Policy, power, roads and laws named obstacles to progress
KATHMANDU, JAN 17 -
A joint team of experts from Nepal and the US have identified policy inconsistency, power crisis, poor road network and rigid industrial and labour laws as the four key constraints to realizing Nepal’s economic potential.
The team led by the Finance Ministry’s Chief Economic Advisor Chiranjeevi Nepal named these hurdles in a study carried out to enable implementation of the Threshold Programme under Millennium Challenge Corporation (MCC), a separate aid agency of the US government.
The US has indicated that Nepal will be reselected for MCC’s Threshold Programme under which it will receive aid to improve policy and the institutional environment.
There are two primary types of MCC grants, compact and threshold. Compacts are large five-year grants for countries that qualify for MCC’s eligibility criteria, while threshold programmes are smaller grants awarded to countries that come close to meeting these criteria and are firmly committed to improving their policy performance.
“With the team of experts identifying four areas as major constraints, US aid under the programme will be focussed on addressing policies and institutional issues of these problems,” said Advisor Nepal.
Finance Ministry officials said that the country could get up to US$ 20 million under the Threshold Programme.
Advisor Nepal said that out of the four constraints, policy inconsistency and power crisis have been singled out as the biggest problems.
“Since the last five years, the country has not been sure whether it would adopt a market economy or a controlled economy,” he added.
“Industries are suffering from power shortages and it has increased their costs.”
He said that the poor condition of the roads had affected the country’s capability to export goods at comparatively cheaper prices. “Labour laws and the Industrial Enterprises Act have not been revised for a long time despite the need to make them timely and flexible.”
He added that the study had been delayed for the last one and half years, but now it has been completed paving the way for the implementation of the Threshold Programme in the country.
The government has sought US assistance under the Threshold Programme within March 2014 so that it could be incorporated in the budget for the next fiscal year.
Meanwhile, Nepali officials asked the MCC team to focus their aid on institutional and policy reforms and on the areas of power and transpiration (road) at a meeting on Thursday.
The Nepali team led by National Planning Commission (NPC) Vice-chairman Rabindra Kumar Shakya and represented by chief secretary Lilamani Poudyal and MCC team held a meeting on Thursday on areas to be focussed while implementing the Threshold Programme.
“We also asked them to focus their aid on single problems in the future after first focussing on two issues,” said Madhu Marasini, chief of international economic cooperation coordination division at the Finance Ministry.
With the country crossing the Low Income Category (LIC) median in 14 out of the 20 indicators classified under three major categories - Economic Freedom, Investing in People and Ruling Justly - Nepal’s chances of getting the assistance under the Threshold Programme has increased.
Despite Nepal’s selection under the MCC Threshold Programme in December 2011, it has not received the expected aid.
According to the MCC website, Nepal is still below the median in indicators like health expenditure, trade policy, girls’ primary education completion rate, gender equality in economy and rule of law.
Meanwhile, the country has passed in indicators like fiscal policy, inflation, primary education expenditure, natural resources protection, regulatory quality, immunization rate, child health, land rights and access, political rights, civil liberties, freedom of information, access to credit business start-up, governance effectiveness and control of corruption.
(Source: The Kathmandu Post)
