HOW'S THE BUSINESS?

After some big factories closed down and some foreign investors shifted their factories abroad, the message spreading around is that the investment climate in Nepal is worse than in the neighbouring countries. Security situation is cited as the major hurdle. The dismal rate of GDP growth that stood at mere 2.9 percent (in producer's price) in the year ended on mid-July 2007 is offered as the further proof. This rate is far lower than in any other South Asian country.

Now let's look at the composition of these data. Though overall GDP growth rate is 2.29 percent, transport, communication and storage as well as financial intermediation, real estate, renting and business activities have grown over 8 percent while mining and quarrying have grown over 6 percent.

Moreover, if one flips through the newspapers, there are reports of new types of industrial units being set up or the capacity of some others being expanded. Prominent examples include powder milk factories at Pokhara and at Chitwan, pharmaceuticals factories in Kathmandu and cement factories in different parts of the country.

This means the country's business sector is going through period of massive structural change which obviously is natural with the type of transformation going on in political and social structure of the country. Also the Industrial Statistics for the fiscal year 2006-07 indicate such change taking place. In the first nine months alone of that year, 111 new industrial units were registered whereas the total number in the entire year before that was only 120. And it can be noticed that the number of units registered in new sectors like hydropower, cement and pharmaceuticals is impressive. Tourism sector too is quite attractive as shown by the same data.

So what if Nepali vegetable ghee couldn't do as expected in the Indian market? Turmeric has recorded impressive export growth at 1625 percent in the fiscal year 2006-07, up from 300 percent in the previous fiscal year. Similarly, turpentine has also been able to register an impressive growth at 120.7 percent that year. Similar is the case in readymade garments export to India .

What all these data indicate is that our business community has not been able to predict the fast-changing domestic and international market. They have kept pushing traditional goods and services. Those few who have been able to see the signals have been changing fast and reaping the benefits.

And look at the flourishing banking industry. If the business sector isn't promising enough, how come all these banks record impressive growths in profits, lending and deposits? Remittance isn't the sole reason for banking sector growth. So, the economic forest might look dwindling down but there are plenty of new species of trees sprouting and growing tall and sturdy. We just need to find the growth sectors and tap them.