Barriers to Innovative Entrepreneurship in Nepal

Article originally published in April 2017 issue of Business360° Magazine, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.

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It is natural that people from different parts of Nepal, depending upon their backgrounds and levels of understanding, will explain reasons behind country’s poor economic performance in different ways. Despite all these differences, in my personal opinion, they agree on one fact – innovation drives economic growth. In fact, in 2015’s Enterprising States and Cities report, the United States Chamber of Commerce Foundation had outlined that the positive correlation between innovation and economic growth had been one of the most consistent findings in macroeconomics that had been true for centuries. Currently, 50% of American annual GDP growth is attributed to increase in innovation.

However, in case of Nepal, there are no major studies that assess current status of innovation and its overall impacts on local and national economy accurately. As a consequence, concerned stakeholders often seem to be ignorant about the true potentials of technological disruptions. According to the Global Innovation Index 2016 (GII 2016), out of 128 countries, United States of America ranks in 4th position while Nepal in 115th position. Though the country has improved its ranking from last year’s, its performance in all seven pillars – Institutions, Human Capital and Research, Infrastructure, Market Sophistication, Business Sophistication, Knowledge and Technology Outputs, and Creative Outputs – is still unsatisfactory. Among South Asian economies, India (66) tops the list followed by Sri Lanka (91) and Bhutan (96). Only two South Asian countries, Bangladesh (117) and Pakistan (119), lag behind Nepal’s position in the ranking.

Innovation does not take place automatically but for it to properly influence economic activities of an economy, there should be few pre-requisites in place. Inadequacy of these factors across the country explain country’s poor innovation outlook. There are numerous factors that hinder innovative disruptions to occur in the country. For our ease, we can categorise such major factors into following three groups:

Poor Investment Climate
Political instability, small market size and difficulties trading across the borders, meagre public and private R&D investments, inadequate infrastructure, insufficient human capital and incompetent access to finance status of Nepalis are some of the key factors that hamper modernization of country’s entrepreneurial activities.

Nepal continues to suffer from rapid changes in political regimes. In past 26 years, the country has witnessed 24 Prime Ministers. With the presence of 164 registered political parties and formation of new parties, Nepalis have stopped thinking of having a single party-led government sometime in next 2-3 decades. In country like Nepal where politics has huge influence in business activities, frequent changes in the governments have negative impacts on overall business environment. In addition, small domestic market, low purchasing power of majority of Nepalis and difficulties while trading across Nepal-India and Nepal-China borders further discourage entrepreneurs and investors to invest their efforts and capital in the country.

A recent study from Berlin’s Deutsches Institut für Wirtschaftsforschung (DIW) has found a positive correlation between R&D and innovation in micro, small and medium enterprises (MSMEs). Nepal still ranks in 93rd position in R&D pillar in the latest Global Innovation Index. In addition to unsatisfactory R&D investments from government authorities and private business entities, country’s academic institutions and think tanks also do not invest ample resources in such activities. Besides poor R&D facilities, Nepal also does not have sufficient infrastructures to boost innovations. Except for gross capital formation (as percentage of GDP), Nepal’s position in rest of the indicators in GII 2016 is in poor conditions. Though country now has mobile phone and Internet penetration rates of 116.59 per cent and 54 per cent respectively, the corresponding growth in use of ICT tools in public and private business activities is low.

A competent human capital also helps to enhance novelty in business activities. A 2015 study by McGuirk et al has concluded that skilled workforce is vital for the conceptualization and implementation of nouvelle business ideas and strategies. By using the concept of Innovative Human Capital (IHC), a concept that incorporates four key elements – education, training, willingness to change in the workplaces and job satisfaction, they have found that IHC is valuable for both small, firms with less than 50 employees, and the large firms, firms with more than 50 employees, with more value being seen for the formers. In case of Nepal, the Government expenditure on education – primary, secondary and tertiary – as percentage of GDP is marginal. As a result, even if we have enough innovation ideas and capital, we do not have sufficient skillful human capital to make use of those resources. Furthermore, Nepalis still do not have an easy access to financial resources. As per the available data, only 61 per cent of Nepali adults have access to formal financial services and 18 of the adults are yet to be provided with such facilities. Also, of those who have formal bank accounts, the ratio of a branch of banks and financial institutions (BFIs) and consumers remains astonishingly high – national average of 6,647 individuals and in some rural parts 72,026 individuals per branch respectively. Likewise, the entrepreneurs have huge difficulty obtaining credits.

Policy Instruments
The second category of barriers to innovations in Nepal comes from insufficient policy instruments. The recent year has given entrepreneurs and investors high hope with the Parliament approving Special Economic Zone Bill, amendments on old Industrial Enterprise Act and Company Act and government also ensuring an investment friendly Foreign Investment and Technology Transfer Act soon. In addition, the proactive roles of the Ministry of Industry, Nepal Electricity Authority and other related public and private stakeholders have further heightened the motivations of local and foreign investors to initiate and upgrade their business ventures in the country. The positive impacts of encouraging developments between August 2016 and March 2017 were clearly visible while Nepal concluded a 2-day long Nepal Investment Summit 2017 during first week of last month with more than 250 investors from different countries pledging investments worth of $13.51 billion. For now, though there has been adoption of favourable policy instruments and progressive commitments from three major political parties recently, we are yet to see how these new policies go into implementation. As Nepal holds bad reputation for turning good policies into actions, this time, the costs for failure to do so would be huge for the country.

Attitude and Behaviour
There has been prevalence of “Fear of failure” among Nepalis, more predominately among majority of country’s youth entrepreneurs. Moreover, there has been simply duplication of business ideas among majority of local businesspersons when it comes to starting a business or investing in one. Besides these individual-level attitude and behaviour problems, there exists an inconvenient perception of private sector stakeholders among government authorities and vice versa. All these factors further deter potential and capable Nepalis from coming into the market with new business ideas or invest into old and new firms by either limiting individual business creativity or by failing to praise one another’s ideas and efforts or both.

Money, Campaign Finance and Elections – A Case Study of the US Federal Elections

Here is the abstract of my co-authored paper on “Money, Campaign Finance and Elections – A Case Study of the US Federal Elections” with Ms. Khadija H. Nasirova.

The influence of corporations and interest groups on US elections is a much-debated issue. The issue became more pronounced after the 2010 Citizens United V. Federal Election Commission court decision. In this study, we analyze changing patterns of US election contributions and federal election outcomes. For our study, we take data from FEC database for federal elections held between years 2002 and 2014. We use Difference-in-Difference and instrumental variables (IV) to measure the net effect of 2010 court decisions on election contributions and their subsequent influence on election outcomes.

Keywords: US federal elections, campaign funding, Citizens United V. FEC

Read full paper on SSRN here.

Good Political Culture

Op-ed piece originally appeared in The Kathmandu Post on March 29, 2017. Read original article here.

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Artwork Courtesy: The Kathmandu Post

Political parties’ failure to adjust their ideologies, principles and actions could put the country at risk

These days, people are constantly questioning the performance of Nepal’s political parties—be it in terms of maintaining internal cohesion or having enough collaborative efforts with other parties to work towards common national interests. While common Nepalis exhibit this trend in relation to the overall performance of Nepali political parties, cadres affiliated with different parties tend to defend their positions and make quick comments against other parties and their policies.

Need to evolve

I have interacted with some of Nepal’s leading politicians from both old and new parties, and only a handful of them have both impressed and instilled faith in me through their work and vision. While I don’t believe that our current politicians are totally abysmal, I believe that those with sound vision for the country are obscured and divided by individual and political ideologies.

Nepal’s major political parties have undergone numerous divisions and reunions, resulting in the constant creation and absorption of different factions, and providing an often ignored explanation for the country’s dire political conditions. Moreover, we can see how the intensifying frustration of common Nepalis towards the failure of old parties resulted in the rise of new political parties in the post-2006 period. If this trend continues, I do not see the formation of a better political system in Nepal. In the absence of a stable political system, I also cannot expect Nepal to establish balanced diplomatic ties with our immediate neighbours and with other nations across the globe.

My experience in over two dozen countries has led me to believe that, in conjunction with guiding political ideologies, all parties should also incorporate three key principles—political compromise, constructive criticism and innovative protests—into their political agenda to better organise themselves and meet citizens’ expectations. These principles are missing from the ideologies and actions of Nepal’s political parties.

Key principles

Forming a new political group is not a novel practice in a democratic country like Nepal. That’s why Nepal has countless political parties, of which over two dozens have at least one member in Parliament. If the figures are analysed according to the existing number of districts and zones in Nepal, about two registered parties can be allocated to each district and two parties represented in Parliament can be allocated to each zone. I have found no evidence of countries and communities flourishing as a result of having a large numbers of parties. Personally, I think this practice overcrowds the political scene and harms parties by creating confusion and division among voters. Political compromise among leaders and cadres of parties with similar ideologies and agenda could help avoid electoral losses. By coming to a compromise, individual parties would be able to prevent potential electoral losses and strengthen their collective voice to advocate common agendas.

Identifying problems in individuals or in political institutions is easy, but the real challenge lies in developing an intervention strategy that can make leaders and parties realise mistakes and correct them. I believe that if individuals enter into politics with the assumption that all others in the system are corrupt and non-functioning, these new entrants will neither give positive work due praise nor accept constructive criticism; they would only promote practices of blame game. During my travels to Switzerland and Japan, I witnessed the respectful way local politicians talk about their opposition and the overall impact this practice has on politics at local, national and global levels. I believe that parties in Nepal could employ these principles of respect in political activities, thus building a harmonious relationship with other parties and with the public.

With a large number of political parties in a country, the chances of disagreements are higher. This could result in frequent protests. This has been the case in Nepal. Though the ways of staging protests are changing over time, the current practice of disrupting public life by closing roads and markets, vandalising vehicles or burning tyres still persists in Nepal. Instead of inflicting damage, parties in Nepal should learn to use innovative and non-violent ways to express their dissimilarities; they should not compromise the country’s basic service sectors like education, healthcare, industries and airports. If used properly, effective protest techniques could help parties rally against disagreeable policies and actions presented by their opposition. They could also win public support through the same efforts, and build and maintain a good political culture in the country.

Nepal has seen a substantial growth of political parties in the last decade. Those that fail to recognise the citizens’ demands of time and dignity, and fail to accordingly adjust their ideologies, principles and actions could put the country’s future at great risk.

Innovations in Healthcare Industry in Nepal

Article originally published in March 2017 issue of Business360°, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.

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Citizens’ good health has positive and significant impacts on economic growth of a nation. Researchers from Harvard T.H. Chan School of Public Health, in a 2001 study, found that a one-year advancement in society’s life expectancy increases output by four percent. Though researches afterwards have confirmed varying relationship between health and economic growth across the countries, no one can deny their affirmative link in developing economies like Nepal. Despite these potentials, healthcare services in Nepal and other similar countries are plagued due to four key reasons – complicated geography, inadequate trained human capital, insufficient awareness among people and most importantly government’s low priority in healthcare investments. Since traditional healthcare models in the country have not been able to yield desired outcomes, maybe its time for public and private stakeholders to reconsider old approaches, devise new models that have potentials to deliver quality services to Nepalis across the country.

Assessment of Nepal’s Healthcare System

More than 80 percent Nepalis still live in rural communities where access to healthcare services is limited. This limitation is mostly visible in terms of inadequate infrastructures, trained medical professionals and supply of basic life saving medicines. In recent years, the existing health posts and hospitals across the country have not being able to meet increasing demands of curative care services.

According to a 2013 research done by Society for Local Integrated Development Nepal and Health Research And Social Development Forum, Nepal still lags behind when it comes to meeting World Health Organisation recommendations (WHO). For example, Nepal has 0.67 doctors and nurses – 0.17 doctors and 0.50 nurses – per 1000 Nepalis against WHO recommendation of 2.3 doctors, nurses, and midwives per 1000 individuals. There are about 196 institutions that offer more than 390 health-related training courses in Nepal and between 2009 and 2011 altogether they had produced more than 32,000 health workers – including 7,099 doctors and 8,681 nurses. From government investments perspective, as of 2014, Nepal’s total health expenditure as percentage of GDP stood at 5.8 percent against global average of 9.94 percent. Similarly, Nepal’s health expenditure per capita lags behind world average by a large margin – $ 40 against $1060. In recent years, the private sector has become an integral part of the country’s healthcare system. According to a cover story on healthcare system in Nepal in Business360°’s December 2016 Issue, private sector – with an investment of 5-6 billion and 15,000 human capital – has established half of the existing hospitals and provides almost double the numbers of beds as compared to those from government side and provides services to 50 percent of total patients.

According to WHO, Nepal’s healthy life expectancy in 2015 was 61.1 years against life expectancy at birth of 67.7 years and 70.8 years for men and women respectively.This decline in life expectancy can be explained on the basis of country’s poor performance in other areas of healthcare system. Except in preventing incidents of Tuberculosis, Malarial and HIV infection among adults; country’s performance in other areas – including proportion of population using improved sanitation, proportion of births attended by skilled health personnel, maternal mortality rate, mortality rate attributed to exposure to unsafe WASH services, under five mortality and neonatal mortality rates and prevalence of stunning among them – are not satisfactory in terms of achieving national health goals and also meeting the SDGs targets.

Global Good Practices

Over the years, there has been an increasing trend in the global numbers of chronic disease and dementia patients for whom the medical care is considerably expensive. Similarly, the rising trends in aging population, labor costs, communicable disease patients worldwide are also to threaten affordability of future healthcare. As a consequence, governments internationally need to increase healthcare spending as parentage of GDP to 10.5 percent 2020. According to Deloitte’s Global Health Care Sector Outlook report 2017, the world is expected to see increase in global healthcare spending to $8.7 trillion in 2020 from $7 trillion in 2015. In the light of rising healthcare costs and emerging health threats, public and private actors in different parts of the world have been employing innovative ways in order reach out to larger beneficiaries, minimise related costs and maximise efficiency through incorporation of one or more of these ten healthcare innovations – Next-Generation Sequencing, 3D-Printed Devices, Immunotherapy, Artificial Intelligence, Point-of-Care, Virtual Reality, Biosensors and Trackers, Convenient Care, Telehealth and Social Media – into their business models.
The “American Well” (AE) in Boston, USA is one of such examples and its functions are based on the concept of telehealth. Currently active in 46 US States, AE employs doctor-to-consumer (DTC) model and connect patients directly with the doctors online in order to deliver quality services at lower costs. In order to run business smoothly, AE has also managed to bring together all key actors in American Healthcare System – Patients, service providers (hospitals, nursing homes and clinics), public and private payors (insurance companies, banks), suppliers (pharmaceutical companies, healthcare information technology companies, private equity and venture capitalists).

The Arvind Eye Hospitals in Tamil Nadu, India is another example of an innovative healthcare model – Arvind Model – that has played crucial role in fighting cataract in India. According to the data released by the Hospital, it has treated more than 32 million patients and has performed over 4 million surgeries.Created in 1976, the Arvind Model comprises of activities at three centers – Main Hospital, Free Hospitals and Eye-Camps. Hospital personnel regularly participate in partners funded eye-camps in new places from where they refer genuine patients to either Free Hospitals for free treatments or the Main Hospital for paid services depending upon economic statuses of the patients. In addition, they also rotate duty hours of health workers between free and paid wards. To minimise the costs of the services, he hospital has its own lens manufacturing facility and blood bank.

Additional examples of innovative healthcare initiatives outside Nepal include TelaDoc and ReduClinic in the USA, One Family Health and Child and Family Wellness Clinics in Rwanda, HCG Oncology and Deccan Hospital in India and Beijing Genomics Institute in China.

Current Efforts and Future Potentials in Nepal

In order to properly address emerging health issues and also to resolve prevailing health problems in better and cheaper means, public and private sector stakeholders in Nepal should focus on working on prevention, diagnosis, monitoring and treatment parts of the healthcare ecosystem. In recent years, some of the old hospitals have upgraded their ecosystems and other created entire new company to deal with Nepal’s health issues in innovative ways. Some of these examples include – Tilganga Eye Hospital, Patan Hospital Telemedicine Facility, Possible Health and Health at Home. However, there is still enough room for few more new actors to enter the market, contribute their parts while earning profits.

Considering poor performance of Nepal’s traditional healthcare models, recent technological disruptions, their penetration rates in Nepal, improving internet connectivity and existing barriers to better healthcare services, I can think of enough reasons for public and private sector stakeholders to invest in innovations in order to strengthen national healthcare ecosystem and also to increase people’s access to quality and affordable health services in their local communities.

BRIDGING THE GAP – Emerging Technology Increase People’s Access To Finance

Article originally published in February 2017 issue of Business360°, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.

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January 2017 remained a very important month for smartphone users in Nepal, mainly for two big reasons. First, the iPhone was celebrating its tenth anniversary and the second, Nepal Telecom (NT) was launchingLTE-based 4G services for its postpaid GSM users in Kathmandu and Pokhara effective from day one of this year.

When late Apple co-founder Steve Jobs first unveiled iPhone to the public at Macworld Convention on January 9, 2007; most of the senior Silicon Valley entrepreneurs, including former Microsoft CEO Steve Ballmer, suspected that it would have substantial impact on people’s lives.However, in just one decade iPhone has revolutionised the way people live globally. It transformed a traditional communication device into a real “smart-phone”with sophisticated user interface, easy connectivity, rich app store and took the concept of mobile computing to next level with unlimited potential. Enhanced security features, user-targeted and user developed multimedia rich content and alternative ways of doing things that were traditionally less effective changed people’s way of thinking and acting. These developments have changed the way we communicate online thus affecting most aspects of our lives. In 2016, of an estimated 4.61 billion mobile phone users globally, about 2.1 billion users were thought to have been using smartphones and the latter trend is peaking significantly, especially in emerging economies like Nepal.

While there were less than 50 internet users in Nepal in 1995, the year 2016 saw that number increased to over 30 million according to the mid-September 2016 Management Information System report by Nepal Telecommunication Authority with country’s mobile phone and Internet penetration rates now standing at 116.59 % and 54% respectively. Though mobile phone ownership rate in urban areas is higher by about 15 % than in rural areas, the latter parts of the country are expected to see considerable growth in the near future with improved network coverage and expansion of service facilities. With the recently introduced fourth-generation wireless facilities, eligible NT users now can browse Internet at a peak data rate of 32.4 mbps and if used properly it can help them to significantly enhance their personal and professional development. As NT plans to qualify its prepaid subscribers to use 4G networks towards the second half of the year, the anticipated overall positive impact of mobile computing on lives of Nepalis are quite exciting and most of these would take place in rural Nepal where more than 80% people live.

Globally, mobile computing has been helping emerging economies to minimise the digital divide and facilitate a variety of public and private services in money and banking, education, health, transportation, agriculture, tourism and governance sectors in rural and urban areas alike. However, in the context of Nepal, I see huge potential of leveraging emerging technology in order to increase people’s access to finance, especially in the rural parts of the country, given geographical distribution of the country’s population, their current and potential smartphones subscription patterns and projections, annual incomes, literacy rate and underlying difficulties and high transaction costs for opening branches of banks and financial institutions (BFIs) in these regions.

Finance is at the center of the development process. A 2008 World Bank study has outlined that access to finance with an inclusive, efficient and well-functioning financial system leads to steady economic growth through improvement in opportunities and balanced income distribution and poverty reduction. Access to finance, in simple terms, is the ability of individuals or enterprises to receive financial services, including credit, deposit, payment, insurance and other risk management services. Indicators of whether individuals have bank accounts, use banks as their primary financial institutions and can reach financial institutions by foot are used to measure the extent of access.

According to Nepal Rastra Bank, 61 % Nepali adults have access to formal financial services. In recent years, there has been a surge in the network of banks and financial institutions in the country. However, 18 % adults still do not have access to financial services. As of mid-June 2016, there were 4,219 branches of 182 BFIs in the country and population per branch of financial institution stood at 6,647 national average. In some parts of rural Nepal, this figure remained at 72,026. I see a potential injection of mobile computing in order to minimise the existing inequality among ‘banked’, ‘under banked’ and ‘unbanked’ Nepalis at reasonable costs.

Since the last decade there have been many discourses about and experiments on mobile phone’s potential impact on the financial industry. According to the Global Mobile Systems Association (GMSA), in 2015, people in 93 countries made 33 million daily transactions through 271 mobile money service providers. With these developments, mobile money has been changing the overall financial landscape – in 2015, 37 mobile money markets had ten times more registered agents than bank branches and the total number of registered customer accounts increased by 31 percent and reached 411 million globally. Sub-Saharan Africa still dominates mobile money market with Kenya leading the way in harnessing mobile phone technology in financial services. For example, M-Pesa was the first mobile money transfer service in Kenya. Run by Safaricom, a Kenyan mobile-phone operator, M-Pesa was launched in 2007 for basic money transfer and financial services and has now transformed overall economic interaction of the Kenyans. In 2013, this platform witnessed 237 million P2P transactions amounting 43 percent of the country’s GDP. Currently, M-Pesa has became an integral part of the local daily lives as it allows people to accomplish an array of banking services including money deposit and withdrawal, remittance transfer, utility bills payment and microcredit provisions.In less than a decade, it has extended financial inclusion for an additional 20 million Kenyans and helped to create thousands of other small enterprises. Between 2008 and 2011, Kenyan mobile money services users living under $1.25 increased from 20 percent to 72 percent. After promising accomplishments in Kenya, M-Pesa later expanded its services to nine additional countries in South Asia, Africa and Eastern Europe. In addition to M-Pesa, FNB Connect and WIZZIT in South Africa, GTEasy Savers in Nigeria, Smart Money and GCASH in the Philippines, bKash in Bangladesh and EasyPaisa in Pakistan are some of the other successful mobile money service providers.

With the unprecedented innovations in mobile phones and related technologies in the recent decade, globally, more people now own real smartphones and these new devices are getting cheaper with the Internet too becoming easily accessible at lower cost. A 2014 study by GMSA has anticipated that smartphone features would allow every mobile money service provider to ameliorate the quality of its services through introduction of suitable apps, improved user interfaces, and enhanced functionalities. These features would also potentially ease adoption and usage by giving more intuitive customer experiences. Thus, the overall impact of mobile money services on people’s lives is certain to become even more evident in the future.

These successful experiences from different countries in Sub-Saharan Africa, East Asia and South Asia accompanied by available futuristic smartphones in the Nepali market that also can exploit NT’s 4G services, provide sufficient room for the country’s public and private mobile phone operators to work on utilising technologies to break the barrier among ‘banked’, ‘under banked’ and ‘unbanked’.

Beware Trumponomics

The economic policies of the incoming US president do not bode well for Nepal

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Artwork courtesy: The Kathmandu Post

Later today, Donald Trump will be inaugurated as the 45th president of the United States. When he had announced his candidacy in June 2015, no one really took him seriously. But he started winning the primaries one after another to become the Republican nominee. He went on to trash all election predictions and beat the Democratic contender Hillary Clinton by earning a majority of electoral votes to occupy the world’s most powerful position for at least next four years.

Even before Trump won the election, professionals worldwide had begun issuing many scary predictions. These debates and projections became more heated in the post-election transition period, and economists across America and elsewhere were discussing the domestic and global economic consequences of a Trump administration. Sadly, most economists do not expect better outcomes from Trump’s proposed economic policies. The conclusions of the annual meeting of the American Economic Association held in Chicago and a survey conducted by the University of Chicago’s IGM Economic Experts Panel do not expect Trump’s economic policies will continue Obama’s legacy: an annual growth rate of 2.9 percent, an unemployment rate of less than 5 percent and shrinking budget and trade deficits.

However, all these speculations are based on Trump’s prior experiences, his election agenda, strategies during campaign rallies, updates on social media platforms and portfolios of individuals that Trump has appointed for his cabinet. In reality, except for only a handful of his close aides, no one really knows how a Trump presidency will function. Though no one can deny potential disastrous consequences of ‘Trumponomics’ on the US domestic market and the world’s major economic players, effects on small and emerging economies are often overlooked. With regard to Nepal, I see the Trump administration having noticeable effects on three sectors: trade and investment, macroeconomic stability and foreign aid and remittance.

Trade and investment 
One thing we know for certain is that protectionism seems to be the signature component of Trumponomics. Trump has already revealed that his government will impose a flat 35 percent tax on goods imported from Mexico and 45 percent on imports from China. Similarly, he has decided to leave the Trans-Pacific Partnership and renegotiate other trade deals. If necessary, he wants to leave the North American Free Trade Agreement. In addition, Trump has proposed huge tax cuts in the form of lower income taxes for high-income Americans, and lower capital gains tax and corporate taxes.

The Obama administration recently signed a Trade Facilitation and Trade Enforcement Act with Nepal to ease the entry of Nepali products into the US market. In 2016, Nepal’s exports to the US were valued at $82.7 million and imports from the US were worth $37 million, as per the US Department of Commerce. Under the Trump presidency, these figures may become reversed. Furthermore, Nepal could also suffer from Trump’s plan to restrict American investments outside the US. As per the Economic Survey 2015-16, the US is Nepal’s sixth largest foreign direct investment (FDI) partner with Rs7.096 billion in investments in 298 projects. Though this represents only 4 percent of the total FDI in Nepal, it has immense economic value. Under the Trump administration, these investments might disappear.

Macroeconomic stability
Experts say Trump’s protectionist policies will make imports into the US expensive. This, in turn, will result in an increased US budget deficit and a stronger dollar. The US Federal Reserve System will raise interest rates. With a stronger greenback, currencies of other countries, including the Nepali rupee, will depreciate.

As a result, Nepal Rastra Bank will be forced to lower interest rates which will lead to increased inflation. Thus, Trumponomics may also be a direct threat to Nepal’s macroeconomic stability. Indirectly, subsequent economic and political developments in China, India and other major trading partners will have considerable impact on Nepal’s overall economic stability.

Foreign aid and remittances
Trump’s appointment of Scott Pruitt, whom The New York Times described as a climate change denier, as the new administrator of the Environmental Protection Agency, and his tweets about the United Nations last month help us to imagine what his global development priorities might look like. Though it is very difficult to quantify the exact amount, the development community can expect huge cuts in the US foreign aid budget. The US is one of Nepal’s most important development partners, and it pledged more than $187 million in aid last year to help us recover from the earthquake. However, new priorities under the new president might lead to a decreased net inflow of aid from the US, and this could critically damage the local economy as aid finances one-third of the development activities listed in the budget.

America’s protectionist policies are sure to damage export-oriented markets in Asean and East Asia. In addition, the country’s changing relations with Iran, ongoing crises in Syria and Iraq, a potential economic crisis in Egypt, and Israel-Palestine issues are sure to affect most of the economies where Nepali migrant workers live.

Prolonged instability in any of these regions during Trump’s presidency would damage Nepal’s economy, as remittance in 2015 equalled 31.8 percent of the country’s economy. Though the new world order and world economy seem grim under Trump, many of us still expect him to work in ways that will change our current views about him.

Read article on The Kathmandu Post’s online portal

The Singapore model

What Nepal can learn from the city-state’s success in nation-building

Jaya Jung Mahat and Prem Upadhayaya

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Artwork courtesy: The Kathmandu Post

Jan 10, 2017- Foreign and Nepali politicians often refer to Singapore as one of the model nations when it comes to planning for a ‘new Nepal’, even though our own country is almost five times older than Singapore. But Singapore has come a long way since its independence in 1965. Pragmatic policies, commitment, accountability and tireless efforts by Lee Kuan Yew, the founding father of Singapore, have contributed to this development miracle. There are key strategies that helped Singapore remain strong on the world map and lessons that Nepal could learn from.

A top performer

An island with an area of 720square kilometres, Singapore is home to about 5.5 million residents. Roughly 74 percent of the population is Chinese, 13 percent Malays, 9 percent Indians, and 3 percent are of other origins. It has a GDP per capita of 69,283 Singapore Dollars ($55,182)—almost 70 times higher than Nepal’s, and it maintains top positions in other international rankings.

Singapore has been thriving in an unprecedented way through locally contextualised politics. It has no natural resources, but Lee Kuan Yew understood that ‘people are everything’. He invested in them and believed in meritocracy to deliver development.

The dominance of Chinese Singaporeans is often considered one of the major factors that led to the separation of Singapore from Malaysia. Thus, in the post-independence era, the country adopted inclusive social policies that would help harmonise relations between citizens from different ethnicities. Hard work and self-reliance were extremely valued. Lee believed that all are born equal. He made huge investments in, and ensured equal opportunities to, all citizens in education, healthcare, employment, and social unity. Through a ‘many helping hands’ approach and ‘self-help’ community initiatives, the country could ensure participation of each individual, and meritocracy has remained the leading principle of every sector in the country.

Becoming a major player

Singapore started to move away from import-substitution by attracting multinationals during the mid-1960s, when only a few other countries had practised such strategies. Also, substantial investments for developing competent human capital, creation of industrial clusters and reforms of labour laws and fiscal and monetary policies helped Singapore achieve a competitive advantage. During this period, the country managed to maintain a 10 percent annual growth rate on average. Later Singapore revised its economic policies and liberalised key service sectors like finance, business and telecommunications to remain competitive. Such a ‘learning by doing’ reform approach helped Singapore graduate from the third world to the first world in a single generation.

Singapore has also proven that small states can be major players in world politics. Trade networks, inter-regional groups and engagement are some of the diplomatic tools Singapore has been pursuing to boost its global standing. It has broken out of the ‘small-state mentality’ to think beyond borders. With limited land space at home, it believes in building industrial parks abroad. Its diplomatic dealings are fair, neutral, and mutually beneficial to all involved. It is the domestic strength and international trust that Singapore earned since its independence.

Both Singapore and Nepal are multi-racial, multi-cultural, and multi-lingual countries. Singapore has been practicing a dynamic social policy to strengthen national identity by protecting interests of all groups, and developing a common space to enjoy social life. Everyone is treated fairly without any discrimination. The minor-

ity’s representation in the political process is ensured through Group Representation Constituencies (GRCs). Every public housing estate has an equal share of different ethnic groups to foster harmonious relations. These insights will be instrumental for Nepal to realise federalism.

Breaking the inferiority complex

Like Singapore, Nepal too is surrounded by giant economies. If we could develop suitable and balanced economic policies and strategies, our industries could have direct access to the Indo-Chinese market of over 2.5 billion people. To achieve this, we need to focus on a high-end-value and export-oriented economic model rather than on an import-substitution one.

Breaking an ‘inferiority complex mentality’ in pursuing foreign policy goals must be at the forefront of Nepal’s external dealings. Singapore succeeded in positioning itself as a crucial player in the world economy. Nepal must also participate in trade networks and inter-regional groups, and engage actively in geopolitics in order to boost its standing with other economies.

Singapore has proven that the size and the population of a nation do not necessarily determine a country’s prosperity; its social, economic, and foreign policies and strategies do. There are two things that Nepal must learn from the Singapore model. First, we must gain internal strength through economic prosperity and social harmony. Second, external dealings must focus on national interests rather than on partisan interests. Despite being a landlocked country, these two nation-building principles could help Nepal survive and escape the vicious cycle of underdevelopment.

Read it online

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