February 7, 2009
Last autumn, when the new government took control of the country, it was hoped that the international economic crisis would have minimal impact on Nepal’s fledging economy. The reasoning went that, since Nepal was only marginally involved with global finance, the country could emerge from a world recession relatively unscathed.
When I interviewed Finance Minister Dr. Baburam Bhattarai (September 2008) and asked him about the possible ripple effect of the plunging world market, he was cautiously optimistic: “Actually, it has some impact,” he agreed, “but it’s not very big because our economy is at the far periphery of the global economy. In that sense, I think the impact will be minimal. So we will work out measures, keeping this in mind.”
But six months ago, no one was predicting the catastrophic and far-reaching grip of the global recession, which, like the bird flu, does not recognize international boundaries. Through no fault of its own, Nepal is observing a foreign crisis coming home to roost.
Certain economists would have it differently. Barry J. Hitchcock, director of the Nepal Resident Mission of Asian Development Bank (ADB), predicted this week that Nepal would see a 3.5% increase in growth rate this year. But ADB’s forecast seems based on the assumption that agriculture, the main stay of Nepal’s economy, would do well this year. Predicting farm-yields is always a dicey game to play, dependent as it is on the weather. Last year’s horrific floods can attest to that. Hitchcock’s speech – at least, as reported in the press – did not address other mitigating circumstances that seem glaringly obvious.
January 2009 indicators point to Nepal’s high inflation, a drop in tourism, and an alarming decline in overseas workers -- all exacerbated by an endless series of strikes, insufficient electricity and, most recently, the arrival of bird flu.
High Inflation
Hikes in fuel and food prices lead the list in culprits that have pushed Nepal’s inflation to its highest level in over a decade. The rate of inflation for the 2008 calendar year soared to 14%. Part of this can be attributed to higher global food and fuel prices. But part of the blame is attributable to domestic shortcomings: Nepal’s dependence on the importation of large quantities of consumer goods, including food, is partially due to bureaucratic bottlenecking, which prevents the smooth flow of supplies. The situation is exacerbated when one takes into account that workers’ salaries have not kept pace with rising costs. A $15 dollar bag of rice today cost $10 two years ago, while the consumer’s income has, in general, remained stationary.
Nepal Migrant Workers
The Himalayan Times recently reported that there are 1.24 million Nepalis working abroad – perhaps more. Annually, this brings in $551 million in remittance, which adds up to 17.4% of Nepal’s GDP. Remittance helps reduce the trade deficit. Spending on education and health in rural areas is crucially dependent on remittance. If remittance diminishes, all manners of economic suffering will arise.
Nepal must now prepare itself for such a dire scenario.
Due to global recession, the Malaysian government has announced its intention of stopping recruitment of foreign workers. This is going to hit Nepal hard. Although there is an ongoing search for new labor markets, the international alternatives shrink by the day. Mohan Krishna Sapkota, director general of the Department of Foreign Employment recently offered this bleak statistic: “ Every month, 3,500 Nepali job-seekers used to leave for Malaysian.” That means that 42,000 unskilled laborers will have to look elsewhere for a job during the 2009 fiscal year. And that’s only in Malaysia.
The Gulf countries don’t look much better. Until recently, the Gulf was a major market for Nepali migrant workers. Now, the Gulf has reduced the workforce strength, especially for unskilled hands and those working in manufacturing and service sectors.
The new government is looking for new destinations like Oman and Libya to help ease the crisis but critics say not enough is being done in this arena. Respectively, Libyan and Oman have 30% and 15% unemployment already and there is no extant Nepali mission in either country, so the diplomatic groundwork does not exist.
Remittance has dropped from the US and European countries as well. Even Japan, which has been a lucrative job market in the past, has now shifted from low-skill workers to semi-skilled or trainee workers, which eliminates many of the Nepali job-seekers.
Below is the breakdown of the top ten countries where Nepalis have gone to seek employment:
Malaysia -- 426,778
Qatar -- 350,453
Saudi Arabia -- 231,444
United Arab Emirates -- 148,249
Quwait -- 13,420
Bahrain -- 11,220
South Korea -- 6,378
Hong Kong -- 4,213
Oman -- 3,525
Israel -- 2,650
Of all the above, Qatar seems the most eager to still approve working visas for Nepali laborers. But Qatar has one of the worst track records for foreign worker abuse. According to Business and Economy, “Nepali women continue to enter this country and some of them meet an unimagined fate. …More women, after finding themselves at the receiving end of exploitation and cheating, are taking refuge at the Nepali embassy [in Doha].” The embassy also indicated that incidents of Nepali workers dying in accidents in Qatar are on the rise.
Ever since King Birendra introduced the Foreign Employment Act in 1985, which predicated the 1990 outflow of Nepalese workers going abroad, remittance has become a lifeline for Nepal’s meager economy. Global recession now seriously compromises Nepal’s ability to depend on that lifeline.
Tourism
According to figures released this week by the Immigration Office, the Kathmandu International Airport posted a big decline in arrival figures for January: 15.8% down from last year’s January tally. Foreigners aren’t traveling like they were. Reports coming back to their native countries that garbage fills the Kathmandu streets, that electricity is unreliable, that there is Bird Flu to worry about, and that innumerable strikes pop up like mushrooms after a rain, will not help induce those foreigners who do have money to come to Nepal to spend it.
Bird Flu
The disastrous avian influenza has hit the poultry industry in southern Nepal with all its might. A senior member of the National Poultry Farmers Association said: “The market has already gone down by over 40%, causing a daily loss of over Rs 35 lakh.” The government has risen to the occasion and is taking preventative measures -- vaccination, culling, mopping – but its efforts are being confounded by poultry farmers who have placed a seven-point demand that includes compensation and other rehabilitation clauses. What funds are available for such parachute schemes?
Nepal’s Love Affair with Strikes and the Vampiric Consequences
An endless and broad consortium of Nepalis take to the streets in protest: transport workers, impoverished rural workers, teachers, doctors, students, taxi drivers, Indian haters, religious advocates, journalists and unionists of all descriptions, to name a few. Some conduct demonstrations that, apart from a bit of traffic congestion, do little to interrupt commerce, which already has a gun pointed at it’s temple. Other organizers take a more violent approach: destruction of property, physical harm, intimidation, bandas designed to cripple industry.
Recently, Maoist Party leader and Prime Minister Prachanda proposed a ban on all public sector strikes, to which the seven major parties all agreed.
But what, then, to make of this week’s strike in Pokhara?
Maoist supporters targeted a hospital/medical college in the tourist town, demanding salary hikes and other benefits. A Maoist-affiliated trade union chimed in by effecting a total shutdown of the college, citing, as their reason, that the union was being paid less than the government-announced scale.
The hospital management disagreed: "We have provided more salary and benefits than other hospitals in the country," said Medical Superintendent PK Chakrabarty. "We are providing even the sanitation workers more than the government-announced scale of Rs 4,600."
The hospital run by the institute has halted all its services, except emergency, causing inconvenience to patients after the 'All Nepal Health Workers Union and Manipal Non-Teaching Staff Union' went on indefinite strike demanding salary hike and other benefits.
Seventy-five patients admitted in the hospital had to be shifted elsewhere earlier this week.
So which strikes are permissible and which are not? Who gets to decide? The Maoists have long been criticized for being soft on its cadre resorting to violence and intimidation in order to obtain their objectives. The question remains, does Prime Minister Prachanda really mean “all” when he says, “all public sector strikes”?
One way or another, as long as the strikes continue unabated, as long as the people of Nepal regard strikes as the preferred way of handling problems, the severely hobbled economy will never be able to get up and stand on its own two feet. Strikes have become such a “given” in Nepal that what one begins to see is Economic Death by a Thousand Cuts – this in a country that needs to join hands, not chop them off.
The global recession may be knocking the air out of Nepal’s nascent republic, but there are plenty of native Nepalis who are sucking the blood from what is already an extremely anemic economy.
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