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Farm Is The Future
As Nepal faces extreme competition in international trade, it is learning that it needs to return to the basics of agribusiness to survive
By SANJAYA DHAKAL
In the past few years, the economists, officials, businessmen as well as common people have started to learn that Nepal does not have many options to survive amid the cut-throat competition of international trade vis-à-vis WTO.
“It is very simple. Apart from tourism and hydro power, agribusiness is the only sector in which Nepal can compete in international trade,” said Kumud Dugar, a leading industrialist who operates a host of agro-industries.
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Sawtee meet : Promoting agribusiness |
“But till now, we have simply failed in realizing the potentials of this sector. Because of various reasons including the haphazardly imposed local taxes, our cost of production is very high. If we can bring this cost down and maintain quality, importers will simply run towards us,” Dugar added, while speaking at an interaction on Promotion of Agribusiness organized by South Asia Watch on Trade, Economics and Environment (SAWTEE) and Agro- Enterprise Center of FNCCI on November 18.
“Agriculture, no doubt, plays a crucial role in poverty reduction. Without having rural linkages to the agriculture growth or industrialization, there can be no poverty reduction. This is where promotion of agribusiness can come into play,” said Navin Dahal, executive director of SAWTEE.
But this is easier said than done. As western countries are fiercely protective of their farm community, there are various sorts of non-tariff barriers and Sanitary and Phyto-sanitary (SPS) measures that prevent developing countries like Nepal from exporting agro-products.
Over the time, the western countries have become so fixated by standards and quality that it sometimes becomes virtually impossible for countries like Nepal to fulfill them. “There are several instances where western countries have fixed such high standards,” said dr. Krishna Prasad Pant, senior advisor at the Ministry of Agriculture and Cooperatives. He cites an example how the minimum standard of presence of benzene in water (used in production of agro-products) is similar to the risk posed to a person by a flying plane to fall down and hit him. Such absurdly high standards can practically keep off all the products from the least developed countries where farmers are not used to modern standard testing techniques.
Dr. Pant also analyzes various other reasons that can hinder in the efficiency of agribusiness in Nepal. “The fragmented or loosely linked enterprises in the commodity value chain; regulatory requirements; small scale of production; and large proportion of isolated (subsistence-based) farms are some of the factors contributing to their inefficiency,” he said.
According to him, the government can help in raising the efficiency by investing in infrastructure development; by ensuring access to market; by spreading information about quality standards and providing for standard certifications; and by technical support.
“In the context of Nepal’s membership to the WTO, a national strategy to strengthen and develop a partnership among the government, private sector and farmers should be designed so that they could together work and promote the Nepalese agribusiness in the globalized era,” said Dr. R. P. Chaudhary, a member of the National Planning Commission (NPC).
As the world is coming together to promote free and fair trade, it is imperative for countries like Nepal to use trade as a tool to end poverty. “Although international trade usually serves the interest of trans-nationalist capitalist class; there is a growing belief that it also enlarges market and benefits those who develop comparative advantages,” said Dr. Posh Raj Pandey, chairman of SAWTEE. There is no doubt that agriculture is one of the few sectors where Nepal can develop such advantage.
Since Nepal’s overriding priority is to reduce poverty, its objectives of doing trade should also be guided by this goal. At present, the consumption of poorest 20% of households increased at roughly half the increase in consumption of richest 20% of households (91.1% vis-à-vis 177.1% between 1996-2004 as per the NLSS II). Nominal income of poorest 20% of households increased at a rate (98.2%) which is 11.3% lower than rate of increase (109.5%) for richest 20% households. These data show the lopsided nature of distribution of economic growth.
In fact, economist Dr. Yuba Raj Khatiwada has come up with an interesting analysis that indicates that the reduction in poverty from 42 to 31% as shown by the NLSS II could have been much rapid was it not for lopsided and asymmetric income re-distribution. “Growth alone contributed to 24.1% of decline in poverty, redistribution of income exacerbated poverty by 13.2% resulting in net about 11% points decline in poverty from the 1996 level,” Dr. Khatiwada states in his report “Linkage Between Trade, Development and Poverty Reduction.” According to him, had there been judicious income redistribution the current level of poverty would have come down to 18 (not 31) from 42%.
As shown by these data, there is a lot Nepalese policy-makers need to do to reduce the poverty – particularly the rural poverty that haunts the predominantly farming community of the country.
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