Nepal, having faced two major blows in the recent years, the 2015 earthquake and subsequent Indian blockade, is facing a major concern with the Covid-19 pandemic. The major economy of the country being dependent on migration and tourism, Nepal is being severely impacted by the global pandemic. With business coming to a crushing standstill globally, the landlocked country will surely not be an exception.
Impact on the business sector
A tough blow for the Nepali economy, the COVID-19 outbreak will hit almost every sector of the country’s economy, shaving up to 0.13% off the gross domestic product and rendering up to 15,880 people jobless, as per an analysis by the Asian Development Bank (ADB).
The COVID-19 outbreak affects Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects, as per ADB. Nepali economy will be impacted on four major fronts, affecting economic growth and employment opportunities.
The dire need of today is that the Nepal Government, looking at the examples of the neighbouring countries, should also set up COVID 19 Economic Response Taskforce, to decide on the relief package for sectors hit by this outbreak. To tackle the current situation, food security, funds for healthcare, and sector related incentives and tax deadline extensions should be thoroughly thought upon.
Now is the time when all the taskforce of Government should combine with the think tanks of the nation and call upon the views and opinions of intellectuals, economists, chambers of commerce and industries, banks, developers, etc and work together to rebuild the nation, in a sustainable way.
First, the travel and tourism industry, which was preparing for an expected tourist flow in 2020, is feeling the effect of Covid-19. The Visit Nepal 2020 mission now has a very slim chance of achieving the ambitious two-million tourist target.
Second, hindrance in project execution is likely in several large infrastructure projects in the airport, hydropower and road transport sectors. The delay in completion of several infrastructure projects like Pokhara International Airport, Gautam Buddha International Airport, and Melamchi drinking water projects are being greatly affected due to the absence of Chinese workers. It will affect projects led by chinese contractors that are employing some Chinese workers and managers. It includes the cement industry, whose capacity utilisation had already dropped to 40% in 2018-19.
Third, the Coronavirus outbreak will disrupt supplies of raw materials and intermediate goods because of China’s central role in global value chains. Nepal’s manufacturing industries mostly rely on raw materials from China. China accounts for about 15% of Nepal’s total trade. Furthermore, the Coronavirus has started threatening the nation’s ‘inflation’ rate. Nepali rupee has been falling after the local market placers started investing in gold and dollar against stocks and businesses on the back of COVID-19 threat. Moreover, the adverse impact of Coronavirus outbreak on the supply chain has further affected the inflation rate in Nepal.
Fourth, foreign employment is a major source of remittance in Nepal. Remittance contributed 26% to the country’s GDP last year. Nepal received more than 50% of its remittance from countries like Qatar, Saudi Arabia, Kuwait and UAE. Outmigration to attractive destinations like South Korea is already suspended. A sharp global economic slowdown due to supplies and economic disruptions will gradually lower investment in migration destinations such as the Middle East. This will decrease the demand for Nepali migrant workers, leading to a decrease in remittance inflow.
Need of an Economic Response taskforce
The dire need of today is that Nepal Government, looking at the examples of the neighbouring countries, should also set up COVID 19 Economic Response Taskforce, to decide on the relief package for sectors hit by this outbreak. To tackle the current situation, food security, funds for healthcare, and sector related incentives and tax deadline extensions should be thoroughly thought upon.
Now is the time when all the taskforce of Government should combine with the think tanks of the nation and call upon the views and opinions of intellectuals, economists, chambers of commerce and industries, banks, developers, etc and work together to rebuild the nation, in a sustainable way. For this, we can think of the solutions via:
- Promote entrepreneur ecosystem to meet the gap of supply chain demand. Entrepreneurs should come up in the production line front so that the deficit is met and service sector can effectively run.
- Optimum skill utilisation of the people coming back to homeland from international labour market. Through entrepreneurship, we can tap their potential and create exportable products, which in turn will help create economic sustainability.
- Planned real estate and safe shelter is the need of the hour. Be it during the earthquake or the present day pandemic, HOME has always been the safe abode for us. Our ancestors also believed that home is the safest investment and thus used to invest their lifetime earnings in a home. Thus, serious thoughts need to be laid on functional homes and focused urban planning.
- Real Estate needs to be facilitated immediately because it has forward linkages to many other industries. Creation of employment and support to country’s economy can be achieved.