Nepal Economy And Sustainable Development example essay topic

This essay is mainly about Nepal economy and sustainable development. In the following, I will discuss several questions, which are related to Nepal economy and development. Sustainable development in Nepal Nepal, officially Kingdom of Nepal, which borders autonomous region of Tibet of the Peoples Republic of China in the north and India in the east, south and west, with a number of over twenty million people, is one of the least developed countries in the world. The condition of Nepal economy will be followed. Q 1 Absolute advantage Firstly, because of the scarcity of natural resources and rugged terrain, the productivity of Nepal is low. According to Graph 1.1, we can see that most area in Nepal is in high elevation, and the rugged terrain in Nepal leads to poor transportation and difficult communication.

As we call the country have an absolute advantage in the production on a goods when the country can produce more of a good with the same resources that another country can, we are hardly find that Nepal has many absolute advantages over UK. In fact, Nepal is basically an agricultural country. Agriculture provides employment to over 80 percent of labour force and contributes about 40 percents of gross domestic product. Agricultural production technologies are primitive and the production system is subsistence based. The major crops grown in Nepal are paddy, maize, wheat, pulses, oilseeds, potato, vegetables and fruits. Food grains production in 1997/98 is likely to reach about 6.36 million metric tonnes.

Vegetables and fruits production is expanding very fast particularly in hill areas. The major export goods of agricultural production are pules, niger seeds, cardamom, tea, medicinal herbs and hides and skin. Area, production and productivity of major crops are presented in table 1.2 1.3 Q 2 Comparative advantage Although the rugged terrain makes some difficulty for Nepal to developing its economy, the rugged terrain does bring Nepal some benefit. For instance, the rugged terrain help Nepal became the "Land of Paradise" for tourists. The natural landscape of Nepal Mountains, rivers, glacial lakes, forests and wild animals are major resources for its tourism industry.

The famous Himalayan range, favorable climate and the hospitality of the Nepalese people and their culture are also major attractions. Therefore, it seems that the tourism industry of Nepal have comparative advantages over UK. Tourism as an industry has influenced segments of Nepal's economy, includes hotels, restaurants, transport, shopping, entertainment and other allied economic activities. See table 1.4 In addition, Nepal has a comparative advantage in the carpet industry in the international market, with its cheap labour; The Nepalese carpet industry has enjoyed the largest share of Nepal's total foreign export. In recent years, the carpet industry has emerged as the largest and most important industry in Nepal, without which the stability of the Nepalese economy is unimaginable. In addition, there is no domestic market for Nepalese carpets.

The carpets produced in Nepal are exported to western countries where they are recognized as a Himalayan handicraft. Germany is the biggest importer of Nepalese carpets. Germany imports more than 80% of the carpets produced in Nepal followed by the Netherlands, United Kingdom, Sweden, Austria, Belgium, France, Ireland, Switzerland and USA. Nepal ranks fourth in the world in terms of hand knotted carpet exports, with 10%of the global market share. Nepal! (R)'s major exports are clothing, carpets, grain, and leather goods besides major imports are petroleum products, fertilizer, and machinery.

(See table 2.4) Q 3 Trade partners Secondly, every country must have trade partners if they want to trade. China and Nepal are traditionally friendly neighbors, however, the level of economic interaction has never been high. In fact, Nepal's major trade partners are G 7 countries and SAARC countries (South Asian Association of Regional Cooperation), which is especially India. (See table 2.1) Nepal depends on India not only for transportation routes for the Nepal's landlocked terrain but almost all aspects of the economy for geographical and historical reasons. (See table 2.2) Since 1950's, over 90 percent of its foreign trade was conducted with India. Goods moved by land for at least a few hundred kilometers through India, and a good relationship with India was essential for the transport of goods to and from foreign countries.

Foreign trade with India has been decreased since 1960 because India imposes a tariff to control Nepal's economy. (The tariff problem will be discussing in subsequent paragraph). To increase exports, Kathmandu introduced some fiscal and monetary measures. Until the trade and transit dispute of 1989, exports had increased by 11 percent or more per year since 1975. In FY 1988, India received 38 percent of Nepal's exports the United States 23 percent, Britain 6 percent, and other European countries 9 percent.

The exports to India are presented in table 2.3. In addition, there are some factors contributed to Nepal's economic growth such as the cheap labour, and varied climate. Nepal's climate varies according to elevation. There are tropical monsoon climate, warm temperate climate, and cool temperate climate. Between about 3500 and 4100 m (about 11,480 and 13,450 ft) summers are cool and winters are very cold.

And above 4100 m (about 13,450 ft) a severely cold, alpine climate prevails. The varied climate made Nepal become the most famous tour place. And it contributes to Nepal's economy directly. Q 4 GDP Thirdly, when we want to measure the stage of one country's economy, we may use a concept called GDP (Gross Domestic Product).

It is a basic measure of economic output, in other words, the total market value of all final goods and services produced in an economy in a given year. For instance, we classified Nepal to be a least developed country for its GDP per capita (GDP divided by population) is low. In table 3.1 3.2, we can see the Nepal's GDP by sector, it is easy to know that agriculture contribute 80 per cent of GDP, but Industry only contribute less than 10 per cent. In addition, as we can get further information about one country through the information of some other countries that are related which this countries, I make a compare between Nepal, India, UK, Zambia and Turkmenistan.

For India and Nepal are neighbor, and to Nepal, India is the most important trade partner. UK is one of the richest countries in the world. Zambia and Turkmenistan are countries that have same GDP with Nepal. The comparison is presented in table 3.3. As we can see, UK is indeed a rich country. Furthermore, as Nepal's economy is depending on India, it is understandable to know that India is rich than Nepal.

However, the population problem leads to Nepal Zambia and Turkmenistan have almost the same GDP but different GDP per capita. In addition, the country is going through an economic down turn. According to the Nepal R astra Bank (Central Bank), government revenue collection has significantly declined. There maybe difference of views in the technicality of the term "recession" (whether we call the present problems being faced by Nepalese economy a recession or not) but there is genuine concern and pessimism among entrepreneurs.

With a 3 to 4% percent growth in the economy, one cannot state the affairs in the economy to be satisfactory. It needs a much higher growth (7% or more) if Nepal is to see positive changes in solving its economic problems like poverty. The problems maybe cause by the situation of Nepal's population. In fact, although Nepal's birth and death rates are both relatively high, the population is growing at a fairly rapid rate. More than two-fifths of the population is younger than 15 years of age.

In other words, the Population Growth Rate (usually called PGR) is high and will remain in high for a long time. In fact, Nepal's population growth rate increased by 2.66% in the 1970's and 2.06% in the 1980's. The economic growth rate during the same period was around 3%, meaning that the population increases virtually off set the economic growth. Furthermore, India Zamia and Turkmenistan are facing the same problem, and that is why they are not rich. Q 5 Trade barriers Fourthly, Nepal has met a trade barrier in foreign trade. Although India is the most significant trade partner with Nepal, it used to impose the majority trade barrier to Nepal.

The dispute began at 1960's. After a several years, in March 1989 there is an impasse in negotiations for trade and transit treaties with India seriously damaged Nepal's economy. As a result of the breakdown in negotiations, only two trade and transit points remained open -- both in eastern Nepal. Nepal's exports to India were subjected to high tariffs, and imports from India also carried increased costs.

The dispute was not solved until June 1990 when Kathmandu and New Delhi agreed to restore economic relations to the status quo ante of April 1, 1987. Another, Nepal and the People's Republic of China had signed a Traffic Operation Agreement in 1994 to initiate traffic from Lhasa to Kathmandu and vice versa to promote trade and tourism between the two countries. This agreement, however, has yet to be implemented. According to Chinese authorities, the problems of high tariffs and non-tariff barriers in Nepal on Chinese goods are a major barrier for rapid growth of trade. At present Nepalese Customs requires certificates for 27 kinds of Chinese commodities and the average tariff level on Chinese products stands at more than 20 percent. Q 6 Sustainable economic development Fifthly, as sustainable economic development defined as meets the needs of the present without compromising the ability of future generations to meet their own needs, all countries in the world are facing a sustainable economic development problem.

Nepal is facing much further problem that is the fast population growth and the environment damage. Since I have mentioned the population problem, I focus on the environment problem this time. Geographically, the country is divided into three ecological belts: mountain, hill and Terai. They differ from each other in many ways, mainly in terms of climate, employment opportunities and landform. As a result, the culture and socio-economy show great variation. Different social and economic factors encourage people to undertake inter-regional migration, mainly from rural to urban areas.

Land erosion, landslides, decline in soil fertility and lack of employment opportunities have been the "push factors" for rural-urban migration. This has increased pressure on the limited resources available in the towns and cities, and contributes to the imbalance between rural and urban areas. However, they are facing the same problems, which are, for instance, greenhouse effect, ozone layer depletion and extinction of endangered species, deforestation, soil degradation, decrease in soil productivity, and water and air pollution. A more local environmental problem is urban air pollution, in Nepal occurring mainly l in the Kathmandu Valley. Besides that, water pollution and soil degradation are important local problems, resulting in health problems and low agricultural production. Hence, it seems that there will be a long and hard road to go for Nepal government to improve their condition of environment, then, to develop the sustainable economy.

Q 7 Debt problem Finally let me discuss the debt problem, for world organizations such as the IMF, World Bank are playing an important role in countries. Since 1980's, Nepal's foreign debt was increasing. Between 1986 and 1990, the debt service ratio increased from an average of fewer than 7 percent to about 12 percent. In 1989 the debt service ratio skyrocketed to 17 percent. This increase was the result of the acquisition of two commercial aircraft and a decline in exports caused by trade and transit difficulties.

According to World Bank figures, by mid-1989 official foreign debt outstanding and disbursed was approximately US$1.3 billion. There also was a deficit in the balance of payments of convertible Indian currency. Then, the World Bank persuades Nepal government to perform the Structural Adjustment Program (SAP) to fell the trade deficit gap and sought to increase the speed of economic development. Although exports increased in FY 1988 by 34 percent over the previous year, Nepal still imported much more than it exported.

In FY 1988, exports were US$187 million (up from US$139 million the previous year), but imports were US$630 million, up from US$507 the previous year. Nonetheless, more efficient use of foreign aid, increased earnings from exports, tourism, and other services improved the balance of payments situation and increased the international reserves through FY 1989. Foreign exchange reserves also had increased, mostly because of loans from the World Bank and the International Monetary Fund (IMF) for the Structural Adjustment Program, as well as loans from the Asian Development Bank. Both Kuwait and Saudi Arabia had made loans that alleviated the balance of trade deficit. The trade and transit problems with India that began in March 1989, however, erased those gains and resulted in tremendous financial hardships.

Hence, it seems that there are successful and failures that world organization in Nepal. Summary To conclusion, although Nepal has few absolute advantages and comparative advantages over the developed countries, it still has its own advantages such as tourism. Nepal has low GDP per capita, high PGR, and international debt. In sum up, Nepal is at a crossroad in its development history which the country has low productivity and some difficulty in sustainable economic development. However, fortunately, the government has recognized the situation and launched wide-ranging reforms to solve the problems. Therefore, I believe that Nepal will become a rich country in future..