Nepal in Figures

A reflection in World Development Indicators shows that Nepal is on track of gradual progress. 

World Development Indicators 2014 delivers a com­pilation of pertinent, first-class, and globally comparable statistics on development and poverty. The indicators are synthesized under six themes--world view, people, environment, economy, states and mar­kets, and global links. Other sections comprises stories highlighting particular global, regional or country trends. The report portrays progress of every countries including Nepal against the backdrop of development indicators. The report compiles statistics from more than 200 countries through a concerted effort of partners including the United Nations, the Organization for Economic Co-operation and Development, the International Monetary Fund, and the International Telecommunication Union.


Global poverty is reducing at faster rate. Nepal belongs to South Asia where half of the world's poor live. Growth is faster in this Asian region. As of 2012 Nepal has GDP US $ 18.96 Billion which is lowest in South Asia. However, it is on a constant rise. It means, despite all the odds, wealth is increasing in Nepal.  

GDP (current US$)

Data from World Bank

Over the years, per capita income is also increasing; however, not in a way as expected. Although GNI per capita is low in South Asian region, it is little bit higher than that of other low income countries. Per capita income reached to US $ 700 in 2012.

GNI per capita, Atlas method (current US$)

Data from World Bank

Foreign investment is crucial for Nepal's development. In fact, the low balance of payment and small reserve of foreign currency has left Nepal to seek support from foreign investors. Besides international Assistance (Aid) foreign investment is playing a crucial role for creating wealth in Nepal. So far, foreign investment was almost US $ 91 million in 2012 which was slightly less than in 2011. The following year has brought more FDI in the country.  

Foreign direct investment, net inflows (BoP, current US$)

Education sector has seen a remarkable progress. School enrollment in primary level was increased by 135% in 2013. This is almost close to attaining Millennium Development Goals.   

School enrollment, preprimary (% gross)

Data from World Bank

Owing to increased awareness, education and health facilities, Nepalese are living more than before. As a matter of fact, average age of a Nepali as of 2012 is 68 years. 

Life expectancy at birth, total (years)

Data from World Bank

The economic transaction of the country remained turbulent lately. It declined to almost nothing in 2010. Though, the remittance and tourism helped the economy make better saving that soared Balance of Payment (BoP).

Current account balance (BoP, current US$)

Data from World Bank

Betterment in aforementioned indicators is one of the good news for Nepal's economy. After a long duration of stalemate, something is good is slowly happening. 

Trade Projects in Nepal

There are a number of projects run by Nepal's development partners in trade. As of April 2014 international organizations including the World Bank, Asian Development Bank, German Development Cooperation, United Nation's specialized organizations and other bi and multilateral entities working in Nepal have supported Nepal's trade sector.

Here is list of some of the trade projects

1. Nepal-India Electricity Transmission and Trade Project (WB)
2. Project for Agriculture Commercialization and Trade (WB)
3. Multimodal Transit and Trade Facilitation Project (WB)(closed)
4. Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program (ADB)
5. Nepal India Regional Trade and Transport Project, IDA 
6. Nepal Economic, Agriculture and Trade Program (NEAT), USAID
7. Ginger Competitiveness Project: Enhancing Sanitary and Phytosanitary Capacity of Nepalese Ginger Exports through Public Private Partnerships, WTO
8. Nepal Enhanced Capacities for Trade and Development (NECTRADE)
9. Trade Promotion Programme in Nepal

SAARC: Propagating south Asian poverty

The ineffectiveness of SAARC has pushed poorer members, especially Nepal into further poverty and deprivation.

SAARC has not been able to tackle poverty in South Asia. Although in this South Asian regional bloc had been created in 1985 with the aim of progress and economic success in the region, no fortune has been created in the poorer countries, such as Nepal. Unlike other regional blocs in the neighborhood, SAARC suffers from poor integration, non-implementation of decisions, India-centric and reluctant to spread out its membership. As a result members with LDC status are more affected and reaping poverty rather than prosperity.

Although SAARC has made a number of landmark decisions such as transport links, growth corridor, Preferential Trade Agreement, Free Trade Area, they were barely implemented.

In a contrary, another regional cooperation in the locality--Association of South East Asian countries (ASEAN), created in 1999, has left no stone unturned thereby making greater amalgamation of trade, technology and capital among them. ASEAN has left SAARC far behind not only in cooperation among members, but also in prosperity.

Poor Regional Integration

This southern bloc of Asia is creeping at a snail’s pace towards integration. It has hardly climbed up to the second stage of the cooperation staircase. Regional cooperation has six stages. A rise in integration to the succeeding stage is accompanied by higher collaboration as well as free flow of capital, commodities and technology without any restrictions.

Stages of regional integration

So far, the SAARC has ended up in Preferential Trade Arrangement (PTA) and Free Trade Agreement (FTA) in the territory. PTA reduces tariffs for certain goods in the region, whereas FTA eliminates tariffs, quantitative restrictions and non-tariff barriers to conduct trade freely.

On the other hand, regional blocs in the neighboring continent—Pacific Alliance (central and southern America), the Andean Community (South America), Southern African Custom Union (Africa) and European Union Custom Union (Europe) —have extended their cooperation a step further to Customs Union. This alliance eliminates customs tariffs among members and applies common tariffs for other states. The nations of eastern and southern Africa established a common market under their alliance Common Market for Eastern and Southern Africa (COMESA). This system helps them to move factors of production—capital, labor, technology—across the member states. Furthermore, European Union (EU) has entered into the Economic Union with common economic and monetary policies among members. Amid rapidly growing regional blocs with deeper integration, SAARC is still hovering over swallow integration with no substantial benefit for its members.     

Characteristics of regional integration

Growth Corridor in limbo

Moreover, SAARC has not become capable to implement previously proposed growth corridor (growth zones) in the country. These zones are said to boost rapid growth in the implementation area by consolidating efforts and resources. The cooperation for growth corridors focus primarily on infrastructure development, joint natural resource development, promotion of trade and investment and the creation of free trade zones. As a sub-regional cooperation this is a potent tool for speedy growth.

Regional Growth triangles    photo: www.wtec.com

Growth triangle of ASEAN, comprising Singapore, Riau Province of Indonesia and Johor state of Malaysia is a successful model. In addition, other growth zones are Tumer River Economic Development Area (TREDA) containing Yanji, Nakhoda and Chongjin of Chinese, Russian and North Korean region; ASEAN northern growth triangle including some regions of Thailand, Malaysia and Indonesia; growth quadrangle of Brunei, Indonesia, Malaysia and the Philippines; and BIMSTEC growth quadrangle comprising Bangladesh, India, Myanmar, Srilanka and Thailand. 

Owing to the example of successful sub-regional co-operations in the Asia, SAARC made an initiative to form a growth quadrangle in 1997. Four countries—Nepal, India, Bangladesh and Bhutan made an endeavor to create a growth zone aiming to develop infrastructure, tap natural resources, and build institutional linkages facilitating cooperation within members. The identified areas of cooperation were natural resource endowment (Bangladesh), tourism (Nepal), trade and investment (India) and environment (Bhutan). The ambitious SAARC growth quadrangle was expected to be completed in 7-13 years by 2009. Nevertheless, it wasn’t materialized.

SAARC Connectivity

Another episode of beautiful dream of SAARC was the connectivity of member states. The twelfth SAARC Summit held in Islamabad in 2004, planned to link South Asian Countries via strengthened transport, transit and communications. An assessment--SAARC Regional Multimodal Transport Study (SRMTS)—conducted in June 2006 10 road corridors, 5 Rail, 2 Inland Water Transport corridors, 10 Maritime and 16 Aviation Gateways for greater transport connectivity in the region. The only progress to SRMTS was on 14th SAARC Summit held in April 2007 in New Delhi that urged SAARC Transport Ministers to oversee for implementation. As time passed, it withered away.

Proposed Asian Highway Map              Photo: Wikipedia 

Over Indo-centricity

In fact, India has been piloting the regional bloc since its establishment. Role of India has been decisive for implementing SRMTS, and inviting new members in the alliance. However, India is reluctant in giving full transit right; access to the sea to landlocked SAARC members—Bhutan and Nepal. In addition, India is hesitant in inviting new members, especially China. India has sustained perennial enmity with China. As a result, the Indian national interest of Chinese evasion is daunting other state’s will of membership expansion.

“It is pointless to include new member, China, that doesn’t share a common culture, economy and history of South Asia”, a senior official of the Indian Foreign Ministry in New Delhi said in an interview to The Telegraph on 19^th March 2014. 

Accumulation of Poverty

The Perennial inefficacy of SAARC has resulted in reaping more poverty in south Asia. Despite national effort of poverty reduction in the member countries there is no substantial decrease in number of poor. In addition to the poor supply side capacity of LDCs in this Asian region restriction on trade and frail linkage—transport, policy and communication—among members has worsened the trade regime. Whereas, ASEAN’s endeavor has rocketed economic progress in East Asia. As a result ASEAN poverty which was more eminent than that of South Asia in 1980s, fell sharply after 1990s.    

The time has come to redefine the objective of SAARC, restructure and reform to the greatest possible extent. In addition, there is a need of upgrading the present cooperation into the higher level of regional consolidation. This regional bloc needs Implementation of current SAARC Free Trade Area and gradual advancement towards the SAARC Custom Union and Common Market where factor of production—capital, labor and technology can freely flow across countries. Then only, SAARC will garner its member states a robust economic development. 

Economic Diplomacy for Tourism Promotion in Nepal

The use of diplomatic channels for promoting economic interest including tourism is of paramount importance

Nepal’s dealing with the external world should focus on economics rather than politics. Due to the multitude of restrictive factors—difficult geography, inadequate military capacity, poor technological development, less influential leaders Nepal’s national capacity to play a big game of political diplomacy in the world stage is limited. Now, the only option left for us is steering our whole gamut of international affairs towards economic diplomacy. For instance, as a robust comparative advantage to others, tourism promotion at the forefront can harvest enormous benefit to enhance economy. The better economy would eventually increase our internal capability.

Nepal Tibet War                        Photo:Nepal Army

The economy had been at the essence of diplomacy during 18th and 19th century, when Nepal established business ties and an effective trade system with Tibet and British India. The relation, as a strategic alliance, was purely based on economic interest rather than political gain. Even after the war broke out between Nepal and Tibet--as a conclusion Thapathali treaty was signed in 1856. As per the truce, Tibetans agreed to pay an annual subsidy of ten thousand rupees to the Nepal Durbar and to allow a Nepalese trading station and agency to be established in Lhasa.

Government of Nepal (GoN) realized that tourism can contribute to the country’s economy only during the late fifties. Tourism Administration was formed in 1957. Next, a major step forward in Nepal’s tourism appeared in 1972 by the formation of ‘Nepal Tourism Master Plan’. Among other tourism promotion strategies, the master plan also recommended establishing ‘tourist bureaus in Western Europe and USA’. Also, the plan advised to distribute Travel Agents Manual for wholesalers in North America, Europe, Japan and Australia that operate in the Asian marketplace. Nevertheless, those recommendations are still a great challenge for implementation.

Namobuddha Monastry in Kabhre district   Photo: Author

Moreover, Tourism Policy, 1995 made special emphasis on promotion of tourism from Asian markets. Under its working policy, it attempted to direct attracting tourists from neighboring countries during the lean season when overseas tourists were few. In addition, it envisaged the then Royal Nepalese embassies and consulates abroad to mobilize promotion of Nepal's tourism. It also emphasized the provision of Nepalese people abroad, or foreign citizen involvement in tourism business or with a keen interest in tourism, could be appointed as representatives for tourism promotion.

Eventually, the GoN established Nepal Tourism Board (NTB) in 1999 after the realization that private sector’s effort is also necessary.  The Board is the public—private partnership model incorporating the participation of the private sector under a legitimate leadership of the government.

Nevertheless, the effort being made for tourism promotion through diplomatic channels is not sufficient.  NTB has been hit hard by lack of sufficient budget. Consequently, the board has not been able to deploy its office abroad.  In a contrary, other National Tourism Organizations (NTOs) with similar tourism potential has posed great threat to Nepal’s tourism promotion body. Nepal is facing a sharp competition from destinations--China, Sri Lanka, Thailand, Malaysia, Hong Kong, Singapore, Vietnam, and Laos. Due to adequately high promotional budget, these East Asian countries have comparative advantage over Nepal in many factors. However, Nepal is doing its best with its inadequate budget.

After the fall of the Soviet Union in the early nineties, the cold war eventually ended that gave a new dimension to diplomacy. Although it started a bit earlier, cessation of cold war put economy at the forefront of diplomacy rather than political gains.

Amid shifting global ideology, Nepal also underwent through major political transference i.e. restoration of democracy in 1990. Thus, Nepal adopted policies of open market economy, giving high priority to integration into the world economy. In this context, the Government emphasized economic diplomacy, a set of actions linked to cross-border economic activities. Economic diplomacy is a part of diplomacy that promotes the economic interests in its interactions with other countries, regional and international organizations. Diplomacy is the art and practice of conducting negotiations with other countries to secure national interests.

In order to mainstream the potentiality of Nepal’s advantageous sectors into foreign policy instruments, a separate division--Multilateral Economic Affairs Division (MEAD) was formed within the Ministry of Foreign Affairs. The division undertakes the function of promoting Nepal's economic interests abroad. It also emphasizes promotion of tourism along with foreign direct investment, export and development cooperation.

Today, amid insufficient tourism promotion in the country, and its continual failure to draw in foreign nationals, diplomatic and consular missions of Nepal is the only hope left behind. The political transition of this time has radiated hope in the international arena that Nepal is no more a dangerous place to shoot the breeze. 

This is a great leverage for Nepal’s diplomatic missions who have their presence in 29 countries, many of which have greater affinity for visiting destinations like Nepal. There is a need for further orientation of these staff of the missions who can play a vital role in tourism promotion. NTB can provide orientation programs for those mission members prior to performing their project. To lead the process ahead, the Ministry of Foreign Affairs should have adequate cooperation with other line agencies, including the Ministry of Culture, Tourism and Civil Aviation.

Furthermore, the GoN’s proposed action plan to promote tourism as well as foreign employment, investment, and hydropower through the medium of economic diplomacy should materialize as soon as possible. In that direction, GoN has formed a high-level coordination committee led by the Minister for Foreign Affairs and set up an economic diplomacy desk including representatives of the representatives from Nepalese diplomatic missions abroad.

The private sector’s role is also instrumental in promoting tourism overseas as the government’s effort is insufficient. As per examples from other states, private sector’s bilateral chamber of commerce in a foreign country supporting honorary consulate generals by organizing tourism trade fairs is highly fruitful. It is indeed a good initiative of the Non Resident Nepalis Association (NRNA) that its president Shesh Ghale has called supporting Nepal’s economic diplomacy through their presence in 65 countries across the globe. So far, supportive role of NRNA in Hongkong for promoting Visit Nepal Year 2011 is commendable.

A vigorous public, private initiative for promoting tourism through Nepal’s diplomatic and consular missions abroad is the need of this hour. Private sector’s expertise and resources coupled with GoN’s already established workstation can better promote the country’s brand image in the world. Besides 29 diplomatic missions, 4 consular missions in Kolkata, Beijing, Lhasa and Jeddah are important hub for showcasing Nepal’s sight-seeing portfolio. Federation of Nepal’s Chamber of Commerce and Industries (FNCCI) can start an immediate promotion plan in tandem with limited government staffs deployed in those missions in the region. 

Drawing the global customers starting from the immediate region is a proficient heads up for a start. A diplomatic leverage for promoting tourism in the neighbor and the rest of the world is something practically feasible approach. Amongst growing regional powers in the vicinity Nepal’s political dealing has reaped no fruits. At this juncture, Nepal has to use its comparative advantage--tourism to collect currency reserve that will ultimately protect national interests.      

Nepal’s Access to the Sea: Is it possible?

There are binding international laws that can grant Nepal's access to the sea. However, Nepal's over dependency over India and the later's reluctance diminishes this possibility.    

Nepal’s unfavorable terrestrial position is one among the several factors responsible for geographical, economic and developmental problems. The country’s export is cumbersome due to the unavailability of direct access to the sea. The international trade is expensive, un-competitive and incurs high cost of production.   

Nepal stepped in to the club of Land Locked Developing Countries (LLDCs) which contains 31 countries spread across Africa, Asia, Latin America and Europe. As a member of LLDCs Nepal has got a platform for raising its voice collectively for the transit rights. So far, Nepal endeavor has not reaped ample benefit in this regard. However, Nepal’s stance of implementing all the international obligation for the benefit of poor land locked through their neighboring transit countries is praiseworthy.

International community has always been in favor of weaker—land locked—countries of the world. Their rights are ensured by several international treaties. One of the pioneer effort is the Congress of Vienna, 1815 recognized the LLDCs. The discourse of transit rights of the Land locked accelerated after First World War. The shrink of Austrian empire into a land locked country accompanied by Czechoslovakia and Hungary revitalized the issue. The Treaty of Versailles, 1919 allowed land locked states to freely transit goods and personnel to sea ports. The Covenant of the League of Nations, 1920 also provided ‘freedom of communications and of transport and equitable treatment for the commerce of all members of the League’ through article 23. Later, the Declaration recognizing the Right to a Flag of States having no Sea-coast  was signed on 20 April 1921 in Barcelona, Spain, at the League of Nations Conference. Fifty States have ratified the declaration as of 2013. As an international law, it recognizes the rights of any state to sail ships on the sea under its own flag. Owing to this, a number of land-locked countries—Austria, Hungary, Switzerland, Luxembourg, Moldova, Slovakia, Paraguay, Bolivia, Mongolia, Laos, Ethiopia--have their own merchant vessel fleets. 

IGC Meeting between India and Nepal, 2013 (Photo: Kantipur)

A more robust strategy for supporting LLDCs right, including Nepal, came during 1960s only. After the formation of UNCTAD in 1964, the transit and transport problems of LLDCs were recognized. Further, in 1995, the UN General Assembly endorsed the Global Framework for Transit Transport Cooperation between LLDCs, transit countries and donor community. Later in 2003, United Nations organized an international ministerial conference in Almaty city of the world’s largest land locked country—Kazakhstan. With the goal of overcoming the problems of LLDCs, the conference adopted Almaty Declaration and Almaty Programme of Action (APOA). The objective of APOA is to establish a global framework for action in favor of both the landlocked and transit developing countries. The Programme of Action basically aims to secure access to and from the sea by all means of transport according to applicable rules of international law. It also addresses reducing costs of export, imports, delays, loss, damage as well as opening the way for export expansion safety improvement of road transport.

UNCTAD is the implementation partner of APOA and also provides technical assistance to the LLDCs.

The next episode of the ministerial meeting was held in Paraguayan city of Asuncion in 2005. It expressed concern of marginalization of LLDCs in multilateral trade, remoteness and isolation form world market is due to lack of access to the sea. The conference adopted Asunción Platform for the Doha Development Round aiming at trade facilitation and technical assistance to the LLDCs through negotiation.

Furthermore, the global body’s established the UN Office for High Representative for LDCs, LLDCs and SIDs (UNHROLLS) in 2001 to provide support for those poorer countries and implement APOA.

The aforementioned provision have been instrumental in supporting LLDCs rights of free transit to the sea. These multilateral international obligations in the form of international laws have benefitted most of the suffering countries.

Moreover, bilateral negotiations between the geographically locked countries and the transit countries have positive implications. In 1992, One among the large land locked country, Mongolia signed an agreement with Russia concerning its access to the sea and transit transport across the territory of the Russian Federation. Mongolia has been maintaining cargo ships in the East China Sea. Besides, land locked South American nation, Paraguay operates a navy of around a dozen vessels and has several thousand personnel. The Paraguayan navy could reach the open sea by traveling downriver through Argentina. In December 2013 Uruguay offered Paraguay and Bolivia, the South America’s only two-landlocked countries, access to the sea in exchange for hardwood sleepers used to reform railway infrastructure in the country. The Uruguay agreed a port to Bolivia in Rocha, located on the Atlantic Coast near the border with Brazil. 

Nepal’s most convenient route to the sea is via India and Bangladesh. Nepal shares similar cultural characteristics with India. There has been movement of people across the border between the two countries since time immemorial. Apart from this age old cultural ties, Nepal and India signed a Treaty of Peace and Friendship in 1950. The treaty allows free flow of people and goods reciprocally. Article 1 of this agreement binds the two countries respect each other’s independence, territorial integrity and sovereignty. Likewise, article 6 of the agreement allows free movement of people, capital and right to perform any industrial activities. This is only possible when the free and unrestricted movement of each other’s goods (traffic in transit) is given a good treatment. Additionally, article V of GATT 1947 (General Agreement on Tariffs and Trade) has the provision of 'freedom of transit through the territory of each contracting state via the routes most convenient. GATT was succeeded by the WTO in 1995. Both the countries are party to the WTO. A powerful Dispute Settlement Body (DSB) is there at the WTO which can bind its member countries to obey the laws. However, Nepal has never filed any case claiming hassle free and un-restricted access to the sea at the DSB. More often, Nepal has been raising the issue in bilateral talks. However, India is always reluctant in granting sufficient rights to its poorer northern neighbor.   

Government of India has become positive to grant Nepal with sufficient rights for transit via its territory. In December 2013, during a commerce secretary-level “Inter Governmental Committee (IGC)” meeting, the southern neighbor agreed to allow imported vehicles to be driven through Indian roads to Nepal from Kolkata’s Haldiya Port “on its own power”. This is one of the remarkable agreements between India and Nepal which include developing infrastructure at new customs points to facilitate bilateral trade; easing the current provision of transshipment which Nepal can further negotiate to establish port for Nepal.

Apart from this bilateral relation, Nepal can further strengthen the progress of SAARC and BIMSTEC in which both the countries are members. The current development of these two regional instrument is only up to Free Trade Areas as SAFTA and Bimstec FTA. Further diplomatic leverage can enhance the development of two of these regional cooperation into SAARC/BIMSTEC Custom Union, Common Market or, if more successful, Economic Union. Further up gradation of these fora allows free flow of capital, technology as well as a robust common economic policy in the region can allow Nepal a greater access to the sea. In order to materialize this regional instruments, Nepal should have more list of goods and services for export. At least, for now, implementation of Nepal Trade Integration Strategy 2010 which provides the list of 19 products and services as Nepal’s export potentials.

Although Nepal has several multilateral agreements and instruments to claim its rights to sea, there is always a win-win situation in bilateral dealings. The instances of Russia—Mongolia and Uruguay—Paraguay & Bolivia model of land locked state's access to the sea is beneficial for Nepal.