Constraints
• Small scale of production
• Old technology
• Unskilled & less productive labour
• Lack of innovation & entrepreneurship
Comparative advantage ?
Labour intensive ; natural resource based, indigenous skill related.
Table 4 : Output and Investment Growth in Manufacturing Sector
Period
1986-1990
1990-1995
1996-2000
2001-2004
1986-1995
1996-2004
Output Growth Rate Investment Growth
(annual average)
Rate (annual average)
5.2
-1.4
14
15.9
7.6
5.9
-0.4
NA
9.6
7.4
3.6
NA
Source: MOF (2002). Economic Survey 2003/04.
Impact of Policy reforms:
i. Manufacturing output growth
ii. Employment
iii. Poverty
a. Immediate after policy reforms (90-95), output grew by 14% much faster than later 80s
b. Then down to 7.6% in 1996-2000
c. Then negative 0.4 %
• Could not compete; after liberalization import increased
• Investment did not increase to ensure output growth
Problems:
• Narrow commodity composition
• Dependence on a few export markets
• Inability to compete with imports.
Table 5 : Allocation Pattern of Public Expenditure (in growth rates and shares)
General Services
of which Police
Social Services
Education
Health
Drinking Water
Local Development
Others
Economic Service
Agriculture & Forestry
Industry
Trans.& Communication
Electricity
Others
Defense
Debt Servicing
Miscellaneous
Total Expenditure
Growth Rate
Share in Total
199119911981-90
2001-03 1981-90
2001-03
2000
2000
16.9
15.2
21.4
8.5
8.7
12.1
19.6
17.7
26
3.3
4.4
7.1
23.6
17.1
7.9
22.9
27.1
30.6
19.2
18.6
12.7
10.2
12.8
15.3
20
18.9
2.1
4.3
4.1
4.5
32
22
-4.3
2.6
3.4
2.5
30.6
31
9.5
3.9
4.8
5.8
56.8
8.6
12.1
2
1.9
2.4
16.6
10.2
-4.9
48.6
39.2
24.6
20.7
9.3
-2.2
19.1
14.4
9.3
34
19.7
-1
4.7
2.9
0.9
12.6
12.7
0
13.4
12.2
6.8
21.7
15.1
-7.9
10.1
7
6.2
118.3
112.9
-13.8
1.2
2.7
1.3
16.8
13.2
29.7
5.7
5.1
7
27.6
16.8
17.9
8.1
14.2
15.8
40.2
25.5
21.2
6.1
5.7
10
19.2
13
8.6
100
100
100
Source: Economic Survey 2004, MOF.
What is happening to public investment ?
a. Economic services receiving less and less investment
b. See industry, dramatic decline in both share and growth rate !!!
Table 6 : Structure of Foreign Aid (Share in Percent)
1985
39.3
36.2
16.2
7.2
1
Agriculture
Infrastructure
Social Service
Industry & Commerce
Others
Total
Source: Economic Survey 2004, MOF .
1991
18.3
37.6
23
20.3
0.9
100
1997
18.8
56.6
24.4
0.2
0.1
100
What is happening to Foreign Aid ?
a. Again dramatic reduction in industry and commerce
2003
13.7
48.9
33.5
2.5
1.3
100
What happened to Poverty ? [1997 – 2002]
•
•
•
•
•
•
•
Number of Industry decline by 9.7 %
Employment declined by 2.5 %
Wages went up by 57.5 % ( Inflation ?)
Share of wages in output from 7.4 to 6.7%
Share of wage cost in total value added
slightly increased from 18.6% to 19.6 in 2002.
Share of domestic raw materials to total raw
materials used by establishments declined
from 54 % to 34 %.
Only 2% of manufacturing employment is
shared by Far & Mid western regions.
NHDR 2004 says
Manufacturing exports have
overtaken food and animal products.
However, because of weak backward
linkages, as well as concentration in a
few products based on imported raw
materials, the benefits produced by the
sector have been extremely unevenindeed, limited largely to the urban
business community”
“