September 2006
Economy & Policy

Trading Education An Opportunity for Nepal

The policymakers, private sector and educationists in Nepal are not yet aware of global trends in education trade.

Eucation is a fundamental human right, so it cannot be treated as a commodity for trade – it is the view that most of the Nepalis favour. ‘Trading education’, therefore, can hardly be an issue of debate in Nepal. In reality, however, trade in education is a billion dollar business these days. The demand for education, on one side, is growing, while on the other side, trans-border education is increasing. Global market for higher education has increased tremendously in the last two decades. Currently, almost two million students worldwide are involved in formal education outside their home country. Moreover, the worldwide market for education services is estimated to treble over the next 20 years.

Nepal’s trade in education

While most of the countries, both developed and developing, are exploring their opportunities in education trade, the policymakers, private sector and educationists in Nepal are not yet aware of global trends in education trade.

Therefore, since long, thousands of Nepali students are crossing the border each year to search for high quality education abroad and spend millions of rupees in foreign educational institutions each year. Attracting foreign students in Nepal has never been considered as a serious matter by policymakers and educationists of Nepal. Despite such ignorance, in recent years, few educational institutions, especially health related, are experiencing an increasing inflow (enrolment) of foreign students in Nepal. Such an inflow clearly shows Nepal’s potential in the educational services trade. There are still many other factors that show Nepal’s potential in education sector. Climatic and natural advantages and low cost of living are the most important. These facts urge Nepali policymakers/educationists to explore the potential of Nepal in education trade and make the country a net exporter of educational services in future.

Education trade under WTO

When we talk about trade, definitely the World Trade Organisation comes to our minds. Trade in services, including educational services, is within the domain of the General Agreement on Trade in Services (GATS) under WTO. The agreement has outlined obligations and rights of member countries in services sector. It also sets out a comprehensive definition of trade in services in terms of four different modes of supply. The first mode (Mode 1) is cross-border supply: Services supplied from the territory of one country into the territory of another are defined as cross border supply. An example is distance learning programme in which services are supplied through mail or electronic means to consumers in another country. The second Mode (Mode 2) is consumption abroad: Services supplied in the territory of one country to the consumers of another are defined as consumption abroad. For example, a Nepali student (consumer of educational services) going to another country (the US) to consume educational services is a recipient of educational service through mode 2. The third mode (Mode 3) is commercial presence: Services supplied through any type of business or professional establishment of one country in the territory of another are defined as commercial presence. The example is a medical college with foreign equity participation established in Nepal. The fourth mode (Mode 4) is presence of natural persons: Services supplied by nationals of one country in the territory of another country are defined as presence of natural persons. The example is a Nepali professor supplying his services by physical presence in an educational institution in the United Kingdom.

Trading education: prospects for Nepal

Recent development in ICT (distance learning) has raised the importance of mode 1 at the global level; but, right now, due to weak capacity, there is less potential for Nepal to export educational services through mode 1. However, the movement of natural person (mode 4) is very important for labour abundant countries like ours. Projected demographic changes within major developed countries show that labour supply will stagnate or start falling in the next 10 years, if present demographic trends continue. On the other hand, the need for workers, in those countries, will increase significantly. At the same time, it is also projected that 10 million Nepalis will be unemployed by the year 2010. In this situation, Nepal may provide a good source of temporary workers (Mode 4 supply) to the developed countries. Unfortunately, Nepal cannot benefit much in the absence of proper planning for human resources development and identification of market access opportunities.

How Nepal can benefit?

In this context, establishment of quality institutions in Nepal, coupled with natural and cost related advantages will definitely help Nepal to attract foreign students (mode 2). Moreover, establishment of such institutions would enable Nepali people to develop their skills as per the global requirements, which will ultimately help Nepal to seize the opportunities under the mode 4 trade.

But, in a country like Nepal, where the capacity of the government and private sector is limited due to resource constraints, it may not be possible to establish such high quality domestic institutions. Foreign investment (mode 3) may help Nepal overcome such resources constraints. Affiliation with resource abundant countries/institution is a way to attract such foreign investment in education (particularly higher education) sector.

However, such commercial presence requires many other things. Among them are political and policy stability, availability of physical and social infrastructure, availability of human resources, the size of the market, and other incentives for investors.

The policies adopted by the Nepali government and its commitment at the WTO to open up higher education sector for foreign investors are very favourable. Nepal’s commitments towards policy stability are well reflected in its schedule of specific commitments in service sector (WTO document, WT/ACC/NPL 16 Ad.2).

In education services, Nepal has committed to open three specific sectors, viz. higher education, adult education and other education services for market access and national treatment (nationals and foreigners treated equally) without any restriction in respect to cross-border supply, consumption abroad and commercial presence. However, market access through commercial presence will be allowed only through incorporation in Nepal with maximum foreign equity capital of 51 per cent and except for education services funded from state resources. Additionally, Nepal has committed to increase the maximum limit of foreign equity participation to 80 per cent after five years from the date of accession to the WTO.

Nepal’s commitment to allow foreign equity participation up to 80 per cent is really attractive. However, without the participation and proactive role of the private sector, it may not be possible for Nepal to attract foreign investors. Unfortunately, Nepal’s private sector has yet to realise and recognise the potential of educational trade. Similarly, political instability in Nepal is another obstacle inhibiting its potential in educational trade. The debate among Nepali educationalists never goes beyond the issues of imports; they have never thought and discussed the topic ‘trading education’ from the perspectives of exports.

It is now the right time for Nepal to explore her trade (exports) potentials in education services, particularly in higher education. Therefore, it is imperative to initiate a debate immediately to identify Nepal ’s potential (strength, weaknesses, opportunities and threats) in the areas of trade in education. After identifying such potentials and impediments, actions, both at the governmental and non-governmental level, should be undertaken to seize the opportunities, while removing hurdles. Thirdly, a road map to facilitate the process of commercial presence of foreign educational institutions in Nepal is urgently needed.

If Nepal succeeds in doing so, the inflow of foreign students will definitely increase. In addition, it would help Nepal to retain domestic students within the country and curb the outflow of huge amount of foreign currency.

(Bhatt specialises on foreign trade and development)

Economy with Electricity

By Er. Mahesh Mahato

The economic use of energy means the better use of energy without compromising the requirement, living standard, safety and quality. There are proven methods available to achieve this.

The world is becoming increasingly aware that energy will become a scarce and expensive commodity which could in turn effect economic development in the next decade. Therefore, it will be prudent for us all to make the optimum use of limited supplies of resources and seek ways to improve the efficiency of energy by using various processes. This article tries to suggest some simple and easily implemented measures to save energy.

The economic use of energy means the better use of energy without compromising the requirement, living standard, safety and quality. There are proven methods available to achieve this. Therefore, the most probable reasons for uneconomic use of electricity are lack of awareness, technology and local expertise among many factors.

Saving on lighting

One of the most important uses of energy is in lighting. Although it is not by far the largest, by its very nature, it is an overt example of conspicuous consumption of energy and therefore, an easy prey for energy savings drive. It has also been experienced that the lighting load consumes around 22 per cent of the total power generated in Nepal and 8 per cent in the developed country. Therefore, it must be said that lighting is indeed a very promising target for energy saving. Significant savings can be achieved in it by converting to easily available devices from the presently used devices. The accompanying table lists the suggested conversions.

The following example, gives idea about how energy can be saved in a business unit.

Saving by improving the power factor

All electrical appliances and industrial equipment, barring synchronous motors, resistance heaters, and incandescent lamps, consume power at a lagging power factor. Let's assume an industry draws a maximum demand of 1,000 kW at 0.8 lagging power factor and in order to reduce the demand charge, the management decides to improve the power factor to 0.95 by some power factor improvement devices. Let's also assume the cost of power factor improvement device to be NRs. 500.00 per kVAR.

In such a situation, the industry will be able to save over Rs. 17,000 per month and with 10 per cent discount rate criterion, the investment in the power factor improvement device will be paid back within approximately 13 months (see calculation in box in previous page.

Energy saving tips:

Effective use of lighting system and energy savings lamps:

A good lighting management system should be followed, i.e. when lights are not needed, they should be switched off. This lighting management system can be done in following three different ways: (a) by manual switching system for residential use, (b) by using timer, photocell, dimmers for commercial and residential use, (c) by using PC base centralised lighting management system for industry, large commercial buildings, public lighting etc.

Energy efficient lamps should be used as much as possible.

Electronic ballast should be used in place of electromagnetic ballast to save energy up to 75 per cent. While the electromagnetic ballast consumes 12-18 Watts, electronic ballast consumes 2.5 Watts less.

Improving of power factors by using capacitors or synchronous condensers:

Electrical supply authorities have specified a minimum permissible power factor level to encourage industrial consumers to produce reactive power. A simple and economical method to produce reactive energy locally is to switch in parallel onto the installation, a bank or banks of capacitors, which indeed improves the power factor. It is seen that the most economical power factor is in between 0.92 to 0.95.

Selection of proper protecting devices:

The protecting devices with minimum loss should be used and it must comply with the latest international standard.

Other recommendations:

Energy audit should be carried out on an annual basis by qualified and experienced experts for loss reduction, especially for industries and hospitals.

For new construction, it is strongly recommended that the most effective and energy saving electrical and allied system designs should be carried out by reputed consultants.

(Mahato is Sr. Electrical Consultant / Managing Director in Cosmic Electrical)