KATHMANDU, Finance Minister Dr. Yubaraj Khatiwada said on Thursday that Nepal’s economy should achieve a sustained growth more than 7 percent to achieve target of transforming the country into middle income country with per capita income of at least $5000 by 2030.
Speaking at the launching of the Nepal Development Update, a half-yearly report on Nepal’s macro-economy in Kathmandu published by the World Bank, Minister Dr. Khatiwada said that a growth of 7 percent could be enough for graduating the country into developing country from current least developed country status but not enough for becoming a middle income country within the period.
Nepal aims to graduate into developing country by 2022 and to the middle income country by 2030.
Minister Dr. Khatiwada stressed on the need for enhancing productivity of capital and labour, better use of technology, better management of companies and improving industrial relations for unlocking the country’s growth potential.
Stressing on the need for increasing the investment in the country, he said the private sector should play crucial role.
Since the country is adopting the federal structure of the governance, both national and sub-national governments should create environment for crowding in private sector investment, he said.
Dr. Khatiwada also stressed on long-term financing mechanism for the infrastructure sector. “As financing facility available from the banking sector has short-term nature. So, the development of bond market and capital market is necessary,” he said.
On the occasion, Dr.Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal said the private sector investment was a must to generate necessary resources needed for transforming the country into middle income country by 2030.
For attracting private sector investment and foreign direct investment, Dr. Fan suggested that Nepal must ensure political and macro-economic stability, improve quality of infrastructure and to create transparent and predictable legal and policy environment.
“Nepal has strong political stability like never before, macro-economy is quite stable and the government has taken initiatives to improve legal and policy environment,” he said. “But, it may not be enough as the country has large backlog of needed reforms.”
He also stressed on enhancing Nepal’s competitiveness not only in terms of improving from the past levels but in terms of improving it against other countries. He however praised Nepal’s march towards shifting its economy from remittance and consumption driven economy to the investment driven one.
Making presentation on the report, Dr. Kene Ezemnari, senior economist at the World Bank said that limited access to finance, low productivity, poor connectivity, lack of long-term financing options and delay in approval process have remained as big constraints for increasing investment in Nepal.
Dr. Kene also showed concern over lack of expenditure even from sub-national levels despite allocation of huge resources at the local and provincial levels.
In a panel discussions, Dr. Bimala Rai Paudyal, member of National Assembly said that the country was still in transition in federal set up with a lot laws and polices required to be formulated. “Once the issue of jurisdiction among federal, provincial and local levels is clearly defined, the situation will improve,” she said.
Suraj Vaidya, president of Vaidya’s Organization of Industries said that the private sector was concerned more about implementation of laws and policies than the their formulation itself. “If the policy says about providing one window facility, it should be translated in action,” he said.
Prithvi Raj Ligal, former vice-chairman of National Planning Commission stressed on the review of Nepali currency’s exchange rate pegging with Indian currency. “Current mechanism of exchange rate pegging with India has not helped to enhance competiveness of Nepal,” he said.
He also highlighted the government’s failure to convince the private sector by assuring them about the environment where they can earn good money.
Manuela Francisco, practice manager (Macro-economic, trade and investment), World Bank said that that Nepal highlighted four areas where Nepal should improve to unlock Nepal’s growth potential.
“Increasing foreign direct investment, improving investment climate, availability of skilled workforce and improving access to finance are key areas of improvement, “she said.