The economy will rebound to surprise everyone.
--BY SUJEEV SHAKYA
Nepal’s economic analysis is not led by pracademics. We have two distinct sets of people who get active during difficult times to start spreading doomsday prophecies. First, there are those who have never visited Nepal or just come on as parachute consultants who will tell you what they have been told by the same set of people for the past thirty years. They will of course paint a grim picture as their objective is to be able to sell some poverty alleviation programme and work with Nepal’s poverty brokers. The objective is to paint as dismal a picture as possible to be able to start some grants or programmes that have little accountability.
Second, there are these seasoned folks who every media person goes to for comments who have been the same people who have commented for the past two to three decades. They have an objective to keep it a bit bleak as they are the first choice of consultants to draft grim pictures. There are also a few who are running think tanks and other institutions who are also thinking on how the next set of paychecks will be met. But people are not really interested in listening to these people.
Projections Without Understanding Ground Reality
Projections on Nepal’s economy have never been correct as economists who do it are completely unaware of the reality on the ground. Nepal is not an economy that is integrated to the outside world through supply chains and exports, so it is not Vietnam and Malaysia. It is rather an economy that is built on consumption.
During the lockdown, one of the challenges people had was to figure out how to get their favourite brand of alcohol. People are not going to give it up. Similarly, what if a kilo of mutton costs Rs 1,500, people do not want to skip it. This is in stark contrast to other neighbouring countries where people have also adopted austerity measures. In Nepal, people do not know what austerity is, they keep consuming. Once the Bhatbhateni superstores opened, you could have seen this at checkout by the type of stuff that people were buying. This is a country that has already been addicted to buying expensive imported stuff like packaged food, beverages and consumables. It is a country where people do not bat an eyelid to pick up a Rs 500 a kilo Kiwi fruit during the good times and Rs 800 during such challenging times. Even at the bottom of the pyramid our poor and marginalized, apart from a minor group, are different than what other countries have. We see people holding new models of iPhones queuing up at places where relief is being distributed. Further, let us not forget, while we cannot look for the citizenship of people begging and in tattered clothes, it has been interesting to note what language they speak and how they get awkward when we start asking which part of the country they belong to. The perception of a prosperous Nepal compared to the states across the border, attracts people who form the bulk of the pictures taken by poverty brokers. The on the ground reality is different in a country that does not really bother when it comes to consumption and that is what drives the economy.
Tourism and Remittances
There are of course doomsday prophecies floating around on tourism to ensure that the big folks can get a lot of money out with tourism relief. However, with 64 percent of Nepal’s tourism earnings dependent on domestic tourists and big hotels sales mix dependent on social functions hosted by Nepalis, international tourism plays a role smaller than what is projected.
Nepalis will not stop travelling and they will not stop having large gatherings conducting every function like what they see on Indian television serials. Further, with Chinese tourists rising, come April 2021, we would have realised that all the tourism projections that folks were churning out were not correct. In the case of migration, the countries where Nepalis migrate to are dependent on migrants to keep the economy going, therefore, we will see no major reduction in the medium term. These countries in their contingency planning will start looking at having more people as back up as happened when AIDS gripped Africa.
For instance, for cabin crew, there will be an extra crew on standby in case the set gets quarantined. There will be new human intervention at airports, different large gathering places, which will mean more people to man security. Post-9/11 in the world airports and post-26/11 in India, there were new checks established that employed more people.
Of course, in Nepal, the well-connected manpower agencies mostly run by ruling party royalists (they change the parties depending on who is in the government) will be able to eke out some subsidies for themselves. Of course, they need money to subsidise the lavish lifestyle they have been used to living.
Crises do not deter entrepreneurs, they find new ways to keep themselves afloat. Post-quake and blockade, we saw the type of people who worked hard and the type of people who just stayed at home. This time also, we saw people who were selling clothes or sweets turning into vegetable vendors overnight doing some good business.
Nepali businesses are now dominated by Marwaris and post-2008 rising Bahun business barons, as I write in Unleashing The Vajra. Both these communities are very well connected to the political powers and know how to get around. Among the big guys in these groups, it would be rare to find them not being able to wiggle out the passes to run vehicles during the lockdown. They know how to leverage the white number plate government vehicle and obtain permits for their own. The folks in government can only but support these folks as with their money power which is so important at times of elections, some of these people will be instrumental. So, there are also people who have raked in the money during the crisis as they find new channels to make supplies, defer contracts, claim compensation, avoid paying employee salaries and vendors and figure out new ways of making more money.
For many businesses, just handing over relief materials to someone in government and, of course, with social media, having pictures out there are so important because in this country a business person or a professional is judged on how much they are hogging the limelight rather than on how good that person’s business is doing and how much taxes they pay. These people are well organised under cartels and super-cartels and know how to be on the right side of the politicians for business gains.
Nepal’s economy is a complex one to understand as the reason behind the actions of the government and people require a much deeper understanding of the complex nature of our society, our habits, our rent seeking mindset, the dependency on external resources, short term opportunism and our short span of memory.
Until and unless the COVID-19 pandemic infects hundreds of thousands of Nepalis resulting in many deaths and chaos as we saw in Europe or US, this is a passing phase that some will try to learn from, but most will forget like the perils of a natural disaster like the earthquake. I would like to see in September, how much the folks who are selling doomsday prophecies got it right and how much they were wrong.