Terai unrest paralyses economy (Nepalnews Special)
By Sanjaya Dhakal
Hopes of business community of reaping post conflict gains have been dashed as they find themselves facing worsening situation in the country, particularly the prolonged unrest in Terai – the nerve center of business and trade activities.
"The business community is totally demoralised. The business sector was already hard-pressed due to pressures from the trade unions. With the sudden unrest in Terai, the community is really demoralised," said leading industrialist Rajendra Kumar Khetan.
As situation in the southern plains worsens, the umbrella organisation of the business community the Federation of Nepalese Chamber of Commerce and Industry has been issuing out appeals for calm and restraint.
Terai plains in the eastern and central region constitute the major trade and transit point for Nepal. Almost all of its trading activities are carried out through the points like Biratnagar and Birgunj. From petroleum products to other essential goods, these are the major points from where they are transported to capital valley and elsewhere. The Parsa-Bara and Tankesinwari-Duhabi corridors are the major industrial and manufacturing hubs.
"For the past three weeks, all the industries there have simply shut down," said Khetan. Apparently shell-shocked by the speed and intensity with which the unrest gripped the region, the business leaders have become subdued, of late.
According to economist Dr. Shankar Sharma, who is a former vice chairman of National Planning Comission (NPC), the Terai unrest will have a
number of short and long term implications for the national economy. "It will have significant impact. At present, most factories have shut downdue to unrest. Since non-agriculture sector contributes 60 percent to our GDP, this will have serious impact," he said. Dr. Sharma added that the paralysis of trade, manufacturing and transport will have enormous impact on the GDP growth.
"In the long term, this unrest will cause serious impact on Nepal's ability to attract Foreign Direct Investment (FDI)," said Professor Dr. Bishwambher Pyakuryal, president of Nepal Economic Association (NEA).
Due to the unrest, the level of confidence that was restored after the peace pact has rapidly declined.
"The joint venture companies who had not backed out during the decade-long conflict and who were planning to expand in the post conflict period will be faced with a situation where there is a greater degree of unpredictability in the economy," added Dr. Pyakuryal.
At the micro level, the livelihoods of daily wage earners have been seriously threatened. Due to constant curfews, bandhs and strikes, thousands of laborers have already lost their earnings.
To make the matter worse, the unrest is certain to trigger further rise in inflation – which is already too high and growing at over 7 percent as per the report by the central bank on economic situation in the first five months of the current fiscal year.
The derailment of supplies system, scarcity of essential goods and stalled local economic growth will have multiplier effect pulling down the country's prospects of achieving four percent growth this year.
Another area that is sure to be hard-hit is the revenue collection. According to the central bank's report, in the first five months, the government has collected revenue worth Rs 26.73 billion. But due to unrest, revenue collection has trickled down almost to nothing at prime custom generating points like Birgunj and Biratnagar in the last three weeks. Protesters have not even spared custom offices in some places. This is not good news for the Finance Minister who had promised to generate Rs 85.37 billion as revenue this fiscal year.
Tourism, always a sensitive industry, has been left high and dry with the continuation of incessant bandhs and now the serious unrest in Terai.
Although the industry had heaved a sigh of relief after the cessation of armed hostilities, it has not been able to reap peace dividends due to the never-ending bandhs.
According to Nepal Association of Tour Operators (NATO), because of the bandhs and unrest, the industry is facing hardships as "cancellations from various groups have already started pouring in."
The central bank's report has stated that in the first five months of the current fiscal year, the total trade deficit reached to Rs 52.72 billion. Total exports stood at Rs 26.59 billion while total imports at Rs 79.32 billion. Recently, government secretary at the Ministry of Industry, Commerce and Supplies Bharat Bahadur Thapa had revealed that during last year, Nepal conducted total trade transactions worth Rs 222 billion. "Of that, our exports totalled Rs 60 billion while our imports stood at astounding Rs 162 billion. And nearly 70 percent of the transactions were with only one country ( India)," he had said. The saving grace has been the precious remittances sent by hundreds of thousands of Nepalese working overseas. The remittance has helped the economy from falling apart.
Given such a precarious economic situation, the occurrence of unrest – that, too, hitting at the economic nerve center of the nation – is causing nightmares to the business leaders.
"After the success of 19-day-long Jana Andolan, there was a new sense of recovery. But the business sector has been neglected and we don't see the presence of state in many areas," quipped Khetan. He warned that business sector will be haunted by feelings of insecurity and unpredictability if the situation is not immediately brought under control.
It is unfortunate that at a time when two of Nepal's immediate neighbors –India and China – are hugging the international limelight due to their stupendous economic growth reaching double-digit, Nepal continues to struggle to even achieve four percent growth. nepalnews.com sd Feb 07 07
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