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Ninth Plan - Nepal
Tables of the original document are excluded
Source: National Planning Commission
In the process of planned development, we have arrived at the Ninth Plan. In the context of growing peoples' aspirations following the restoration of democracy, this Plan has been formulated in somewhat different form from the previous plans in the light of the implementation experience of the Eighth Plan. Basically, poverty alleviation has been taken as the main objective of the Plan; and sectoral objectives, policies and programmes have been focused towards the fulfilment of this challenging objective.
A significant attempt was made in the Eighth Plan to extend socio-economic facilities to the village level through the medium of decentralisation and the provision of physical infrastructure. However, these facilities have still become more important particularly in the backward districts as employment and income-oriented foundations have not been able to make sustainable and extensive in the country. Therefore, an attempt has been made to develop more remote areas that have lagged behind, socially and economically.
While formulating the Ninth Plan, it is almost impossible to attain the set targets in line with the fundamental objective of the country within five years. Therefore, long-term targets for the crucial sectors of the economy have been set in this Plan for the first time, which is based on the thinking that the country can make a significant progress by setting long-term targets and accordingly formulating five-year periodic plans.
Although sectoral priorities in previous plans have been set by the allocation of expected outlay, it is evident that all sectors have received equal importance in line with the concept of development. In the context of the past experience where the country has not been able to attain predetermined target, a clear development thrust for major sectors has been incorporated in the Ninth Plan.
In the present context of poverty being the development challenge to all sectors and securing the welfare of the majority of people in the country from fast poverty alleviation, this Plan has given main emphasis on poverty alleviation and employment generation and has adopted poverty alleviation as the main objective.
In the context where the majority of people at present depend upon agriculture, the Plan has laid more emphasis on the implementation of the Agricultural Perspective Plan as supported by all the past governments.
Chapter 1: Review of the Eighth Plan
1. Background
The process of planned economic development has commenced in Nepal since 1956 with the inception of the First Five-year Plan (1956-1961). Eight periodic plans have been implemented so far. Some progress has been made towards laying socio-economic infrastructure, which has supplemented national development over a little more than four decades; however, achievements of these plans do not measure up to the expectation. No substantial progress has registered in the agriculture sector, upon which the majority of people mainly rely for subsistence. Only a limited number of industries have been established. Internal savings have remained low. External assistance has not been utilised gainfully. Foreign trade has recorded increasing deficit. Unemployment and economic inequality have not been able to reduce. As a consequence, the problem of poverty still remains unresolved.
Poverty still persists as a formidable challenge as population growth has not been able to bring down and the increase in the income of the people has remained minimal. Against the backdrop of 42 percent of the population living below the absolute poverty line, it is highly essential to promote investment and employment and render sustainable and dynamic economic development in order to increase the income of the poor within a certain time span.
2. Review of the Eighth Plan
The Eighth Plan, which was implemented following the restoration of multi-party system, set the objectives of attaining sustainable economic growth, alleviating poverty and reducing regional disparity. For the attainment of those objectives, it was underlined in the Plan to allocate the limited economic, human and institutional resources in a priority order given below:
The development approaches to the Eighth Plan were as follows:
Attempts were made during the Eighth Plan period to encourage private sector participation and investment and to confine the role of the government more to developing socio-economic infrastructure. Thus attempts were made to make the role of the government limited but effective by gradually replacing the command economy by open market system. During the Plan period, efforts were made to create an environment conducive to liberal and market-oriented economic system. Preparations were made to introduce value-added tax (VAT). Privatisation of public enterprises was initiated. Protections, which the public enterprises were enjoying in various areas, were removed to encourage private sector participation. Subsidy was controlled. Exchange rate was left to determine by market forces; and commercial banks and financial institutions were encouraged to establish.
The Eighth Plan envisaged transforming the village into a centre of development and attempted to channel a big chunk of public investment towards its upliftment. In this context, power was devolved to the local bodies and various policies and programmes were executed to transfer resources to the local bodies. All these were carried out to implement the decentralisation policy effectively. Thus, a policy of inter-weaving the concept of regional development with that of village development and decentralisation policy was being adopted. Likewise, new programmes directed towards alleviating poverty and reducing regional disparity were initiated. An Agriculture Perspective Plan (APP) was prepared, which gave a clear direction to national development programmes. A basis was worked out in regards to land reform to put an end to dual land-ownership. Potential areas were identified for the development of irrigation and energy. Likewise, new programmes were initiated to uplift the deprived and the down trodden class and special programmes were started for the homeless, kamaiya (bonded labour), the old and the helpless.
Status of Economic Progress:
Gross Domestic Product
The Eighth Plan had set a target of attaining an average economic growth of 5.1 percent per annum. To attain this growth rate, the value added had to grow by 4.8 percent per annum on an average. Similarly, agricultural growth rate had to be 3.7 percent and non-agricultural growth rate had to be 6.1 percent. Based upon the estimated population growth by 2.1 percent during the Plan period, the per capita income was estimated to grow annually by 3 percent on an average.
As per the plan target, gross domestic product (at producer's prices) increased by 5.1 percentage point and the same (at factor cost) was estimated to have increased by 4.9 percentage point. Average agricultural growth rate stood at 3 percent while non -agricultural growth rate remained 6.3 percent during the plan period.
The progress made in the agriculture, irrigation and forest; industry, geology and mines; power, public works, trade, hotel and restaurants sectors fell below the set growth target. However, the progress in transport and communication, finance and real estate and social services exceeded growth targets. In the fiscal year 1992/93 and 1994/95 - the first and third year of the Plan, inclement weather and resultant flood and landslides caused great destruction in men and materials, which had adverse impact upon the agriculture sector. In addition, the internal situation that transpired within the country has caused a set back in the growth of industrial production. Beside this, as Arun Third Project failed to take off, the power sector did not record expectant progress, which rendered its contribution to GDP quite low. Likewise, no improvement could be made on the existing international air service. The garbage problem within the Kathmandu Valley defied solution. As a result, the trade, hotel and restaurant sector recorded low growth rate.
In the financial sector, progress exceeded the target due to the establishment of numerous new commercial banks, financial institutions and insurance companies following the adoption and execution of open market and liberal economic policies. Likewise, the transport and communication and the social services sector registered high progress in comparison to the target owing to expanded investment during the Eighth Plan.
Despite growing private investment in the industrial sector, the average annual growth rate remained a low of 6.8 percent due to load shedding and political instability during the Plan period. Although some foreign investment was attracted to the industrial sector during the period, more effort was felt as needed for the same. Following the policy of reducing public investment in the industrial sector, some public enterprises were privatised. While some industries had record high production after privatisation, the government losses scaled down.
Changes were seen in the economic structure due to various growth rates recorded in different sectors. Contribution of the agriculture sector to GDP which stood at 44.89 percent in the fiscal year 1991/92 came down to 41.02 percent in the final year of the Plan. The transport and communication sector recorded a high increase in its contribution to GDP, which rose from 6.89 percent in 1991/92 to 8.03 percent in 1996/97.
Savings and Investment
Based upon the incremental capital output ratio (ICOR), it was estimated that an investment of Rs 170,332 million (at constant price of 1991/92) was needed to achieve the growth target set in the Eighth Plan. Of this, 35.9 percent (Rs 61,139 million) was to be invested by the government and 64.1 percent (Rs 109,193 million) was to come from the private sector. For the capital investment from the government side, an outlay of Rs 113,479 million was estimated as the development allocation.
During the period, gross fixed capital formation reached Rs 188,892 million at 1991/92 prices. Investment in the first year was Rs 35,918 million, which reached Rs 48,359 million in the final year. In the gross capital formation, the share of the private sector stood at Rs 128,624 million and public investment constituted Rs 60,267 million.
In the year 1991/92, the base year of the Plan, total investment constituted 21.2 percent of the gross domestic product, which reached 25.1 percent in the final year of the Plan. Likewise national savings rose from 13 percent to 14.8 percent of the gross domestic product. In 1991/92, total national savings formed 61.4 percent of the total investment. The same increased to 68.3 percent in 1991/92 and decreased to 59.1 percent in 1996/97.
Thus, as against the estimation of 15 percent, national savings remained 14.8 percent of total gross domestic product.
Status of Public Finance:
Financial Resource Mobilisation
Internal resource mobilisation plays a significant role in bearing public expenditure, increasing investment rate and maximising the utilisation of foreign assistance. Keeping this in mind, the Eighth Plan had set a target of raising revenue up to 13.4 percent of the GDP. For this purpose, the Plan adopted a series of policies which aimed at bringing required changes in tax system: making a tax guided by a single objective rather than multiple; introducing value added tax; evolving a tax system for the agriculture sector; bringing uniformity in custom duties; gradually removing excise duty; making income tax simple and comprehensive; enhancing land revenue as a local resource; making property tax systematic; and rendering the revenue administration more capable and efficient. As regards to foreign assistance, the Plan laid emphasis on its maximum utilisation and stated that external loan would be taken only for directly productive programmes and that for the rest grant would be sought.
As against the target of making the revenue administration capable and efficient as a first step, formation of the revenue group was completed during the Plan period. To bring about a desired change in the tax structure, attempts were made to bring about uniformity in country-wise import duties and reduce number of import rates to a mere five, including a special rate. Sale taxes were fixed at only 10 and 20 percent and excise duty was limited only on production of alcohol, cigarettes, and tobacco. To introduce value added tax, the number of commodities, which had to pay sales tax at two levels, was increased. Besides this, Acts were enacted, preliminary administrative arrangements were made and various activities, including raising public awareness about the tax, were carried out.
As per the policy of developing land revenue as a local resource, a system of allocating 55 percent to District Development committee (DDC), 40 percent to Village Development Committee (VDC) and depositing 5 percent in the government of the total revenue collected was introduced. The budget for the fiscal year 1995/96 provided 75 percent of the total land revenue and land tax to be allocated to municipality and VDC and 25 percent to DDC. Steps were taken to make income tax simple and comprehensive. Attempt was made to increase the number of income tax payers. A system of self- assessment of income and pre-tax collection was put in place. Despite formulation of policies to systematic property tax, various practical obstacles came in its enforcement. As such, this tax was revoked and a policy of effectively executing house and land tax in its place was adopted.
Regarding evolving and introducing tax system in the agriculture sector, various rates of land revenue were fixed for lands which had not been surveyed and tea estates and urban land area were imposed. Yet substantial amount of revenue could not be mobilised. During the Plan period, prioritisation and classification of projects into the core and non-core projects were carried out, and execution of three- year rolling plan was initiated.
Public Finance
It was estimated that during the Eighth Plan period the regular and development expenditure at the constant prices of 1991/92 would be Rs 53,759 million and Rs 113,479 million, respectively.
Regular Expenditure
During the Plan period, the regular expenditure at constant prices of 1991/92stood at Rs 68,339.6 million,which exceeded the target. In the first year of the Plan the expenditure reached Rs 10,553.3 million which decreased by 0.85 percent in the second year and came to Rs 10,463.1 million. But in the third year the expenditure rose by 44.21 percent and reached Rs 15,088.6 million. The main reason for this expected rise in the regular expenditure had been the transfer, from the development head to regular head, of Rs 352 million (at the current prices) and Rs 2,718 million (at the constant prices), which were of regular nature. In the final year of the Plan, the regular expenditure stood at Rs 16,614.6 million.
Development Expenditure
It was estimated that during the Plan period, the development expenditure (at constant prices) would reach Rs 113,479 million, which turned out to be Rs 111,824.4 million (at current prices) and Rs 87080.3 million (at constant prices) which was 76.74 percent of the target.
Development expenditure (at constant prices) rose by 8.04 percent and reached Rs 17840.1 million in the first year; increased by 0.14 percent and reached Rs 17,865.3million in the second year; and decreased by 13.22 percent and came down to Rs 15,403.5 million in the third year. The main reason for a decrease in the development expenditure in the third year of the Plan had been the transfer of Rs 2,718 million (at constant prices) from development head to regular head; and holding of election and consequent political instability, etc. In the fourth year of the Plan, the development expenditure grew by 16.73 percent, which came down by 1.78 percent and remained Rs 17774.9 million in the fifth year.
As against the target of development expenditure of 29.6 percent in economic services sector, 31.6 percent in social services sector and 39.6 percent in physical infrastructure sector in the Eighth Plan, the actual expenditures were found to be 30.94 percent, 33.29 percent, 34.37 percent, respectively. In this way, it was found that the expenditure was less against target in physical infrastructure while it was high in economic services and the social services sectors.
Sources of Development Expenditure:
The total development expenditure of the plan period was envisaged to be Rs 113,479 million at 1991/92 prices and was expected to be borne from the following four sources: (a) revenue surplus (b) internal loan (c) foreign grant, and (d) foreign loan.
Revenue
Against the target of mobilising revenue by 13.4 percent of GDP during the plan period, it stood at 8.97 percent in 1992/93, and reached 9.83 percent in the second year, 11.09 percent in the third year, 11.00 percent in the fourth year and 10.94 percent in the final year.
Revenue collection in the first year of the plan was Rs 15,148.4 million (at current prices) which reached Rs 19,580.8 million, Rs 24,605.1 million, Rs 27,893.1 million and Rs 31,214.1 million respectively in the second, third, fourth and final year respectively. At 1991/92 prices, revenue collection figures from first to final year of the plan were Rs 13,920.6 million, Rs 16,509.9 million, 19,270.9 million, Rs 20,206.5 million and 20978.6 million in the first, second, third, fourth and final years of plan, respectively.
As against the target of increasing revenue mobilisation by an annual average of 9.7 percent at 1991/92 prices, the annual growth rate reached 9.20 percent. In the first year of the Plan, revenue growth rate unexpectedly went down to 3.02 percent. It increased to 18.60 percent in the second year, 16.72 percent in the third year, 4.86 percent in the fourth year and decreased to 3.82 percent in the final year. Revenue growth rate was decreased in the first year due to low import tariff rates imposed on various commodities. Although the revenue growth rate was good enough in the second and third years, it was very low in the fourth and final years of the Plan.
During the Plan period, highest revenue was collected from import duty, sales tax and income tax while lowest revenue was collected from land revenue and export duty. However, from the view point of annual average growth rates, the income tax, import duty and sales tax had high growth rates. The trend of revenue mobilisation from land tax was decreasing while revenue from excise duty had decreased in the initial years though increased in the final year. Property tax could not be raised as expected. Due to administrative and other difficulties, this tax system was removed in 1995/96 and policy was adopted to mobilise house and land taxes.
Non-tax revenue had increased by 3.12 percent on an annual average reaching the amount to Rs 4240.4 million from Rs 3637.1 million at 1991/92 prices. In non-tax revenue high growth rates have been observed on miscellaneous, principal and interest and government properties, and sales of services and commodities.
It was observed that during the plan period the contribution of tax and non-tax revenue in total revenue collection was 78.68 percent and 21.32 percent respectively. In accordance with the objective of imposing value added tax (VAT) during the plan period and removing excise duty, number of commodities levying excise duty had been gradually decreased. Consequently, it was observed that the contribution of exercise duty on revenue had been decreased while the contribution of sales tax had been increased. The contribution of income tax, which had an important role in direct tax, had been increasing every year. Its contribution in total revenue was 6.33 percent in 1991/92 while it reached to 12.69 percent in the final year of the plan.
The proportion of direct tax in total revenue was 11.8 percent in 1991/92, while it increased to 15.7 percent in the third year and reached to 16.1 percent in the final year of the plan. Likewise, the proportion of indirect tax in total revenue was 61.3 percent in 1991/92, while it increased to 64.3 percent in the third year and remained at 63.69 percent in the final year of the plan. The contribution on non-tax revenue in total revenue was 26.92 percent in 1991/92, it was decreased to 20.1 percent in the third year and reached to 20.21 percent in the final year. Thus, the increasing contribution of direct tax in total revenue showed a positive change in tax structure.
Budget Deficit and Deficit Financing:
Budget deficit was Rs 11,261.5 million in the base year of the Eighth Plan. However, it remained at Rs 10,987.3 million in the first year, Rs 9,800.2 million in the second year, Rs 8,315.7 million in the third year, Rs 10,014.7 million in the fourth year and Rs 10,003.3 million in the final year of the Plan. Thus, it was observed that there was a gradual decrease in budget deficit in the first three years of the plan. Though there was some increase in the final two years, it was lowered down in comparison to the base year.
The figure of deficit financing was Rs 4,444.8 million in the base year of the Plan. However, it remained Rs 4,627.0 million (at constant prices) in the first year, Rs 2,073.7 million in the second year, Rs 2,533.8 million in the third year, Rs 3,158.7 million in the fourth year and Rs 2,961.0 million in the final year of the plan. Against the target of keeping deficit financing to 0.9 percent of GDP, it remained at 2.94 percent in the first year, 1.23 percent in the second year, 1.48 percent in the third year, 1.77 percent in the fourth year and 1.58 percent in the final year of the Plan. Thus, it could be observed that though the proportion of deficit financing in GDP was gradually decreasing, the set target of the plan was not achieved.
The proportion of deficit financing in internal resources was 55.20 percent in 1991/92. However, it remained at 57.88 percent in the first year, 25.53 percent in the second year, 38.17 percent in the third year, 40.78 percent in the fourth year and 40.42 percent in the final year of the plan.
Foreign Assistance:
Though it was estimated that the total amount of foreign assistance during the Eighth Plan period would reach to Rs 74355 million at 1991/92 prices, it reached to Rs 49203 million, which is only 66.2 percent of the target. It was estimated that the amount of foreign grants and foreign loans (at constant prices) would be Rs 19761 million and Rs 54594 million respectively. It reached to Rs 15491 million and Rs 33712 million respectively.
The total development expenditure of the plan period (at 1991/92 prices) was Rs 87080.3 million, of which Rs 37823 million (43.4 %) was borne through internal sources and Rs 49203 million (56.5%) was borne through external sources. Amongst the internal sources, Rs 22998 million (26.4%) and Rs 15354 million (17.6%) were borne through revenue surplus and other internal sources, respectively. As against the target of limiting internal loan (including cash reserves) to 7 percent of development expenditure, it reached to 17.6 percent.
The proportion of foreign assistance in total development expenditure during the plan period was estimated to be 65.5 percent, which remained at 55.19 percent in the first year, 54.55 percent in the second, 56.83 percent in the third, 57.20 in the fourth and 58.79 percent in the final year. Likewise, the proportion of foreign loan in total foreign assistance remained at 64.60 percent in the first, 79.29 percent in the second, 65.00 percent in the third, 66.23 percent in the fourth and 67.39 percent in the final year of the plan.
During the plan period, foreign assistance could not be mobilised as per the target and the proportion of foreign loan in total foreign assistance decreased in comparison to the base year although it increased to some extent from that of the beginning year of the Plan. Thus, as against the target of mobilising 65.5 percent foreign assistance, it remained at 56.5 percent. Consequently, the mobilisation of internal loan and cash in reserve was increased.
Monetary and Credit Situation:
Monetary and Credit Policy
The main objectives of banking and credit policy in the Eighth Plan were to mobilise internal resources, to maintain internal and external balance through ensuring monetization ratio as per the demand of economy, to create healthy and competitive monetary environment, and to disburse credit in prioritised sectors such as agriculture, cottage and small industries.
During the plan period, policy was adopted to regularise the monetary and banking sector through indirect measures without interfering directly in accordance with the concept of liberal and market oriented economic system. Likewise, policy was adopted to encourage the commercial banks and financial institutions to run on a competitive basis and let them determine interest rate and other conditions on their own. Policy to limit the credit from the banking sector was adopted by the government with the objective of reducing the budget deficit and channeling more credit to the private sector.
Policy was adopted that commercial banks would compulsorily invest 12 percent of their total credit to the priority sectors as direct intervention. Otherwise, they had to deposit their un-invested amount in the Nepal Rastra Bank as interest free investment. Financial feasibility was considered to be the main basis for expanding the branches. It was also mentioned in the Eighth Plan that rural banks would be gradually established in order to smooth disbursement of credit in rural areas and to minimise government interference in credit disbursement.
In the beginning of the Eighth Plan, there was a compulsory provision of maintaining 12 percent of the total deposit as cash in reserve and investing 24 percent of total deposit in treasury bills of the government or Nepal Rastra Bank. The compulsion of investing 24 percent of total deposit in treasury bills of government or Nepal Rastra Bank was decreased to 22 percent in 1992/93. This provision was removed in 1993/94. This system enhanced the credit disbursement capacity of the commercial banks and had a positive effect on credit disbursement to the private sector. Status quo was maintained in the provision of keeping 12 percent of total deposit as cash in reserve. In the absence of such compulsory provisions, financial programmes of the government and buying and selling of treasury bills of Nepal Rastra Bank became main indirect instrument to control the liquidity. For instance, in 1992/93, in order to absorb liquidity the government reduced the budget deficit through controlling expenditure and mobilising revenue, and Nepal Rastra Bank issued treasury bills of additional Rs 1.71 billion.
With the view of mobilising internal resources and providing more competitive services in the financial sector, establishment of financial institutions was encouraged. As a result, 11 commercial banks including Himalayan Bank, Nepal S.B.I. Bank, Nepal Bangladesh Bank, Everest Bank, Bank of Kathmandu and Nepal Bank of Ceylon were established and involved in banking transactions during the plan period. As regards the financial companies, more than 40 such companies were involved in transactions. Moreover, some cooperatives and non-governmental organisations also started limited banking transactions.
With the increased number of financial institutions and the authority delegated to determine interest rates, there was some decrease in interest rates on deposit but substantial decrease was not realised in interest rates on credit. As a result, the spread rate between savings and credit could not be narrowed down. The main reason for such a situation was observed as the lack of expected improvement in professional efficiency and financial status of government-owned commercial banks. Other joint venture banks also did not make efforts to minimise this gap. In the process of improving financial position of the commercial banks, second phase of commercial banking policy and strategic study (CBPASS) was started in 1992/93.
Some branches of Nepal Bank and Rastriya Banijya Bank were closed according to the policy of opening up and closing down of branches of these commercial banks on the basis of financial viability. Most of the branches situated in urban areas were also closed. With the objective of smooth credit disbursement in rural areas, rural development banks were established in two development regions, Eastern and Far Western, in 1992/93. Additional two Rural Development Banks were operationalised in Western and Mid Western Development Regions in 1994/95 and after that one rural development bank was established in Central Development Region as wll.
Monetary Situation
There would be an adverse impact on balance of payments and price situations if there was excessive liquidity in the economy while development would be hindered with the lack of required liquidity. Realising this contradictory situation, it was targeted to keep the growth of money supply at annual rate of 12.1 percent during the plan period. Through this, it was expected that inflation would be maintained at 9 percent annually. But, it was observed that the average growth rate of money supply was 14.6 percent during the plan period. Money supply was increased by 22.5 percent in the first, 19.6 percent in the second, 15.7 percent in the third, 10.6 percent the fourth and 5.4 percent in the final year of the plan. The main factor for the growth of money supply in the initial years was the credit to the private sector. In the context of the credit to the government was the main factor for the expansion of money supply, the credit to the private sector indicated that the use of indirect instruments for controlling money supply had not been effective and increasing role of the private sector.
In comparison to the mid-July 1992, money supply (M1) increased by Rs4375.3 million in the corresponding period of 1993, Rs 4,677.4 million in 1994 as compared to the same period of the previous year, Rs 4475.0 million as of mid-July 1995, Rs 3512.6 million as of mid-July 1996 and Rs 1962.3 million in the corresponding period of the previous year.
Domestic Credit
The annual growth rate of domestic credit, the main expansionary factor of money supply, remained at 18.74 percent in the first, 17.05 percent in the second, 24.83 percent in the third, 22.75 percent in the fourth and 13.02 percent in final year. Minimal role had been played by the credit to the government and public enterprises in the growth of domestic credit. In the first year, credit to government and public enterprises had increased by 16.85 percent while it increased only by 0.10 percent in the second year. It increased by 7.09 percent in the third year, 12.99 percent in the fourth year and only by 5.65 percent in the final year. The growth in domestic credit was resulted mainly due to credit to the private sector. It was observed that the credit to the private sector had increased by 20.81 percent in the first, 35.11 percent in the second, 38.83 percent in the third, 28.69 percent in the fourth and 16.97 percent in the final year of the plan.
Thus, it was observed that the growth rate of credit to the government and public enterprises had decreased, while credit to the private sector had increased in the initial years, and slightly decreased from the fourth year. In the initial years, increased credit disbursement indicated that the private sector had growing confidence on the policies adopted in the process of strengthening it in accordance with the concept of liberalised economic system. However, it was observed that the growth in economic activities of private sector had decreased in the final years of the plan.
Net Foreign Assets
The growth rate of net foreign assets, another expansionary factor of money supply, was 40.07 percent in the first and 24.35 percent in the second year. It was limited to 1.74 percent in the third, 1.67 percent in the fourth and 6.60 percent in the final year of the plan. Decrease in export had been observed as the main factor for lowering down the growth rate of net foreign assets.
Time Deposit
One of the contractionary factors of money supply was the growth rate of time deposits (fixed and savings). It remained at 31.57 percent in the first, 19.65 percent in the second, 16.31 percent in the third, 17.00 percent in the fourth and 16.21 percent in the final year of the plan. Though the growth rate of time deposits was high in the first year of the plan, it decreased in the remaining years, for which growing attraction towards monetary markets and low interest rates had been observed as the main reasons.
Net Unclassified Liabilities
Net unclassified liabilities, another contractionary factor of money supply, had increased by 20.4 percent on an average in the first two years, by 16.55 percent in the third, by 18.98 percent in the fourth and by 8.79 percent in the final year of the plan.
Deposit and Credit Situation
The sources of funds and their use by commercial banks had increased by 27.40 percent in the first, 24.63 percent in the second, 14.19 percent in the third, 19.95 percent in the fourth and 16.73 percent in the final year of the plan. In the first year of the plan, the growth rate of total resources had been observed high because of average high growth rate in fixed deposit and other deposits as well as high growth rate in resources of commercial banks. In the initial years, growth rate of resources of the commercial banks had been observed low due to decreased growth rate in fixed deposits.
The main source of the commercial banks, total deposit, had increased by 19.60 percent during the plan period. Although the total deposit had increased by 30.65 percent in the first year, there was a gradual decrease from the second year. Total deposit had increased by 19.85 percent in the second, 16.97 percent in the third, 16.65 percent in the fourth and 14.51 percent in the final year of the plan. There was some decrease in the growth rate of fixed deposits in the second and third years of the Plan. This was due to decreased interest rates offered by the banks, establishment of finance companies and attraction of fixed depositors towards such companies since they offered more interest rates on deposits of long-term nature (not possible to draw immediately) and growing tendency to invest in share markets. However, there was some increase in fixed deposits of commercial banks from the fourth year of the Pan although there was slackness in share markets.
As regards the use of resources by the commercial banks, cash in hand and cash in reserve had increased by average 23.43 percent during the plan period. Amongst the subtitles under cash in hand and cash in reserve, it was observed that in all other subtitles, except in foreign exchange, growth rate was high. Particularly, the average growth rate of balance with Nepal Rastra Bank (including the investment on treasury bills of Nepal Rastra Bank) was 23.30 percent. This growth rate was highly increased by 139.02 percent in the first year, and decreased by 22.52 percent and 15.51 percent in the third and fourth years respectively. Likewise, the growth rate of balance held abroad and cash in hand grew by an average of 26.31 percent and 19.86 percent respectively. As regards the annual average growth rate of foreign exchange, it remained at 8.64 percent only.
The average growth rate of total credit and investment during the plan period remained at 19.58 percent. There was some decrease in credit disbursed to the His Majesty's Government and the public enterprises. Credit disbursed to the government and public enterprises during the plan period had decreased by average 3.39 percent and 1.74 percent respectively. But credit disbursed to the private sector had increased by average 27.91 percent. As regards the foreign bills purchase, it increased by an average of 10.58 percent only. Thus, it was observed that the sectoral composition of the credit disbursement of the commercial banks had moved to the positive direction. Credit disbursed to His Majesty' Government and the public enterprises had been decreasing, while credit disbursed to the private sector had been increasing.
When analysing credit by objective, highest percent of credit 39.32 percent was disbursed in trade, 29.86 percent in industry, 25.38 percent in consumption, 2.95 percent in services and 2.48 percent in agriculture from the existing credit disbursed by commercial banks as of mid-July 1992. Of the total credit disbursed by commercial banks as of the end of the Eighth Plan (mid-July 1997), 42.32 percent was disbursed in industry, 37.07 percent in trade, 14.33 percent in consumption, 4.00 percent in services and 1.82 percent in agriculture.
Many branches were opened as per the policy of providing services of one bank to 30 thousand population during the plan period; therefore, run-in loss banks had to bear additional financial liability. In the above context, policy was adopted to open the branches on the basis of financial viability and merging the branches located very near to each other with the objective of improving financial status of the banks and make them competitive.
Price Situation:
Price Policy
Price has an important role to play in anopen, liberal and market oriented economy. If the rate of price rise is high, currency is devalued and purchasing power decreases, and if the price remains constant or falls, investors will be unenthusiastic. So, price rise at some percentage point is desirable in the process of economic development. From this viewpoint, it was targeted to limit the rate of price rise at 9 percent on annual average during the plan period.
Various steps, such as artificial control of price, control in internal flow of goods and services, separate price fixation on goods imported from different countries through custom rates, providing subsidies to enterprises, and monopoly affecting the competition were not appropriate in the context of open and market-oriented economy. Such steps would create unnecessary fluctuation in price and lead towards inappropriate allocation of resources. Keeping these facts into consideration, the Eighth Plan had adopted the policy of decontrolling the internal flow of goods and services. Likewise, policy was adopted for allowing the private sector to import goods on competitive basis, which used to be imported by public enterprises only.
Efforts were made to bring uniformity in custom rates, on one hand, and custom rates were reduced in order to promote competitions by removing protectionism, on the other. Efforts were also initiated to remove subsidies. In the context of competitive environment created through avoiding monopoly of public enterprises, financial institutions and airline services established in the private sector contributed to the increase in the economic activities. Even in essential commodities like foodstuff, Nepal Food Corporation had adopted the policy of stabilising the price by controlling supply through its stocks, but not by controlling the price. Thus, according to the policy of affecting the price level through supply and market instead of directly controlling it, private sector's role in various economic activities had been increasing.
Price Situation
During the Eighth Plan period National Urban Consumer's Price Index increased by 8.8 percent in 1992/93, by 9.0 percent in 1993/94, by 7.6 percent in 1994/95, by 8.1 percent in 1995/96 and by 7.8 percent in 1996/97. Thus, the average annual growth rate of price was maintained at 8.3 percent, which was less by 0.7 percent than the target set by the plan.
After the adoption of open economic system by the country, signs of positive improvements appeared in the economy and accordingly, positive impacts were observed in price situation also. The main reasons for decreased price level could be attributed to control in government expenditure, stability in exchange rate and improvement in supply situation, and so forth.
As regards to the classification of consumption goods, less price increase was observed in food items. During the plan period, the rates of price increase on food and non-food items were 7.9 percent and 8.9 percent respectively. In the first year of the plan, the increase on many non-food items was observed in double digit while it was limited in single digit in the remaining years. But, it was observed that the price of many food items had increased in the remaining years in comparison to the first year of the plan. Price was increased particularly on pulses, sugar, fish and meat, milk and milk products, beverages, restaurant meals, vegetables and fruits etc.
Foreign Trade and Balance of Payments Situation:
Foreign Trade
In accordance with the policy to consider foreign trade as an inseparable medium of economic development but not as a medium of supplying necessary goods only, the Eighth Plan stressed on the overall adjustment of policies and programmes for development of commercial sector along with productive sectors of the economy. Accordingly, emphasis was put on the adjustment of commercial sector with the tax policy, customs policy, policy regarding professional organisations in the public sector and privatisation policy in order to make foreign trade open, transparent and simplified.
For the promotion of export and for providing facilities to the exporters, Nepalese currency was made full convertible in current account during the Plan period. In order to increase the export of Nepalese industrial products in Indian markets, simple provision of export on preferential treatment on the basis of certificate of origin of product was made after the amendment in Nepal-India Trade Treaty. For importing necessary raw materials and machinery equipment at a cheaper price from India for Nepalese industries, provision was made for allowing import of such commodities in convertible foreign currencies.
In an effort to run the activities for the promotion of foreign trade and increasing the exports effectively, various activities, such as production of woollen carpets, quality enhancement and import management of raw wool and increasing the export of Nepali woollen carpets, had been undertaken. In order to promote the increased export of high quality carpets from the Kingdom of Nepal, policies of enhancing the quality in the production of woollen carpets, allowing to import quality raw wool necessary for producing woollen carpets, prohibiting import to low quality wool, were adopted. In order to systematise the export of readymade garments, which occupied the second main position in Nepal's exports, and to increase its export, transparency was maintained in quota fixation and distribution system for readymade garments by strengthening Readymade Garments Exports Promotion Committee. For simplifying export system of gold and silver jewelry for increasing the export of jewelry and handicrafts made of gold and silver, provision was made to supply gold and silver to exporters at a cheaper price by importing gold and silver from international markets through the Nepal Rastra Bank.
Foreign Trade Situation
The Eighth Plan had set a target to increase export by 19.1 percent and import by 11.7 percent on an annual average. On the basis of the anticipated growth rates in exports and imports, trade deficit was expected to be 13.5 percent of the GDP by the final year of the Plan. The average growth rate of trade deficit was expected to be 4.1 percent. In order to achieve the targeted annual growth rate of export, annual targets of some principal commodities to be exported were estimated during the Eighth Plan. Accordingly, export of woollen carpets was estimated to increase by 23.0 percent, readymade garments by 5.4 percent, pulses by 1.0 percent, hides and skins by 13.7 percent and handicrafts (including gold and silver jewelry) by 19.5 percent.
At 1991/92 constant prices, total export increased by 15.77 percent in the first and by 2.52 percent in the second, declined by 15.08 percent in the third, and increased by only 4.25 percent and 4.91 percent respectively, in the fourth and final years of the Plan. This decrease in export was caused, mainly due to the decline in the export to the third countries. In comparison to 1993/94, export of principal exportable commodities, such as woollen carpets, readymade garments and pulses had decreased in 1994/95, while export of hides and skins and handicrafts had increased.
Although the total export and the export to the third countries decreased, export to India increased by 20.47 percent in 1994/95 in comparison to 1993/94. But export to India in the first year of the Plan increased by 2.78 percent only. The main reasons for increased export to India in the third year of the Plan were the improvement in export process after the renewal of trade and transit treaty between the two countries, and the decline in the proportion of raw materials and labour used for producing exportable commodities. Even with the revaluation of Nepalese currency by 1.79 percent in July 1992 and by 3.03 percent in March 1993, export to India increased in these years. It indicated the possibilities of exporting Nepalese commodities with value added to India on a competitive basis in the absence of non-tariff barriers.
As far as the matter of exportable commodities to India was concerned, there was no uniformity in their export intensity. Fluctuation in annual export of various exportable commodities could be observed clearly. This fluctuation showed that none of the commodities had got stability in the export to India. Regarding the export to the third countries, since fluctuation in the export of some principal commodities affected the quantity of total exports, it pointed to the fact that Nepal's export trade was dependent only on some commodities.
It was observed that the export target by commodities set in the Eighth Plan had not been achieved clearly due to annual fluctuations in exports. The export of woollen carpets was found increased by 4.73 percent on an annual average, while export of readymade garments was increased by 12.81 percent on an annual average. Although there was some increase in the export of pulses to India, it was decreased in total by 14.32 percent on annual average. As regards to the hides and skins, its exports had increased by 8.01 percent on annual average. It was observed that the export of handicrafts had decreased by 6.08 percent on annual average during the Eighth Plan period. Thus, export to other countries could rise only by 6.80 percent on average.
As regards the import, total import at 1991/92 constant prices increased by 15.10 percent on annual average. In the first year of the Plan, total import had increased by 12.80 percent, while the growth rate of import remained at 20.69 percent in the second year, 14.70 percent in the third year, 8.15 percent in the fourth year and 19.63 percent in the final year. Import growth rate from India stood at 2.49 percent in the first year of the Plan, while it increased by 24.63 percent in the second year. Likewise, it had increased by 6.96 percent and 15.05 percent in third and fourth years respectively, while it had declined by 1.73 percent in the final year. Import from third countries had increased by 18.40 percent in the first, by 18.84 percent in the second, by 18.52 percent in the third, by 5.07 percent in the fourth and by 30.04 percent in the final year of the Plan.
Thus, that the growth rate of import was not decreasing and the growth rate of export was declining caused the increased growth rate of trade deficit. During the Plan period, trade deficit at 1991/92 constant prices increased by 22.07 percent on annual average. Trade deficit had increased by 10.57 percent in the first, by 34.99 percent in the second, by 32.50 percent in the third, by 9.64 percent in the fourth and by 24.99 percent in the final year of the Plan. Thus, trade deficit at current prices reached to Rs 73,525 million in the final year of the Plan, which was 26.43 percent of the GDP. This figure of trade deficit was very high as compared to the earlier estimation that it would be 13.5 percent of GDP by the end of the Plan. At current prices, export was increased by 10.40 percent only while import was increased by 24.62 percent on annual average during the Plan period.
Balance of Payments Situation
In the first year of the Plan, balance of payments situation of the country was remarkably favourable. In 1992/93, balance of payments surplus at current prices was Rs 7,742 million and stood at Rs 6,283.3 million in the second year, while balance of payments deficit reached to Rs 313.9 million in the third year of the Plan. In the fourth year, the deficit further increased to 1,050.1 million, while there was a balance of payments surplus of Rs 3,214.3 million in the final year of the Plan. In comparison to 1992/93, trade deficit increased by 47.05 percent in 1993/94 and by 42.54 percent in 1994/95. Likewise, this deficit stood at 18.67 percent in 1995/96 and 34.67 percent in 1996/97. During the Plan period, service income (net) and transfer income (net) had increased by 58.84 percent and 28.64 percent respectively, which contributed to minimise the growth of current account deficit, to some extent. It was observed that the current account deficit had increased by 13.67 percent during the Plan period. Current account deficit was declined by 1.01 percent in the first and by 19.50 percent in the second year while it increased by 46.83 percent in the third and by 82.78 percent in the fourth year of the Plan. But it declined by 11.26 percent reaching the amount of current account deficit to Rs 19,116.1 million in the final year of the Plan. The main reason for current account deficit was the trade deficit caused by rapid increase in import in comparison to exports.
The growth in foreign loan flow and the flow of other capital and unclassified amount (net) played prime role to minimise the current account deficit. But the growth rate of other capitals and unclassified amount (net) was negative in the second, third and final years of the Plan.
Foreign Currency Reserves
Soon after the country had adopted the open and liberal economic policy, some changes were introduced also in foreign exchange system. In this context, foreign exchange was made fully convertible in 1992 and single exchange system was introduced removing the dual exchange system in foreign exchange. Nepalese nationals were also provided the facility to open bank accounts on foreign exchange.
In comparison to July 1992, foreign cash reserves increased by 38.18 percent amounting to Rs 33,510.4 million in July 1993. In the total cash reserves, the amount of convertible foreign exchange reached to Rs 30,767.2 million from Rs 23,145.8 in that year. In comparison to 1993, total foreign cash reserves increased by 25.38 percent totaling Rs 42,015.7 million in July 1994, of which the proportion of convertible foreign currency was Rs 38,137 million. Total foreign cash reserve increased merely by 2.54 percent in July 1995 amounting to Rs 43,084.9 million. In this year, convertible foreign currency reserves declined by 5.25 percent reaching Rs 36,136.7 million. But inconvertible foreign exchange increased by 79.14 percent reaching Rs 6,948.2 million. Total foreign cash reserves increased by 3.14 percent totaling Rs 44,438.3 million in July 1996, while it reached to Rs 48,541.4 million increasing by 9.23 percent during the same period of 1997. The total foreign cash reserve in July 1992 had sustained the imports of 9.1 months while the sustaining capacity of foreign cash reserve in July 1993 was for 6 months of imports.
In the beginning year of the Eighth Plan, the exchange rate of one US dollar was Rs 42.80 while it reached Rs 57.30 by the final year of the Plan due to the devaluation of Nepalese currency by 33.88 percent.
It was observed that the implementation of financial reform programmes during the Eighth Plan was helpful for maintaining macroeconomic stability as well as for creating positive impacts in non- agricultural sectors. But, dependency on monsoon for agricultural production had not improved yet. Although there was a positive progress in price, revenue, etc., in the Plan period, development expenditure targets could not be achieved due to the low mobilisation of foreign aid. There were some negative impacts on the economy due to the increasing deficit financing and widening trade deficit. No substantial changes in the living standard of rural people were observed due to the low growth in agriculture. In addition, mainly due to political instability, financial management aspects remained weak towards the end of the Plan.
The economic policies without proper strategies based on clear priority and resource allocation have been unable to increase national productivity and maintain high economic growth rates as well as improve the living standard of poor community. Therefore, the formulation of concrete policies and their implementation for achieving higher economic growth and alleviating poverty have become today's main necessity and challenge. Also, to ensure effectiveness in the policy measures introduced in development policies and the infrastructure developed during the Eighth Plan, priority should be given to the related implementation strategies in the above line as well as to legal and institutional infrastructures by putting special emphasis on integrated development of agriculture.
3. Status of Physical Progress
Agriculture, Irrigation and Forestry:
Agriculture
During the Plan period, only 3.0 percent of growth in agricultural production was achieved as against the set target of the Eighth Plan to increase agricultural production by 3.7 percent. The target to increase food crops production by 400,000 MT on annual average was not achieved. Crop-wise production of millet, barley and cereal crops was more than the set targets. On the cash crop side, tea (including the private sector) and sugarcane productions met the target. Although there was some progress in production of other crops except tobacco, the overall target was not achieved. The productions of minor crops such as coffee and mushroom were much lower than that of the set targets. On the horticulture sector, production of vegetable met the target whereas potato production was somewhat lower. Reassessing the statistics of horticulture products, it was observed that the production was not so discouraging while evaluating the growth rate in relation to the decreased base year data. Fish and meat production had achieved the target, whereas milk, eggs and wool productions were somewhat lower.
The productivity of all crops in the last year of the Plan was lower than the target. The productivity of rice, the main contributor of food crops, was targeted to increase by 2.85 MT per hectare. But it increased only by 2.46 MT per hectare. The supply of chemical fertilizer was not satisfactory. The supplies of improved seeds, plants and high breeds were not effective from quantitative as well as qualitative point of view.
Irrigation
During the Eighth Plan period, it was targeted to provide irrigation facility to additional 293,895 hectares of land through new irrigation projects and the projects under construction. It was targeted to provide irrigation facilities to 161,132 hectares of land, 144,042 hectares from surface and 17,090 hectares from ground water projects implemented by the Department of Irrigation. Likewise, out of 119,700 hectares of land, 49,000 hectares from surface and 70,700 hectares from ground water irrigation were targeted to provide irrigation facilities from the projects run by the Agriculture Development Bank. In addition, 13,063 hectares of land was targeted to provide irrigation facilities through the construction of projects under the non-government sector.
The progress of the programmes implemented under the Department of Irrigation during the Eighth Plan was 85.5 percent. Of this, the percentage progress of surface irrigation was 90.6 percent whereas ground water irrigation had very low progress of 45.4 percent. The programmes implemented under the Agriculture Development Bank had made 63.6 percentage progress. Of which, 32 percent and 74.2 percent were achieved from surface and ground water respectively. To compare with the total target, 72.9 percent progress was made. A total of 22,727 hectares of land was irrigated through lift pump programme run by the Agriculture Development Bank.
Land Reform and Management
As the provision was made for sharing an equal ownership between landlord and tenant through the latest amendment of Land Reform Act 1964, programme was launched to abolish the dual ownership of land.
The Land Reform Act allowed one to keep 25 bighas of land in Terai and inner Terai and 50 ropanies of land in Kathmandu Valley as maximum limit. One could keep additional 3 bighas, 16 ropanies and eight ropanies of land in Terai, Mountain and Kathmandu Valley respectively for household purposes. But there was some exemption in limit on the land used for industrial enterprises, agro-industries, educational and health institutions and cooperative purposes. Cadastral survey, which was initiated as a part of land reform a long ago, had not been completed yet in all 75 districts.
Forestry
Overall progress towards forestry sector development could be termed satisfactory though some of the target had not been achieved. In the community forestry sector, 5,316 users' groups were formed whereas the target was to form 5,004 such groups during the Plan period. Likewise, it was targeted to transfer 251,750 hectares of forestry to 5,000 users' groups. In fact, 300,000 hectares of land was transferred to users' groups by preparing 7,072 Forestry Action Plans. The Plan had set a target of afforestation in 67,119 hectares of land, but it was possible in 26,456 hectares only.
It was envisaged to produce 111 million plants, but only 80 million plants were produced and distributed. The Plan had envisaged distributing leasehold forestry to 25 thousand families, but such forestry was distributed to only 8,000 families. On national forestry management side, forestry management action plan was prepared in 19 districts, which had the target to manage 628,301 hectares of forest area. Under the soil and water conservation programme, soil conservation services were targeted to extend in 60 districts, but such services were extended only in 50 districts during the Plan period. Two thousand five hundred types of plants were kept in-situ conservation in Royal Botanical Garden Godavari, under botany development programme.
Industry, Tourism and Electricity:
Industry
During the Eighth Plan, industrial production at constant prices increased by an annual average of 5.23 percent against the estimated growth of 12.4 percent. Likewise, it was expected that the contribution of industry sector to GDP at the end of the Plan would reach at 8.5 percent on the assumption that it would grow by 4.8 percent annually. Similarly, annual value added rate of manufacturing industries was expected to increase by 10.8 percent assuming that total value of manufacturing industries would reach Rs 12,170 million at the end of the Plan. The average growth rate of value added during the Plan period reached 6.8 percent and the contribution of industry and mining sector in GDP reached 9.2 percent.
It was expected that the number of total employment would reach 395,000 with the creation of additional 128,000 employment opportunities during the Plan period. Of 1,345 medium and large industries registered at the Department of Industry, it was expected that 1,15,000 employment opportunities were created from the implementation of 70 percent of them. Likewise, assuming that 30 percent of the 34,439 small and cottage industries registered in the Department of Cottage and Small Industries would be implemented, it was expected that 120,000 employment opportunities were generated, thus, reaching a total of 235,000 additional employment opportunities during the Plan period.
The Office of the Company Registrar registered 5,202 private and 612 public limited companies during the Eighth Plan period. During the Plan period, 240 investment projects were promoted to reach the figure of foreign investment to Rs 9732 million while this figure was expected to be at Rs 2430 million with the promotion of 200 foreign investment proposals.
Cottage and Small Scale Industries
The Eighth plan had set the target of registering 25,000 cottage and 1,000 small-scale industries. During the Plan period, 43,250 cottage and small-scale industries were registered. It was expected that alternative employment would be available to about 400,000 persons through the registered industries. Skill development training had been provided to 25,219 persons from the Department of Cottage and Small-scale Industry during the Plan period.
Mining and Quarrying
During the Eighth Plan period, it was targeted to undertake research on metallic and non-metallic minerals in 6000 sq. km. But research had been done in 5,902 sq. km. The target of detailed survey and research of gas resource of Kathmandu Valley for commercial use was achieved. As the target of conducting geo-scientific research in 17,450 sq. in different parts of the kingdom, such research had been conducted in 19,500-sq. km. of land. The target of establishing 12 additional seismological centres achieved and all the centres began operating. Although the mining sector had been given a big importance in the Eighth Plan, no satisfactory progress was made due to the lack of investment in this sector.
Tourism and Civil Aviation
During the Eighth Plan, the total number of tourist arrival was projected to be 1,907,745. During this period, the number of tourist arrival was 1,764,739, which was 92% of the target. Likewise, it was expected to earn US $ 375.4 million during the first four years of the Plan. During this period, US $ 374.6 million was earned, making nearly 100 percent progress of the target. During the Plan period, a number of concrete programmes such as Sarangkot road improvement in Pokhara, improvement of Pokhara conservation area, Ghalegaon Sikles eco-tourism development, construction of runway and terminal building in Pokhara airport were completed. Likewise, construction of buildings of Tourism Information Centre and Hotel Management and Training Centre, and conservation and improvement of Gorakha Durbar area were completed. Construction work of International Expedition Museum building at Pokhara started. In pursuance of the objective of making civil aviation service an important means to bring tourists in the country, the number of airports in the kingdom reached 44. In consonance with making the airports more capable, secured, comfortable and standardised, airports were under construction in remote areas such as Mugu, Kalikot, Achham, Khotang and Dolpa. Various improvement measures to enhance the standard, services and capacity of Tribhuvan International Airport were undertaken according to its master plan.
Labour
A total of 22,973 persons were trained through various vocational and skill training programmes run by 13 skill development training centres and two vocational training centres. Skill training with residential facilities were provided to 125 women of various districts engaged in undignified profession, because illiteracy and poverty, and were provided each with a set of sewing machine.
To assist the abolition of yearlong bonded labour system in Dang, Bardia, Kailali and Kanchanpur districts, sewing machine was distributed to each woman after providing skill development training since FY 1995/96. Employment information centres were established in ten labour offices.
Water Resources and Energy
In comparison to the target of generating 347mw electricity by the end of the Eighth Plan, the total generation capacity reached 300 mw, of which 253 mw was generated from hydro-electricity and 47mw thermal energy. Likewise, 1,322.9 million units of electricity energy were generated while the target was to generate 1,522.0 million units. The total length of transmission lines from single and double circuits reached 2,902 kilometers and capacity of substation reached 602 MVA. Total number of customers reached 525,000. Thus, it was expected that 14 percent people of the country had an access to electricity services. Of the total electricity, 26 percent was used by household sector, 30 percent by industry sector, five percent by commercial sector and 13 percent by export and other sectors. Out of the total electricity generation, 74 percent was properly utilised while a loss of 26 percent was found due to technical and non-technical problems.
As internal source was insufficient to fulfill the demand for electricity, the power was supplied by purchasing from private sector and even importing from India. Medium sized hydro-electricity projects such as Khimti and Bhotekoshi were under construction whereas process was underway for the construction of Seti hydroelectricity project.
Negotiations between the officials of Nepal and India were underway for the implementation of big multipurpose hydroelectricity projects such as Karnali (Chisapani) and Pancheswor (Mahakali).
Transport and Communication:
Transport
The Eighth Plan had set a target of constructing 1,778 km roads with the construction of 763 km highway, 915 km feeder road, 100 km urban road, 187 km black-topped road of different standards, 370 km graveled and 1,212 km earthen road. During the Plan period, 471 km highway (61,7%), 487 km feeder road (53.2%), 134 km urban road (134 %), 119 km. black topped road (63.6 %), 231 km graveled road (60.9%) and 742 km earthen road (61.2%) were constructed. The total length of road construction reached to 1092 km, which was 61.4 percent of the set target. In addition, a total of 1,771km road, 372 km black topped, 537 km graveled and 862 km earthen road were constructed which was not mentioned in the Eighth Plan. Thus, the total progress of road construction during the Eighth Plan reached a total of 2,863 km (161.0%) with 491 km black topped (226.6%), 768 km graveled (202.6%) and 1,604 km earthen (132.3%).
During the plan period, 50 motorable bridges (200.0%) were constructed as against the target of constructing 25 bridges. As against the target of constructing 100 bridges on highways and 400 suspension bridges on local roads, 114 suspension bridges (114.0%) from the Suspension Bridge Division and 24 (6.o%) from the Ministry of Local Development were constructed.
Regarding other transports, a part of 13 km of Kathmandu-Hetaunda rope-way was repaired and maintained. Damaged part of Jayanagar-Janakpur-Bijalpura railway was repaired and maintained, 4 diesel locomotive engines and 18 bogy coaches were made available. Ten additional new trolley buses were operationalised in Kathmandu-Bhaktapur trolley bus route.
Communication:
Postal Services
By the end of the Eighth Plan, 3,660 post offices were established throughout the kingdom providing services of one post office per 5917 population. Postal lines were expanded as necessary. Internal express mail services in 33 places of the kingdom and international express mail services (EMS) with 20 countries were operated. Money order service in 85 post offices and postal savings bank services in 10 post offices were started.
Tele-communication Services
Before the implementation of the Eighth Plan, 27 districts of the kingdom lacked access to telecommunication services. During the Eighth Plan, telecommunication services were expanded all over the kingdom through the provision of telephone link from the headquarters to all districts. In this connection, telephone services were provided to 1200 VDCs as against the target of providing telephone services in various areas (Ilaka) by establishing 600 terminals.
During the Eighth Plan, total telephone capacity reached to 2,000,000 lines reaching the density of telephone service 100 persons per line. As against the target to enhance the capacity through additional 161,000 telephone lines, equipment was installed of about 130,000 telephone lines, thus, achieving 80 percent progress of the target. During this period, action was initiated to establish rural telephone exchange with the capacity of 150 to 200 lines in 31 urbanising places. Telephone service was made available in 29 places through the establishment of telephone exchanges.
Besides establishing calibration and maintenance centre of Nepal Television, other programmes were implemented according to the Plan. Under the network expansion programme, relay stations were established in Dhankuta, Nawalparasi, Palpa and Pokhara. Rastriya Samachar Samiti (RSS) buildings were constructed in Kakadbhitta and Birgunj. Under the equipment installation programme, computer system was installed at the centre. A computer network was established to improve news collection, procession and distribution system of Rastriya Samachar Samiti. In pursuance with the privatisation policy of His Majesty's Government of Nepal, Film Development Company was established through selling 51 percent share of Nepal Film Corporation to the private sector in 1993/94.
Housing and Physical Planning
During the Eighth Plan, various activities such as, development of comfortable housing plots, supply of residential buildings, maintenance and improvement of existing buildings, research regarding building construction, increasing investment in development and housing sectors, etc., were carried out. Skill-oriented training was provided for the development of locally available construction materials and local technology. Likewise, steps were taken for development and expansion of construction materials, and a central-level research centre was established.
Despite the effort to distribute housing plots to landless farmers nationwide through Squatter's Problem Resolution Commission, the target group was not very much benefited due to the inability to provide other necessary services and housing facilities. No remarkable progress was observed in the development of housing credit, which was very essential for housing development, and other financial management. Although Housing Finance Development Company, established with the objective of providing housing loan to medium and low income groups, had taken policy to channel housing loan through newly opened financial companies, low income families were not benefited from this programme.
On the housing development side, revision and updating of physical development planning of almost all municipalities were completed and integrated action plans of 12 municipalities prepared. Construction works of some ministry buildings and Birendra International Convention Centre were 18
completed and a master plan for the construction of residence of parliament members was prepared. Constructions of 7,697 two-room school buildings in earthquake affected 29 districts of Eastern and Central Development regions were completed and 35 school buildings were constructed. For selection, implementation and evaluation of development plans and programmes of municipalities, Rs 134.6 million and Rs 96 million were released as loan and grant respectively through Urban Development Fund.
Social Services:
Education
On primary education, it was targeted to achieve the net enrollment of 6-10 age group children to 90 percent, to further increase 2,025 primary schools and 8,000 primary school teachers. In 1996, the number of schools reached to 22,218, number of teachers to 89,378, and number of students to 3.45 million. Net enrollment percentage of children reached to 69.4. During the Plan period, 3,524 schools and 14,883 teachers were added up. For making the primary education compulsory, programme was launched in one VDC of each 40 districts from 1996/97 where primary education project was implemented on the basis of experiences gained from programme executed on a trial basis in Banepa Municipality of Kabhrepalanchok and Ratna Nagar VDC of Chitawan.
During the Plan period, target was set to enhance the access of lower secondary and secondary level education for 45 percent of 11-15 age group children, to establish 900 schools and to make provision of additional 5,404 teachers. According to the educational statistics of 1996, the number of schools reached 5,506, number of teachers 19,704, number students 791,502, and student enrollment 50.3 percent at lower secondary level. Likewise, at secondary level, the number of schools, teachers and students have reached 2,903, 16,423 and 3,29,833 respectively. Student enrollment at this level reached to 34.7 percent.
Regarding the higher education, 213 higher secondary schools were established by 1996/97 against the target to establish 125 higher secondary schools. In pursuance with the target of achieving literacy percentage to 67 by 2000 AD, programme had been launched as a national campaign to achieve 60 percent literacy rate during the Plan period. It was expected that literacy percentage of 6 years and above aged population reached 48 percent with the increment of 1.36 million literates from the literacy programmes run by government and non-government sectors.
During the Eighth Plan, basic and primary education project was implemented in 40 districts of the Kingdom. Fifteen district education buildings were constructed. As per the policy of giving priority to female teachers, 4,150 female teachers were appointed with the objective of appointing at least one female teacher in each primary school. Primary teachers training centres were established according to the target of establishing such centres in nine different places of the kingdom, and 17,265 teachers were trained.
Regarding technical education and vocational training, technical schools were established in Doti, Banke, Dang and Mustang districts as per the target of establishing such four schools in different parts of the kingdom. As per the target of providing regular training to 2,595 persons and short-term training to 2,034 persons, a total of 2,274 and 6,709 persons received regular and short-term training respectively.
During the Eighth Plan, Kathmandu University and Eastern University were established and operationalised. Likewise, Pokhara University was announced to establish. Thus, the number of universities, including Tribhuvan University and Mahendra Sanskrit University reached five, and 196 campuses, 61 under T.U. and 135 in private sector, were conducted.
Health
With the objectives of realising "Health for all by 2000" by improving health condition of people, proving healthy manpower necessary for development, controlling population through effective maternal child health and family services, and making available of specialist-health services within the country, various programmes had been implemented. As against the target of providing basic training to 26,337 persons and refresher training to 137,412 persons under the programme, basic and refresher training was received by 17,150 persons and 95,314 persons respectively.
National Health Policy 1991 spelt out the target of establishing sub-health posts in every VDC and primary health centre in every constituency of the country. In pursuance of this policy, 3,187 sub- health posts were established as against the target of establishing 3,199 sub-health posts, and 100 primary health centres. According to Nepal living Standard Measurement Survey 1996, the percentage of rural households having access to near-by health institution with a walking distance of half an hour reached 41.41 percent.
Total fertility rate remained at 4.6 as against the target to reduce at 4.5. The target could not be achieved since total fertility rate was influenced by marriageable age, time of breast feeding, amonoria, infertility, abortion and social values and norms in addition to the family planning services.
Targets such as spraying medicines for malaria control in the area inhabited by 600,000 to 800,000 people twice a year in 64 districts of the kingdom, 350,750 sample blood collection and test, cure of the affected persons and conducting research programmes were achieved. Nepal, for the first time, launched polio drops services to 3.3 million children of 0-5 age group in 1996/97 by organising immunisation day in order to support the campaign of eradicating malaria from the world by 2000. Tuberculosis control programme was expanded in all district of the kingdom. During the Plan period, the population affected by tuberculosis was estimated to be 5 per thousand and curative services for them were made effective through DOTS curative services in 10 districts.
As against the target of reducing the rate of leprosy calamities to less than one per thousand by the end of the Eighth Plan, it reduced to 0.59 person per thousand, thus, the progress was observed more than the target. Leprosy control programme was expanded nationwide while the target was to expand in 71 districts from 56 districts. As regards to the target of reducing child mortality due to diarrhea by 32 percent, real situation was not known since no survey was conducted regarding the death caused by diarrhea.
Regarding the target of establishing district level ayurvedic dispensaries, ayurvedic health centres were established in 25 districts. Likewise, 20 dispensaries were established, and new buildings and compound walls of 30 dispensaries were constructed. Refresher courses for technical staff throughout the kingdom were conducted. Production of medicine was started from three regional rural pharmacies. 50 beds were added in Ayurvedic Hospital, Naradevi, as against the target of adding 100 beds. In accordance with the policy of commercialise Singh Durbar Baidyakhana by making it autonomous, its managerial efficiency and medicines production capacity was enhanced and physical condition was improved by constituting Singh Durbar Baidyakhana Development Committee.
Drinking Water and Sewerage
For providing drinking water facilities to all people within 10 years, delivering minimum knowledge and facilities to most of the people regarding sanitation including environmental sanitation and conservation, the Eighth Plan had set the objective of providing drinking water facilities to 72 percent and sanitation facilities to 13 percent people. It was targeted to make access of drinking water facilities to additional 7.2 million people, 6.8 million from rural and 4.4 million from urban sector, during the Plan period. Likewise, sanitation facilities were targeted to deliver to additional 1.6 million people, 1.2 million from rural and 0.4 million from urban areas during the Plan period.
It was estimated that drinking water facility would reach to additional 5.4 million people, 5.2 million from rural and 0.2 from urban sector during the Plan period. Since the progress in rural and urban sector was estimated to be 77 percent and 56 percent respectively, the total progress in proportion of total targets was estimated to be 76 percent only. Access to drinking water facility was reached 61 percent of total population of the country as of the end of 1996/97. Although progress regarding sanitation facilities could not be confirmed due to the lack of adequate and reliable information, a sample survey showed that an estimated 20 percent of the people were availed of this facility.
Local Development
Women development programmes were conducted in 620 VDCs of 67 districts of the kingdom up to the Eighth Plan period. A total of approximately Rs 410 million loan was disbursed from various banks through 12,634 income generating groups formed during the Eighth Plan. About 40,906 families were benefited from this programme. A total of 75,000 people were benefited through drinking water projects run in 701 places under community development programme. Under the same programme, approximately 17,738 women received population education and family welfare training and 14,702 women received skill-oriented training.
After the establishment of Local Development Training Academy, a total of 22,644 persons including elected people's representatives from local bodies, civil servants and women activists involved in women development affairs, were equipped with knowledge and skills through various training and seminars. To expand socio-economic services in remote areas of the kingdom, 139 drinking water projects, irrigation projects in 746 hectares of land, 46 suspension bridges, construction and maintenance of 185 km trails and tree plantation in 95 hectares of land, were completed during this period under the Remote Area Development Programme. Under the same programme, construction works of 81 monasteries, temples, schools and pilgrim houses were completed.
A fixed amount of financial resource was sent to each VDC of the kingdom directly for their development purposes. Under this programme, which intended to help the VDCs for conducting small developmental works by themselves, 1,610 km rural roads were constructed and maintained during the Plan period. Likewise, 772 km. foot trails were constructed. A total of 3,549 taps was installed through 81 ponds/tube-wells installation and 171 km pipe work has been concluded. Irrigation facility has been provided in 6,600 hectares of land and 808 bridges/culverts and 514 VDC buildings were constructed.
During the same period, 443 km rural roads and foot trails were constructed through local people's participation. Likewise, under the local road suspension bridge programme, 15 suspension bridges were constructed, and 29 were under construction, 126 were in fabrication stage and 77 were in the stage of survey designing and cost estimation. Rural Infrastructure Development Programme was underway in 20 districts. Under this programme, construction and maintenance by 361 km rural roads, 488 km horse trails, 97 km irrigation, 23 km river control, etc., were completed. Likewise, construction of 48 fish ponds, cardamom plantation in 1.5 hectares, agro-forestry in 65 hectares and school ground construction in 0.5 hectare were completed. A total of 66,228 families were benefited from the above activities. Rural Infrastructure Development Programme was started in 1996/97.
Under the intensive labour - oriented road programme, construction of 40 km roads was completed. Likewise 139 km. rural roads, 160 bridges and culverts were constructed and irrigation facilities were provided in 19,648 hectares of land under the Flood-affected Reconstruction and Rehabilitation Project. Various works, such as irrigation in 7,292 hectares of land and construction of 256 km rural roads, 8,361 km horse/foot trails and 134 public buildings were completed in Dhading, Gorakha, Lamjung, Gulmi, Arghakhanchi, Kalikot, Humla, Mugu, Dolpa, Ilam, Panchthar and Taplejung districts under Rural Development Programme.
Others:
Administrative Reform
In the process of executing policy directives initiated by the Eighth Plan, efforts were made for the phase-wise implementation of the recommendations made by Administration Reforms Commission 1991. Civil Service Act and By-laws were formulated in the new context. While defining job, duty and authority of civil servants, job descriptions of almost all positions were prepared. Job performing ability was considered main element for the promotion of civil servants, and stress was given for the objective performance evaluation. Opportunities to enter in higher posts were increased for competent and intelligent civil servants through open competitions. 21
A Central Monitoring and Evaluation Division was established in National Planning Commission Secretariat as a central body for the monitoring and evaluation of development projects.
Planning and Statistics
During the Plan period, formulation of Agriculture Perspective Plan was completed. Final results of National Population Census 1991 and National Agriculture Census 1991 were published. Under Nepal Multi-purpose Indicator Survey, reports on Health and primary education were made public. Likewise, final results on drinking water and sanitation were prepared. Preparation of indicators on industry and construction was underway in Central Bureau of Statistics and results of some other Surveys were published.
4. Challenges of Development
Despite the planned development efforts of more than four decades, high economic growth rate has not been achieved on one hand, and plans have been unable to make an expected impact on the living standard of general people, on the other. Today's main challenge before the country, therefore, is to bring the country forward along with the developed nations in the 21st century through reviewing the concept and process of development. In this context, it is necessary to review the past experiences as follows:
It is necessary to modify and strengthen the development and planning process in the context of the lessons learned from the plan implementation.
Chapter 2: Concept, Strategies and Targets of Long-term Development
1. The Concept of Long-term Development
Although some sectoral long-term plans were formulated and implemented in the past, a clear vision could not be formed for the socio-economic development of the country because of the lack of formulation of an overall framework for long-term development. The absence of clearly defined concept of the long-term development and lack of clear guidelines to that end led to the inconsistency between the sectoral policies and programmes, adversely affecting the economic growth rate of the country. Because of this situation, efforts are needed to formulate and implement strategies for the immediate and long- term development of the country.
2. Objectives and Strategies
The major long-term development objective is to create a society that is cultured, modern development- oriented and endowed with skills through alleviating the prevailing wide spread poverty in the country.
For achieving the above-mentioned objective, it is essential to broaden the sources of high growth in order to achieve a high and sustainable growth rate and trickle down its effects on the majority of the population by fully utilising and investing available resources in infrastructure and social sectors. In this context, it is equally essential to expand investment in the extensive utilisation of water resources and tourism sectors in active collaboration with the private sector as well. It is required that optimal utilisation of human resources should be ensured by making the most of the possibilities derived from such ecological variation as agriculture, forestry, herbs, etc. The foundation for industrialisation has to be laid by exploring the possibilities of trade with neighbouring countries, and also by considering both the regional trade and the aftermath of the membership of the World Trade Organisation. The lowering of the rate of population growth has become crucial for human resource development for achieving higher and sustainable growth as well as for poverty alleviation.
In a developing country like Nepal, the concept of long-term development should give emphasis to higher economic growth rate, pro-poor development process and equitable distribution of income. Although Nepal has adopted liberal, open and market-oriented economic policies in line with the changes in the world economy, the objective of alleviating poverty cannot be achieved unless the government, market and private sectors complement each other and work together.
In this context, and also in keeping with the past experiences, it is essential that effective machinery should be mobilised to attain the rapid and sustainable development, and plans, policies, and programmes should be geared towards poverty alleviation, employment promotion, and regional balance. At the same time, these programmes should be oriented to the groups and areas that are left out of the mainstream of development. To guarantee the equitable distribution of the fruits of development to the people and to expedite the pace of development by moving the socio-economic development process in tune with the pace of regional and international development will be the long-term development framework of Nepal.
For achieving the above-mentioned objectives, various policies will be adopted with giving a clear direction to the overall economic and social development process, making the long-term development process dynamic, and ensuring commitment and continuity to the process.
The liberal, open and market oriented economic policies pursued by the country will be further strengthened and their implementation will be made more effective, which will enhance competitiveness and make these policies sustainable by exploiting the opportunities created by the open policies. The capability to cope with the changes in the world economy will be increased and reforms in the existing policies and improvement in the economic management will attract foreign investment.
The Government sector has its own role to play in creating a strong and competent economy, changing economic structure, and eradicating poverty and unemployment. Appropriate steps have to be taken to achieve a higher economic growth rate, and effective implementation of equitable distribution and poverty alleviation programmes is equally essential. The creation of infrastructure and human resources along with the welfare of the disadvantaged groups and direct interventions in the alleviation of poverty are the responsibilities of the government. Government’s involvement and its role, which is essential for the achievement of the objective of alleviating poverty, will be made effective.
In view of the inadequacy of investment required for implementing development projects on the part of Government, the crucial role of the private sector in the economic and social development of the country is obvious. It is essential that the State should initiate policy changes especially with regard to strengthening the role of the private sector in the development of infrastructures as well as other sectors. The creation of a congenial environment for attracting private sector investment is very important in this respect. The role of the government sector will not be limited to that of a motivator and facilitator only; it needs to share the risk to some extent as well.
3. The Goals of Long-term Development
Poverty Alleviation:
It is estimated that 42 percent of the total population have remained below the poverty line at the end of the Eighth Plan. With the achievement of high economic growth rate and the implementation of sectoral and other special programmes for poverty alleviation, it is targeted to reduce the population living below poverty line to 10 percent within next 20 years.
In order to increase the per capita income of the people living below the poverty line, it is necessary to increase the economic growth rate, on the one hand and the population growth rate has to be reduced, on the other. In view of this, it has been targeted to bring down the population growth rate at the level of 1.5 per cent within next twenty years. For reducing the level of poverty to 10 percent, striking a proper balance between growth and equity will be the main basis of development. For this, programmes such as employment generation, production and productivity enhancement, good governance, human resource development and the empowerment of people will be initiated.
The Agricultural Perspective Plan (APP) has been taken up as the main basis for increasing production, providing food security, increasing employment and income and ultimately contributing to poverty alleviation. The APP has given main emphasis to the supply of fertilizer, irrigation, rural agricultural road construction and rural electrification and the use of agro-ecologically appropriate technology. Likewise, land management system will be pursued for providing security to land ownership in order to improve the living standard of farmers and increasing agro-products and productivity to give impetus to the economy as a whole. Thus, it is necessary to launch all programmes of agricultural development by making the APP and land reform programme complementary to each other. This will accelerate the growth rate of the agriculture sector and will enhance the performance of the non-agriculture sector, contributing towards achieving the macro-economic growth rate of 7.2 percent within next 20 years.
4. Macro-economic Targets
The target of long-term high economic growth rate is based on the APP. The growth rate of the agriculture sector in the Ninth Plan is less than the target set in the long-term plan. However, it is expected that, due to the higher growth rate to be achieved in the periodic plans following the Ninth Plan,
the target of the APP will be achieved. The economic growth rate of the non-agriculture sector has been set by considering the changed structure of relative contribution of the agriculture and non-agriculture sector to GDP due to differential growth rates of agriculture sector and overall GDP.
It is estimated that the GDP at producer’s prices will grow by 6 percent per annum in the Ninth Plan and by 8.3 percent in the Twelfth Plan, thus making the average growth rate of 7.2 percent during the 20 year period. This long-term economic growth rate seems quite realistic in view of the creation of legal and institutional framework in tune with the open, market-oriented economic policies based on clear, long- term concepts, active private sector and its increased share in investment. The estimated growth rate seems quite plausible because of expected improvements in the agriculture sector under the APP and enhancement in productivity due to infrastructure development and commercialisation. Similarly, the economic growth rate of non-agriculture sector seems achievable because of developments in industry, services, tourism and water resources sectors and their export performance. The agriculture sector will be a stimulating factor for the development of non-agriculture sector in that the expected growth in the agriculture sector will widen the domestic market.
In this way, the contribution of the agriculture and non-agriculture sectors to GDP will be 25 percent and 75 percent respectively because of different growth rates of these sectors.
To achieve the targeted economic growth rate, the investment has to be 25 percent of GDP. In this context, it has to be raised to 34 percent of GDP by the end of the Twelfth Plan.
Mobilisation of national savings is the first prerequisite for sustaining the increased investment. It has been targeted that the growth rate of national savings will be raised to 12 percent of GDP in the coming periodic plans and ultimately to 30 percent by the end of the Twelfth Plan.
Keeping in view of constantly reducing the role of government in a liberal market economy, domestic credit will be controlled and deficit financing will be brought within desirable limits so that more financial resources required for investment are available to the private sector.
5. Sectoral Concepts and Policies
Agriculture: As agriculture is the main basis for increasing income and employment in the context of Nepal, the APP has given emphasis to raising agricultural productivity through resource utilisation, providing irrigation facilities to most of the agricultural land by using low cost technology, raising the productivity of agricultural land by increasing the per hectare use of fertilizer, enhancing the utilisation of available agricultural technology, keeping up the comparative advantage of location-specific technology, raising livestock productivity by upgrading animal health, constructing more agricultural roads and increasing the supply of electricity for facilitating private entrepreneurs and enhancing their competitiveness. Economic growth in the terai will be achieved by utilising food productive capability based on geographic specialisation. Rising incomes in the Terai will generate the required income to purchase high value agriculture products of the hills and raise the economic viability of these products contributing to achieving overall economic growth and maintaining stability. Therefore, emphasis will be given to raising productivity by availing sufficient investment, institutional support at the grass roots level. Alleviating poverty through the achievement of a high growth rate, enhancing the investment capability in the sectors with high multiplier effects, strengthening industrial development with the transformation of agriculture from subsistence to commercial production, and giving emphasis to the poverty alleviation through employment promotion are major objectives in this regard. Priority will be given to agricultural research and extension so as to encourage food production, livestock and horticulture production in hills and mountains. The agricultural production will be geared up towards specialisation based on comparative advantage by developing infrastructure in order to accelerate economic growth by raising overall productivity of resources that increase income and employment and alleviate poverty and raise living standard. With all these, the opportunities for macro-economic reform will be widened. Targets, through agricultural development, are set to provide food security by developing agriculture sector, to reduce regional imbalance and to alleviate poverty.
Industry: The present share of the contribution of manufacturing industry to GDP will be doubled within the next 20 years. The role of the private sector will be vigorously enhanced through increased competitiveness in the areas having comparative advantages and the rate of economic growth will be accelerated through sustainable industrial development. The long-term objectives of the industrial sector for the next 20 years are to make the industrial sector competitive, self-sustaining and market-oriented; to increase its share in value added through its linkage with local manpower and raw materials; to transform local skills and entrepreneurship to small-scale industry so as to make local resources appropriate to local demand; and to launch special programmes to involve more disadvantaged groups and women in the industry and commerce sector. Employment opportunities will be created through the promotion and extension of cottage and small-scale industries. Cottage and small-scale industries will be developed with a view to contributing to poverty alleviation. There will be an emphasis on making contribution to industrial development through the rural entrepreneurship development programme and mobilisation of the rural labour force in productive activities.
Commerce: The commerce sector will be made fully competitive and market-oriented and it will be integrated with the globalisation process. The ratio of export will be raised to 20 percent of GDP, and through the specialisation in goods with comparative advantage. With a view to benefiting from the open global market, programmes related to the export of low-weight-high-value products to international markets will be launched with high priority. In addition, exports will be strenthened by identifying and developing exportable goods. Export initiatives will be carried out by expanding the range of exportable products and by targeting potential markets. It is targeted that the trade deficit will be reduced and the terms of trade will be brought to Nepal’s favour in the long-term period. Increasing the level of exports will be accorded high priority. Following the values and concepts of competitive international trade, due attention will be given to developing infrastructure. A Perspective Export Plan will be formulated and a programme will be launched accordingly to expand export trade, giving priority to goods based on domestic raw materials and agro-based industries. After the implementation of SAARC Free Trade Agreement, emphasis will be given to export the products in which Nepal can compete and which are based on domestic raw materials as well as development of agro-based industries.
Supplies: It has been the long-term view that there must be regular and adequate supply of essential goods in specific areas considering Nepal’s geographic constraints and low purchasing power. An institutional mechanism will be established to enhance consumers' welfare, and to monitor the supply and pricing situation. In addition, there must be adequate buffer stocks to provide food security at the regional level. Emphasis will be given on ensuring the supply from private sectors, and supply mechanism from private sector will be made more effective. The concept of SAARC Food Storage System will be implemented so as to ensure sustainable supplies in the region.
Labour and Employment: The long-term objective in this regard will be to increase the national income by providing more employment opportunities within the country and in the foreign countries, utilising unskilled, semi-skilled, skilled and technically skilled manpower and at the same time ensuring the labourers’ rights, welfare and social security. The rate of unemployment will be reduced to 3 percent from the present level of 4.9, percent maintaining a balance between demand and supply of labour. The rate of under-employment will be reduced to 10 percent from the present level of 47 percent. Skilled manpower will be prepared through skill-oriented training and self-employment and employment opportunities will be generated in a way to contribute to poverty alleviation.
Tourism: The long-term objective of tourism development has been set after taking into account huge potentiality of the tourism industry in Nepal. Nepal will be developed as one of the major tourist destinations and the national identity will be conserved through tourism development. Tourism will be developed as one of the key sectors enhancing employment and as a key sector for economic development. The expansion of tourism to villages will contribute more to the economic development.
Physical Infrastructure:
Electricity Development: Although hydro-electricity has been regarded as the main source of overall development in Nepal, factors such as cost, technology, environment and market have posed serious challenges to its development. The long-term hydropower development has been conceived considering these issues. Both reservoir and non-reservoir based hydropower projects will be developed to ensure reliable supply of electricity. Projects designed to meet domestic demand will be identified and implemented. Public and domestic private investors will be given priority for designing and implementing projects that meet domestic demand. The participation of the private sector will be increased in hydropower production, distribution, management and operation.
Export oriented mega-projects will be implemented to increase the growth of the national income, as multi-purpose big projects are the key to Nepal’s hydropower development. The idea of regional co- operation will be initiated for such big projects as the benefits of these projects occur to the countries lying over lower riverbanks. Domestic and foreign investors will be given priority in the development and operation of large multi-purpose projects. In the implementation of these projects, the involvement of domestic technical management and manpower will be increased. The load factor capacity of electricity generation centres will be increased through the gradual increase in the share of industrial and commercial consumption of domestic electricity supply. Necessary policy reforms will be initiated with a view to attracting the foreign and domestic private sectors to increase investment in hydropower development.
About 50 percent of the population of the Kingdom of Nepal will receive electricity within 20 years in accordance with the long-term electricity development vision. Within this period total installed capacity of electricity will be 20,000 mw. Out of total 224 billion cubic meter water flowing in Nepal, 80 percent flows during the four months of rainy seasons. Therefore, attempt will be made to control the flow of water by building reservoirs so that the damages caused by flooding are minimised and benefits of water resources are maximised.
Other Energy: Since Nepal’s economy is mainly based on rural agriculture and the use of commercial energy is minimal, desired change in the use of energy will be brought about through encouraging changes in the consumption pattern by implementing appropriate energy programmes. Modern energy produced using natural resources will gradually replace traditional sources for developing rural energy system. Small-scale hydropower, solar energy and alternative energy programmes will be widely expanded to fulfill the rural energy demand through the supply of electricity and other alternative energies. Policies that focus on information flow, training, availability of appropriate financial services, technology development and extension and its specialisation will be adopted in order to lessen the present external dependency on the supply of energy.
Irrigation: The irrigation facilities will be expanded on a massive scale in order to raise agricultural productivity, achieve self-reliance in food deficit areas by increasing food production, and contribute to poverty alleviation through employment generation. As it has been realised that irrigation is essential for raising crop productivity, the operation of irrigation projects will be fully managed by farmers themselves so as to increase the cultivation of high yielding crops to minimise their risks and bring about green revolution. Group-based programmes utilising ground water resource in terai will be implemented in order to make irrigation facility available throughout the year, and will be integrated with rural roads and electrification programmes. Land with year round irrigation facility will be expanded in the potential area. Un-irrigated land area will be gradually reduced through year-round irrigation facility available in order to develop irrigated land in terai and hills. High returns from irrigation will be obtained by increasing the cropped area. Priority will be given to constitute water users groups, encouraging women in agricultural development. Moreover, appropriate programmes will be conducted, providing training to women in the areas of irrigation system, its organisation and management.
Transport Sector: Roads that link districts will be accorded high priority while constructing roads in the next 20 years since 18 districts have still no links with roads. People's participation will be mobilised for building agricultural roads on a massive scale as the roads assist in the marketing of agricultural products. Transportation costs in the country will be minimised by reconstructing, improving and upgrading the existing roads, considering the present state of transportation and vehicle situation. In the coming 20 years, a total of 12,000 km of various types of road will be constructed at the rate of 600 km each year. This comprises roads connecting districts with no road links, north-south highways, east-west roads in the mid-hills, Kathmandu-Hetaunda tunnel ways; inner, outer and super outer ring roads and radial roads in Kathmandu valley; other district and urban roads. All of them together sum up to a total of 6000 km; and a total of 6000 km of agricultural roads. The total road length including existing road will be 24,000 km in the coming 20 years. Moreover, 3200 km local level rural roads, 1600 km ghodeto (horse trail) 200 motorable bridges and 2000 suspension bridges will be constructed. Ropeway and cable cars will be installed in remote areas and tourist spots. The construction of electric railway line along Mechi- Mahakali will be given priority. Electric railway will be constructed along the outskirts of Kathmandu valley. The use of circular electric railway will be started and use of trolley buses and electric battery operated vehicles will be expanded in order to lessen the pollution in Kathmandu valley.
Communication and Information Technology: For the development of communication and information technology, the coming two decades will bring new dimension in the sense that there will be a sea change in this regard in terms of government policies, organisational improvement, adaptation and use of new services. This period will herald the beginning of an information-oriented society. Technological services that are necessary for providing basic facilities to the people of urban as well as rural areas will be expanded by establishing communication network system. An Information Network Infrastructure Plan will be formulated for next 20 years, outlining the types of customers and various locations that will be provided with services, and the time frame within which such services will be provided. Emphasis will be given to increase the involvement of private sectors to provide new services, and necessary laws will be enacted for this purpose. Mobile and other telephone services will be introduced in Kathmandu valley and other urban areas within the coming 20 years and telephone services will be expanded in a phase-wise basis. Telephone exchanges will be established at all district headquarters and telephone services (PCO) will be provided to all village development committees. Internet and e-mail services will be expanded in urban areas. In the long run, the multi-media services will be widely expanded to raise the telephone density to 15 percent, of which rural density will be 5 percent and urban density will be 55 percent. In addition, advanced communication technology, which will be regarded as essential means for development, will be widely utilised and expanded. Information technology will be developed with the active participation of private sector as a medium of export trade.
Social Development and Environment:
With the growth of GDP and improvement in the condition of the people living below the poverty line, the welfare of majority of the people will be raised. It is imperative that other indicators, which contribute to the improvement in the living standard of low-income groups, should also be improved rapidly. The average life expectancy, which is both an outcome and indicator of overall development of the country, is targeted to rise from the present level of 56.1 years to 59.7 years by the end of the Ninth Plan, and to 68.7 years in 20 years. Likewise, the present infant mortality rate of 74.7 per thousand will be reduced to 34.4 per thousand. Total fertility rate will be reduced from 4.58 to 3.05. Similarly, the maternal mortality rate will be reduced from 475 to 250 per 100,000 live births. The number of children to be enrolled in primary education will be raised to a hundred percent from 70 percent of FY 1996/97. In the same manner, the number of children enrolled in secondary education will be raised to hundred percent from the present level of 45 percent. The literacy rate for the population of 15 years age and over will be increased to 70 percent by the end of the Ninth Plan, and to a hundred percent within the coming 20 years. For the purpose of increasing women’s participation in the overall development of the country the long-term vision with regard to women will comprise women’s empowerment for development, gender equality, and mainstreaming women in national development. All the population will have access to piped drinking water facility by the end of the Ninth Plan and its quality will be continuously improved thereafter in the long run.
Education: The education sector is the main instrument of human resource development. The past attempts made in the education sector have been beneficial. The long-term objectives of the Ninth Plan are to provide equal opportunity to all sections of society, to develop education as the mainstream of national development, to improve its quality, aware the people for democracy, dedicated, competent, productive, disciplined and socially responsible citizens. In view of the above objectives, literacy, school education, technical education and higher education will be upgraded. The existing literacy rate of the country will be raised to hundred percent in 20 years through compulsory primary education with the active participation of the private sector. To achieve this target within the stipulated period, literacy programmes will be launched, focusing on deprived, backward groups and women, and implemented as a campaign using formal and informal mediums.
Health: Improving public health and related indicators and providing qualitative health services are the long-term objectives of the health sector. To this end, basic health services will be made widely available at the local level. Health services will be provided in an integrated manner through district hospitals, primary health care centres, health posts, and sub-health post. Basic health care and curative hospital services will be expanded and made more effective by establishing a procedure for referral system. Policies will be adopted to make family planning effective; programmes aimed at reducing maternal mortality rate and infant mortality rate at the local level, targeting the poorer, backward and deprived communities living in remote and rural areas. Family planning services will be implemented according to the aspirations of the people based on the concept of small family.
Drinking Water and Sanitation: During the Ninth Plan, drinking water facilities will be provided to all the people and pure drinking water facilities will be expanded within the next 20 years. Sewerage treatment systems will be constructed in all urban areas within the next 20 years. Appropriate solid waste management and disposal system will be provided in all the urban areas. The level of sanitation in the rural areas will be improved by encouraging people to construct appropriate and affordable latrines that fit to the local condition. Because of availability of pure drinking water and improved sanitation, people will be healthier and their time wasted in fetching water will be saved.
Other Developmental Targets:
Population: Taking into account the adverse effect of high population growth on economic and social development, people will be encouraged to adopt the concept of small family. Fertility-related programmes will be implemented effectively through the easier availability of quality family planning se