Globalization, Economic

Liberalization & Privatization

In the Context of Nepal

For MBA VI, Uniglobe
 Globalization
• Premise
- Interdependence has always been a reality.
- Reduction in economic distance led to increased global
interdependence.

- Acceleration witnessed.
- Major decision in isolation
- Externalities.

Globalization – the result of broader interrelations and

stronger interdependence between nations.
“ …. as the expansion of economic activities across political
boundaries of nation states. More importantly, perhaps it
refers to a process of deepening economic integration,
increasing economic openness and growing economic
interdependence between countries in the world
economy.”
- D. Nayyer

So globalization is the movement towards:

- Interaction
- Integration
- Interdependence
Drivers
- Increasing economic activities
- Free trade regime
- Inclination to liberalization
- International bodies
- Donors
- Counter globalization
Nepal and Globalization: issues
• Legal safeguards: Agriculture, bio-
diversity, domestic industry
• Exploring the areas of Comparative
Advantage (see the last slide)
• Strengthening resource based and
industrial capacity
• Benefits of buffer zone between China and
India
 Nepal and Globalization
• Increasing need based FDI and their
assessment.
• Creating and maintaining investment
environment (ranks 107 in doing business
in 2016; Singapore, New Zealand &
Denmark rank 1st, 2nd and 3rd respectively)
• Improving good governance (124th rank)
Nepal and Globalization: issues
• Strengthening Regulatory Mechanism
• Stopping exporting Human Resources and
importing goods and services
• Promoting and benefitting regional
economic blocks
• Developing national consensus on policies
of national interest and adequate work-out
Globalization and Liberalization
Globalization and Liberalization:

PROCESS

MEANS

END
 Liberalization
• Economic liberlization (EL) is a broad concept
covers all the sectors of the economy.
• EL is a comprehensive package of economic
policies and programmes to be pursued by the
government in order to open up the economy so
that effective presence of private sector is
possible in the market.
• Ultimate objective = sustainable growth
 Features of EL
• Effective presence of market forces.
• Outward looking strategy.
• Private sector response.

Triggers of EL

- Collapse of planned economies

- Failure of SOEs
- Enhanced efficiency of private sector.

In Nepal basically the situation of imbalanced macroeconomic

fundamentals paved the way for the introduction of the programme
of economic liberalization.
 Issues
• Growth centered/People centered
• Vertical growth/Horizontal cost

CONSIDERATIONS
- Slowdown destructive development
- Prevent overreaction
- Protect vulnerable
- Identify the areas of comparative and competitive
advantages.

“ What you can not see that can sink you”

 Privatization
• One of the critical components of EL.
• Thacherism – Reganomics
In Nepal particularly after 1990 the govt.
adopted EL policy and privatization is
being considered one of the critical
components of EL policy.
Privatization Programme (PP) became
institutionlized with the introduction of
Privatization Act, 2050.
 Objectives of Pvtn.
• Increase Government’s efficiency
• Enhance productivity
• Reduce/offload administrative and
financial burden.
• Participation of private sector in economic
development.
 Need of Pvtn.
• Internal Factors

= EL policy,
= Competitiveness,
= Continuous loss

• External Factors
 Problems/Challenges/Reasons
behind failure
• Identification of PE
• Private sector
• Employees
• Pvtn. Process
• Institutional arrangement
• Investment climate
• Political confusion
Some Data, 2015/16: update data
of 2016/17
• 30 Pes have been privatized
• Currently are 37 in existance
• Nepal Drugs Ltd. is being revived by
government
• Contribution on GDP: 12.75%
• Net Operating Income of PEs has been
increased by 5.04% and reached to Rs.
270.48 billion in 2014/15.
• 14 PEs are in loss
• Major profitable PEs include: NTC, RBB,
ADB, NB, NOC
• Government’s total share and loan
investment: Rs.126 and Rs. 129 billion
• Sector wise: Finance, Service and Public
utility – satisfactory
• Industry, Social and Commerce-
unsatisfactory
 Product of comparative
advantage
• Cardamom
• Ginger
• Tea
• Herbal
• Textile and Yarn
• Processed Leather
• Shoes and Slippers
• Cashmere
• Woolen Carpet
• HRs
• Tourism
• Information and Technology