Unit 3

Economy of Nepal
• Features of Nepalese economy an its nature (system)
• Natural resources: Water, Forest, Minerals
• Agriculture: Features, Importance, Problem and Remedies
• Poverty: Meaning, types, causes and measures of poverty
reduction.
• Industry: Types, importance and problem.
• Transport and communication: Importance and current status
• Foreign employment: Meaning current status merits and
demerits.
• Foreign Direct Investment (FDI): meaning trend and important.
 Economy of Nepal
The economy of Nepal was largely dependent on agriculture and
remittances. An isolated, agrarian society until the mid-20th century, Nepal
entered the modern era in 1951 without schools, hospitals, roads,
telecommunications, electric power, industry, or civil service. The country has,
however, made progress toward sustainable economic growth since the 1950s.
The country was opened to economic liberalization, leading to economic growth
and improvement in living standards when compared to the past. The biggest
challenges faced by the country in achieving higher economic development are
the frequent changes in political leadership, as well as corruption.
Nepal has used a series of five-year plans in an attempt to make progress in
economic development. its currency has been made convertible. Foreign aid to
Nepal accounts for more than half of the development budget. Government
priorities over the years have been the development of transportation and
communication facilities, agriculture, and industry. Since 1975, improved
government administration and rural development efforts have been emphasized.
.
In 2020, just over 53 percent of Nepal’s gross domestic product (GDP)
came from its service sector. The service sector provides services, rather
than producing material commodities. Activities in the service sector
include retail, banks, hotels, real estate, education, health, social work,
computer services, recreation, media, communications, electricity, gas
and water supply. Agriculture contributed the second largest amount,
while eleven percent came from the industry sector. The majority of the
Nepalese population lives in rural areas, and are depended on
agriculture for their livelihood.
Nepal: Distribution of gross domestic product
(GDP) across economic sectors from 2010 to 2020
Features of Nepalese Economy

• Low Per Capita Income

• Mass Poverty
• Underutilization of Natural Resources
• High Trade Deficit
• Dualistic and Mixed Economic System
• Rapid Population Growth
• Remittance Economy
 CHARACTERISTICS/ FEATURES OF NEPALESE ECONOMY
1. Low Per Capita Income:
Nepal has a low per capita income compared to its neighboring countries. The Per
Capita Income of Nepal in 2019 was US$ 1085 which has inclined to approximately 1200
US$ in 2021 A.D.
2. Mass Poverty:
The estimated poverty headcount ratio is expected to be 16.67 per cent in 2020, down
from 18.7 per cent in 2018.
3. Underutilization of Natural Resources:
Research shows that different areas of the country have deposits of minerals but due to
lack of modern technology and skilled labour the country has been unable to produce these
minerals at maximum levels.
4. High Trade Deficit:
The trade deficit is increasing every year. The trade deficit in 2019 was 1321.4 arba.
The trade deficit in 2018 was 1136.7 arba. The increasing trade deficit is due to the increase in
imports relative to exports each year.
5. Mixed Economic System:
A mixed economic system is a system that combines aspects of both
capitalism and socialism. A mixed economic system protects private property
and allows a level of economic freedom in the use of capital, but also allows
for governments to interfere in economic activities in order to achieve social
aims.

6. Rapid Population Growth:

The population of Nepal has been steadily rising in recent decades. The
current population is roughly 30 million which contributes to an increase of
about 3 million people every 5 years. Rapid population growth has resulted in
underemployment. The population growth rate is 1.35 according to 2011
Census.

7. Remittance Economy:
Nepal is highly dependent on remittance income. The remittance
income in 2019 was 879.3 Arba. It represented a 16.5 per cent increase
from the previous year. An increase in remittance compared to GDP
shows the increased dependence of Nepal on other countries.
Economic System
An economic system, or economic order, is a system of production, resource allocation and
distribution of goods and services within a society or a given geographic area. It includes the
combination of the various institutions, agencies, entities, decision-making processes and
patterns of consumption that comprise the economic structure of a given community.
An economic system is a type of social system. The mode of production is a related concept.
All economic systems must confront and solve the four fundamental economic problems:
• What kinds and quantities of goods shall be produced.
• How goods shall be produced.
• How the output will be distributed.
• When to produce.
The study of economic systems includes how these various agencies and institutions are
linked to one another, how information flows between them, and the social relations within the
system.The analysis of economic systems traditionally focused on the contradiction and
comparisons between market economies and planned economies and on the distinctions
between capitalism and socialism. Subsequently, the categorization of economic systems
expanded to include other topics and models that do not conform to the traditional contrast.
• Main Types of Economic System
• Capitalism
• Capitalism is an economic system based on the private ownership and control of
the means of production and their operation for profit. Central characteristics of
capitalism include capital accumulation, competitive markets, a price system
determined by supply and demand, private property, property rights recognition,
voluntary exchange, and wage labor. In a capitalist market economy, decision-
making and investments are determined by owners of wealth, property, ability to
maneuver capital or production ability in capital and financial markets, whereas
prices and the distribution of goods and services are mainly determined by
competition in goods and services markets. No country's economic system is
completely or purely capitalist, as governments may not allow free markets to
determine all prices.
• Socialism
• Socialism is a political, social, and economic philosophy encompassing a range of
economic and social systems characterized by social ownership of the means of
production, as opposed to private ownership. It includes the political theories and
movements associated with such systems. Social ownership can be public,
collective, cooperative, or of equity established for public benifit.
• Mixed Economy
Theoretically, it refer to an economic system that combines these
characteristics: public and private ownership of industry, market-based
allocation with economic planning, or free markets with state
interventionism. In practice, "mixed economy" generally refers to
market economies with substantial state interventionism and/or sizable
public sector alongside a dominant private sector.
 Natural Resources of Nepal
Natural resources refer to such type of resources that exist naturally in the earth
without any human effort. They are like water, atmosphere, soil, sunlight, natural forest,
and minerals. These natural resources are the main source of the human life exists in the
Earth. We are going to discuss the natural resources of Nepal.
Nepal is a landlocked country in between two big giant countries, China to the
north and India to the East, west, and south. It lies in South East Asia with an area of
147181 sqm. km.Let us discuss the natural resources of Nepal.

• Water :
Water is one of the major natural resources of Nepal. In fact, it is the second
richest country in water resources after Brazil. There are many sources of water,
especially like mountains, glaciers, and snow. Since Nepal is a landlocked country, it has
no any sources of water from sea or oceans. However, nature has provided abundance
sources of water. There are many large rivers like Karnali, Seti, Koshi, Gandaki,
Bhotekoshi, Sunkoshi and many small ponds, waterfalls and small streams. There are also
many lakes like Rara, Phewa, Tilicho, Shey pho ks undo lakes which are also the sources of
water.
 Water has been used especially in the
generation of electricity, irrigation projects,
drinking and household works. But still, the
people of Nepal are not able to get
adequate water resources. The capital city
Kathmandu is still scarce of water and
electricity. However, in the present days,
there has been no lack of electricity but if
the hydroelectricity projects are not
completed in time, it is sure to face major
load shedding in the coming days. The on-
going Melamchi project is also set to quench
the thrust of people of Kathmandu soon.
Hope, our government will properly utilize
the water resources of our country
Nepal River Map
 • Forest
Forest is considered as one of the major natural resources of
Nepal. Forest covers about 25.4% of the total land of Nepal according to
FAO in 2005. However, there has been a drastic change in this
percentage in the present context. Due to the rapid population growth
and unmanaged urbanization, the land covered by forest has been
changed into cultivable land. So, to protect and conserve the forest area,
the government of Nepal has divided forest area into three categories.
They are protected forest, conserved forest, and production forest.
Nepal is an agricultural country and there are large numbers of
people who still depend on the forest for their firewood. Besides it,
many industries like paper production, furniture, and timber industry
depend upon the forest. Forest of Nepal is the homes of medicinal herbs
through which medicines are produced. Still, large quantities of herbs
are exported to other countries since there is a lack of medicine
Production Company.
Forest is also the home to wild animals and birds. Nepal has a
large number of conservation areas that has helped to protect the forest
and conserve the wildlife. These conservation areas are the source for
attracting tourists in Nepal. It has helped to improve the economy of the
country. Forest also plays an important role in controlling the landslides
and flood. It helps to balance the ecosystem of the environment. So, the
forest needs to be protected.
Map of Nepal showing Forest Cover area
 • Minerals
Nepal is rich in minerals which are another important natural resources available here.
There are a large number of minerals like metallic, non-metallic, fuel, stones etc. found
mostly in the mountainous part of the country. Gold, limestone, mica, copper, irons are also
available in Nepal based on researched. It has been recently researched that Nepal has a
possibility of petroleum products in the cities like Nepalgunj, Biratnagar, Dailekh, Pyuthan.
The research is going on and if possible, there is the possibility of establishing the
petroleum industry in Nepal in near future. Similarly, minerals like limestone are used for
the cement production. They are found in Surkhet, Hetauda, Chovar. A research team has
revealed that Kathmandu and Mustang have abundance sources of natural gasses available
but it is not confirmed yet officially.
Nepal is a developing country and it lacks the modern technology, skilled manpower,
and capital to extract the minerals and established the mining industries. There is no hard
and fast rule made by the government due to which even if the international company want
to invest their capital in our minerals, they don’t have any authorize. It takes a long process.
The government of Nepal needs to focus on this matter since it will help to solve the
unemployment problem in Nepal at some level.
Nepal Mineral Map

• Natural resources are a very important factor for the survival of human beings. They need to be
protected, conserved and properly utilized. Since Nepal is taking a step forward in development, it
needs to protect and conserved its natural resources as possible by formulating strong rules and
regulations.
 Agriculture
In Nepal, the economy is dominated by agriculture. In the late 1980s, it was the livelihood for
more than 90% of the population, although only approximately 20% of the total land area was
cultivable, it accounted for, on average, about 60% of the GDP and approximately 75% of exports.
Since the formulation of the Fifth Five-Year Plan (1975–80), agriculture has been the highest
priority because economic growth was dependent on both increasing the productivity of existing
crops and diversifying the agricultural base for use as industrial inputs.
According to the World Bank, agriculture is the main source of food, income, and
employment for the majority. It provides about 33% of the gross domestic product (GDP).
In trying to increase agricultural production and diversify the agricultural base, the
government focused on irrigation, the use of fertilizers and insecticides, the introduction of new
implements and new seeds of high-yield varieties, and the provision of credit. The lack of
distribution of these inputs, as well as problems in obtaining supplies, however, inhibited progress.
Although land reclamation and settlement were occurring in the Terai Region, environmental
degradation and ecological imbalance resulting from deforestation also prevented progress.
Although new agricultural technologies helped increase food production, there still was
room for further growth. Past experience indicated bottlenecks, however, in using modern
technology to achieve a healthy growth. The conflicting goals of producing cash crops both for food
and for industrial inputs also were problematic.
Types of Agriculture in Nepal

• Food crops Nepal: The main food crop includes Nepali women planting rice
rice, maize, wheat, millet etc. It is mainly grown
in the plain areas of Nepal, on the river banks.
• Cash crops Nepal. They include jute, sugarcane,
tea, tobacco, coffee and others. Jute cultivation is
done in plain lands, where there is enough water.
• Mixed crops Nepal: For example along with
maize, soybeans, beans or another type of
similar plant can be cultivated. Similarly in paddy
fields, Lentil can be planted.
• Other types of farming. Animal husbandry is very
much interlinked with farming. Cows, buffaloes,
goats, sheep, pigs, horses and much more can be
raised along with agriculture in Nepal.
Characteristics/Features of Nepalese Agriculture

• 1. Subsistence farming:
Nepalese farmers have taken agriculture as the means of subsistence
farming only. Majority of their production is used for self-consumption and it is still
inadequate for survival. Farming has not been taken from a commercial point of
view.
• 2. Monsoon-based agriculture:
Sufficient irrigation is required for agriculture. Though Nepal is rich in water
resources, the agriculture of Nepal depends on monsoon which is most uncertain
and inadequate. So, agricultural production is directly affected.
• 3. Low productivity:
Nepalese agriculture is characterized by low productivity in terms of output
per hectare. There is low productivity because of the use of inferior seeds, a
traditional method of farming, lack of irrigation facilities, etc.
4. Lack of crops diversification:
Nepalese agriculture is not so much diversified in terms of crops. Farmers are
giving importance to cereal crops and most of them do not want to change the next
suitable and alternative crops. So, limited crops are grown in Nepalese agriculture.
5. Primitive farming:
Nepalese farming practices are still primitive. They still use the same tools and
methods sued by their forefathers. Modern tools, improve seeds fertilizers, etc are
not commonly used by the majority of farmers in the country.
6. High population pressure on agriculture:
The population pressure on the agricultural sector is very high due to the slow
development of other non-agriculture sectors. Thus, the increase in pressure of
population is badly affecting the agricultural productivity.

There are other characteristics of agriculture such as fragmentation of land,

geographical variation, the defective land tenure system, inadequate investment, etc.
 Importance of Agriculture In Nepal

Our country Nepal has more villages than towns. Most of the people live in
villages and they are farmers who depend on agriculture. Agriculture is the
backbone of the country and supplies people with daily needs. Unless Nepal can
develop the agricultural sector, the development of the country is impossible.
Some importance are pointed as below.

• It is the main source of living of the majority of people in Nepal.

• We can export agricultural products and earn foreign currency.
• It provides employment opportunities to the youths and hence holds energetic
youths from going abroad.
• Agriculture provides raw materials for many industries.
• Agriculture involves physical work and makes us healthy.
• It doesn’t keep land barren and helps to decrease soil pollution.
 Problems of Agriculture Development in Nepal

Agricultural is regarded as the backbone of the Nepalese economy. But agricultural

development is not satisfactory. Agricultural production and productivity are low. Nepal, once a
grain exporter country, but now has been a grain importer country. Agriculture in Nepal has been
facing a number of problems as follows:
1. Pressure of population on land:
The population of land is already very high and ever increasing. The annual growth rate of
population is 1.4 % since the non-agricultural sector has not been still developed. The increased
population, all depend on agriculture. Due to this excessive pressure of population, production
and productivity are very low in the agricultural sector.
2. Use of old technique:
Agriculture in Nepal is based on traditional technology. Majority of farmers are illiterate
and poor. So, most of them are either ignorant or unable to use appropriate new techniques,
improve seeds, fertilizers, insecticides, etc. As a result, there is no improvement in the
agricultural system.
3. Lack of agricultural credit:
Majority of Nepalese farmers are poor. They need adequate credit to make the investment
in agriculture. Agricultural development banks have been established in several parts of Nepal,
4. Lack of marketing facilities:
The agricultural marketing system in Nepal is unorganized. The farmers are compelled to
sell their products to a local shopkeeper. Thus, they are not encouraged to invest and produced
more. There is no guarantee of receiving a reasonable price, due to the lack of marketing
facilities.
5. Lack of irrigation facilities:
Sufficient irrigation is required for agriculture, But Nepalese farmers are almost
dependent on monsoon due to the lack of irrigation facilities which affect agricultural products
badly.
6. Lack of agricultural research:
Adequate research activities should be conducted for the improvement in agricultural
practices and an increase in agricultural productivity. But research activities, conducted in
Nepal are not adequate and non-farm-based. Thus, lack of agricultural research has hindered
the agricultural development in Nepal.
There are other problems of agriculture in Nepal such as lack of improved seeds and
fertilizers, lack of transportation facilities, lack of storage facilities defective government policy.
Remedial Measures
The agricultural sector faces serious problems. Despite the continuous efforts by the
government, for its development the remedial measure for these problems are as follows:
1. Control of population growth:
The pressure of population on land has created various problems. Thus, the population
pressure on agricultural land should be reduced by controlling the rapid growth of population
and diverting agricultural labour to other sectors of the economy.

2. Technical improvement:
The technical production techniques help to raise agricultural productivity. Thus the
production techniques should be improved to solve the problem.

3. Provisions of adequate credit:

Most of the farmers are poor. So, the provision of agricultural credit should be made
available at the lowest possible rate of interest to small and marginal farmers. The credit
facilities through different banks and financial institutions should be expanded so that
maximum numbers of farmers have easy access to credit facilities.
4. Marketing and storage facilities:
The farmers have not been able to get a reasonable price due to the lack of adequate marketing and
storage facilities. Hence, marketing and storage facilities should be made available so that they get a
reasonable price.

5. Development of irrigation facilities:

Nepalese agricultural production depends upon monsoon, which doesn’t occur timely and also
inadequate. So, that irrigation facility has to be extended throughout the country to increase
production and productivity.

6. Effective government policy:

The government should help to adopt appropriate and effective policies for agricultural development.
The government should help to make efforts to utilize the resources to the agricultural sector and
make credit facilities easily available to the farmers.

Besides, there are other remedial measures such as provides improved seed & fertilizers,
adequate agricultural research, development of transportation & communication, promotion in agro-
based industries, etc.
 Poverty
Poverty is an economic state where people are experiencing
scarcity or the lack of certain commodities that are required for the lives
of human beings like money and material things. Therefore, poverty is a
multifaceted concept inclusive of social, economic and political elements.
On the basis of social, economical and political aspects, there are
different ways to identify the type of Poverty:
1. Absolute poverty.
2. Relative Poverty.
3. Situational Poverty.
4. Generational Poverty.
5. Rural Poverty.
6. Urban Poverty.
Poverty in the context of Nepal (Trend line)
Types of Poverty :
1. Absolute poverty: Also known as extreme poverty or abject poverty, it involves the scarcity of basic
food, clean water, health, shelter, education and information. Those who belong to absolute poverty tend to
struggle to live and experience a lot of child deaths from preventable diseases like malaria, cholera and
water-contamination related diseases. Absolute Poverty is usually uncommon in developed countries.

2. Relative Poverty: It is defined from the social perspective that is living standard compared to the
economic standards of population living in surroundings. Hence it is a measure of income inequality. For
example, a family can be considered poor if it cannot afford vacations, or cannot buy presents for children at
Christmas, or cannot send its young to the university.
Usually, relative poverty is measured as the percentage of the population with income less than some fixed
proportion of median income. It is a widely used measure to ascertain poverty rates in wealthy developed
nations.

3. Situational Poverty: It is a temporary type of poverty based on occurrence of an adverse event like
environmental disaster, job loss and severe health problem.
People can help themselves even with a small assistance, as the poverty comes because of unfortunate event.
4. Generational Poverty: It is handed over to individual and families from one generation to the one. This is
more complicated as there is no escape because the people are trapped in its cause and unable to access the
tools required to get out of it.

5. Rural Poverty: It occurs in rural areas with population below 50,000. It is the area where there are less job
opportunities, less access to services, less support for disabilities and quality education opportunities. People
are tending to live mostly on the farming and other menial work available to the surroundings.

6. Urban Poverty: It occurs in the metropolitan areas with population over 50,000. These are some major
challenges faced by the Urban Poor:
• Limited access to health and education.
• Inadequate housing and services.
• Violent and unhealthy environment because of overcrowding.
• Little or no social protection mechanism.
Causes of Poverty
• High growth rate of population and low economic growth rate
• Unemployment
• Low Industrial Development
• Socio-cultural Factors (Birth rate/sex distribution/religion/superstition/Traditions)
• Old Technology
• Regional Disparity
• Under utilization of resources
• Inadequate socio-economic infrastructure
 Industries
It is the manufacturing of goods and finished products for
commercial purpose. It refers to the people and activities involved in
the production of things by using raw materials, skills, capital,
management, and means. It can be cottage, small, medium and large
scale industry. It is also called secondary activity. The pre-requisites of
industries are Land, labor, management, capital, raw materials,
machine, markets, transportation, and communication.
Classification / Types of Industries ↓
There are various types of industries. These are mentioned as follows :-
1. Primary Industry
Primary industry is concerned with production of goods with the help of
nature. It is a nature-oriented industry, which requires very little human effort. E.g.
Agriculture, farming, forestry, fishing, horticulture, etc.
2. Genetic Industry
Genetic industries are engaged in re-production and multiplication of certain
spices of plants and animals with the object of sale. The main aim is to earn profit
from such sale. E.g. plant nurseries, cattle rearing, poultry, cattle breeding, etc.
3. Extractive Industry
Extractive industry is concerned with extraction or drawing out goods from
the soil, air or water. Generally products of extractive industries come in raw form
and they are used by manufacturing and construction industries for producing
finished products. E.g. mining industry, coal mineral, oil industry, iron ore, extraction
of timber and rubber from forests etc.
4. Manufacturing Industry
Manufacturing industries are engaged in transforming raw material into
finished product with the help of machines and manpower. The finished goods
can be either consumer goods or producer goods. E.g. textiles, chemicals, sugar
industry, paper industry, etc.
5. Construction Industry
Construction industries take up the work of construction of buildings,
bridges, roads, dams, canals, etc. This industry is different from all other types of
industry because in case of other industries goods can be produced at one place
and sold at another place. But goods produced and sold by constructive industry
are erected at one place.
6. Service Industry
In modern times service sector plays an important role in the development
of the nation and therefore it is named as service industry. The main industries,
which fall under this category, include hotel industry, tourism industry,
entertainment industry, etc.
Categorization of Industries by size
In Nepal, the industry is categorized as follows:
• 1. Cottage Industry: An industry that has fixed assets of up to two
lakhs rupees, and consumes energy less than 5 kilowatts.
• 2. Small Scale Industry: An industry that has fixed assets of up to 3
crores.
• 3. Medium Scale Industry: An industry that has fixed assets of 3 to 10
crores.
• 4. Large scale Industry: An industry that has fixed assets over 10
crores
Importance of Industries in Nepal

Development of industries is vital for achieving rapid economic growth. The

following points highlight the importance of industries:
• Leads rapid development
• Provides employment opportunities
• Uplifts living standard
• Makes the country self-dependent
• Promotes export and reduces imports
• Local resources and raw materials are utilized
• Encourages agricultural development
• Promotes skill development and diversification of investment
• Promotes economic activities, saving, investment and income
• Promote regional development
• Promotes urbanization
 Problems of Industries in Nepal
1. Lack of capital
For the establishment of medium and large scale industries huge
amount of capital is required which is very difficult to be formed in the
context of Nepal. So, lack of capital is the problem of medium and large scale
industries.
2. Lack of infrastructure
Infrastructures such as transportation, communication and electricity
are the most essential elements for a industry to be operated. In our country
all there mentioned infrastructure are not available in adequate number or
are not sufficient.
3. Lack of skilled–manpower
Generally, medium and large scale industries need skilled manpower
for handling the delicate task but there is a situation of Brain Drain in our
country. So, there is scarcity of skilled manpower.
4. Lack of competitiveness
Most of the Nepalese industrial products are of low quality. Such
low quality products pose a formulate difficulty to complete in both
domestic and international market. Car telling is the major problem of
Nepalese market.
5. Limited Market
The domestic market for Nepalese industrial products is very
limited due to low purchasing power of the people. There is lack of
transport and communication facilities to sell the commodity
throughout the country.
Transportation and communication
Transportation and communication
Concept
Transportation and communication are important infrastructures
for the overall economic development of a country. Transportation is that
facility by which people can move from one place to another place and
transfer goods and services from one place to other. The means of
transport available in Nepal are road transport, ropeway, cable car and air
transport.
Communication is defined as the medium of exchanging news,
views and propagation of information. Important medium of
communication in Nepal are postal service, radio, telephone, teller,
internet, e-mail. Fax, television and newspaper.
Means of Transportation in Nepal
There are various means of transportation in the world. The modern means of
transportation include surface transport, air transport, sea-route etc. The main
means of transportation used in Nepal are surface transport and air transport.
(i) Surface transport
Surface transport includes road transport, railway transport, ropeway
transport, trolley bus, cable car etc.
a) Road transport
Due to the rugged physiography of Nepal, road transport gets an
important place here. It is the major means of transport in Nepal. But in 2007
B.S. there was only 376 km of the road including 5 km of blacktopped. There
was altogether 23,209 km road up to FY 2011. But by the end of 2012, 24,389
km road has been constructed.
Major highways of Nepal with their respective lengths

S.N. Highway Length (Km)

i. Mahendra Highway 1024

ii. Tribhuwan Rajpath 190

iii. Prithvi Highway 174

iv. Siddhartha Highway 184

v. Araniko Highway 114

• b) Railway transport:- The first railway line in Nepal was constructed in 1929 between
Amlekgunj and Raxaul, which was known as Nepal Government Railway. Janakpur-
Jaynagar railway which is 52 km long, constructed in 1936.
• c) Ropeway (Cable car):- The transportation system which is operated from electricity
is called Ropeway. In 1964, a new Kathmandu- Hetauda ropeway was begun. Now this
ropeway system is not in operation. During the 9th plan period as per the government
policy of promoting private sector participation in the transport sector, a cable car
project had been undertaken by the private sector from Kurintar to Manakamana.
• (ii) Air transport:- Air transport started in Nepal on a regular basis in 1953 A.D. with
three old aircraft which belonged to an Indian company. The air transport system was
developed in the country with the establishment of Royal Nepal Airlines Corporation
(RNAC) in 1958 A.D. Tribhuwan Intenational Airport having its initial runway length of
6,600 feet was constructed with American assistance. Modern equipment of air traffic
control RADAR has been installed with the assistance of Japan in 1998 A.D.
Since, Nepal is a mountainous country, it faces many difficulties to develop road
facility to all parts of the country. Therefore, air transport is the only alternative facilities
to all parts of the country. At present, Nepal has 51 airports including one international
airport in Kathmandu. A total of 120 helipads has been constructed in the country.
Communication
Communication is a process through which individuals mutually
exchange their ideas, values, thoughts, feeling and actions with one or more people.
There are two ways for establishing communication. One is personal communication
and the other is mass communication. Postal services, wireless telephone, and e-
mail are the means of personal communication and radio, television and newspaper
are the means of mass communication.
Some important means of communication service in Nepal are as follows:
i) Postal service:- Postal services are one of the traditional modes of transportation
services in Nepal and it is one of the important communication services. Postal
services started in Nepal from 1879 A.D. Currently , there are 3997 post offices in
operation in Nepal.
ii) Telecommunication services:- Telecommunication is the easiest and fastest
means of communication. The telecommunication department was established in
2016 B.S. in Nepal. The development of telecommunication services in Nepal is
extended to all the 77 districts of the country. At present, Nepal telecommunication
company (Nepal Telecom) is providing telephone services.
iii) Radio broadcasting services:- One of the most important means of mass
communication is radio broadcasting service has been accessible throughout
the medium-wave transmission. Radio Nepal is also using V-SAT to make its
broadcast audible throughout the country.

iv) Television services:- Television telecasting services is an important, effective

and live medium of mass communication. The service of Nepal television
started in 2042 B.S. It is expanding its services in various parts of the country.

v) Newspaper:- Newspapers are also the effective medium of mass

communication. By mid- May 2013, the total number of newspaper registered
in the various district of kingdom reached 6490. Out of the total newspaper
4510 are in the Nepali language.
Importance of Transport and Communication
Transportation and communication are important means and media for the development of the
socio-economic structure of Nepal. They are pre-requisite for the development of the country. They help to
mobilize the existing resources and integrate the sectors of the economy. The important role of
transportation can be explained as follows:
1. Development of the agricultural and industrial sector:
Transportation and communication play a vital role in the development of the agricultural and
industrial sector. Without efficient transportation and communication facilities, the development of the
agricultural market is very difficult. Transportation helps to carry final goods at the market and to bring raw
materials from the market to specific site whereas communication helps to get information about the
market structures of goods and services.
2. Basis of tourism development.
Development of tourism is impossible without efficient transportation and communication system.
Tourists require transportation and communication facilities to travel to various parts of the country. Most
of the tourists who came to Nepal return back to their country after visiting some places where these
facilities are easily accessible. So, to increase the average living of tourist stays, we must develop these
facilities to a considerable level.
3. Market expansion:
Transportation and communication network help to deliver the goods and services from one place to
another place easily. People can send their products easily and cheaply to far distances. It helps to expand
the market.
4. Utilization of natural resources:
Nepal is reach in natural resources but it has not been able to utilize the natural resources
properly due to the slow development of transportation and communication facilities. If we
develop the modern means of transportation and communication, natural resources can be
utilized in a proper manner.

5. Social reform:
Improved and developed transportation and communication system helps to increase people
to people contact, exchange their views and attitudes, change their lifestyles which help
people to avoid their traditional attitudes and adopt scientific method o social system.

6. Creation of employment opportunities:

Development of transportation and communication facilities, help to establish various
industries, factories, hotels and other services where people can get job opportunities in these
sectors.
There are other roles in transportation and communication facilities like an increase in
trade and commerce, regional development, social benefit, an increase in national income, etc.
Foreign Employment
Meaning
Going from one country to another country for job and to earn money is called
foreign employment. People of Nepal go to different countries of the world for jobs
and earning. The Nepalese labor and sweat is being used in foreign countries and
there is scarcity of human power for the development of our own country.
 Current status of Foreign Employment in Nepal

Over the years, there has been a growing trend of inclination for
foreign employment among Nepali working age population, especially the
youth, due to the lack of employment opportunities locally.
As a result, Nepali working population have been migrating to the
foreign destinations such as Malaysia, Singapore and Gulf countries, majorly.
The Economic Survey of the Ministry of Finance was quoted to have
reported the addition of a minimum 512,000 youth population to the Nepali
labor market, annually.
While the number of new entrants to the Nepali labor market stands
at more than 42,000 people per month in the last fiscal, the number is
expected to grow further in the coming years owing to the declining
dependency ratios.
 The International Labor Organization (ILO) calls Nepal a
young country with 63.7 percent of the country’s overall population (26.5
million) aged below 30 years. However, when it comes to the
employment, the unemployment rate among youth aged 15-29 years
stands at 19.2 percent compared to 2.7 percent for the whole population.
“Over 400,000 young people are estimated to enter the labor force
every year. These figures indicate the quantitative dimension of the
employment challenge in Nepal,” says ILO.
Basic employment-related challenges in Nepal are attributed to the
predominance of employment in the informal segments of the Nepali
economy with low productivity and earnings, and poor working
conditions, resulting in underemployment in the country.
Higher incomes and dignity of labor are among other aspects
contributing to the rise in migration for foreign employment.
 Merits of Foreign Employment
• Country can get lot of foreign currency as a remittance which can be
used to establish industries in the country . Such Industries provides
job opportunities in the country.
• People who went overseas to work can learn different skills and
modern technologies which can be beneficial for the development of
our own country.
• Foreign Employment helps to reduce unemployment problem in the
country.
• It may help to develop International relations with other countries
because the county has to do labor contract with other countries and
embassies has to be establish there.
Demerits of Foreign Employment
• The employees are forced to work for long hours without holidays and often
paid no wages
• Mostly, the semi-skilled and unskilled workers go to the foreign countries so,
they do not get job as per the contract.
• Some of the employees are mentally and physically tortured and sexually
abused and exploited.
• The worker are forced to work in low salary job.
• The manpower companies charge a huge sum of money for the visa and other
legal processing which forces the employees to sell the property to take the
money on high interest.
• The increase in trend in Foreign Employment creates scarcity in man
power(Skilled ,semi-skilled and unskilled) in the country.
 Foreign Direct Investment (FDI)
A foreign direct investment (FDI) is a purchase of an
interest in a company by a company or an investor located outside its
borders. Generally, the term is used to describe a business decision to
acquire a substantial stake in a foreign business or to buy it outright in
order to expand its operations to a new region. It is not usually used to
describe a stock investment in a foreign company. Foreign direct
investments (FDI) are substantial investments made by a company into
a foreign concern. The investment may involve acquiring a source of
materials, expanding a company's footprint, or developing a
multinational presence. As of 2020, the U.S. is second to China in
attracting FDI.
• How Foreign Direct Investments (FDI) Work

1. Companies considering a foreign direct investment generally look

only at companies in open economies that offer a skilled workforce
and above-average growth prospects for the investor. Light
government regulation also tends to be prized.
2. Foreign direct investment frequently goes beyond capital
investment. It may include the provision of management,
technology, and equipment as well.
3. A key feature of foreign direct investment is that it establishes
effective control of the foreign business or at least substantial
influence over its decision-making.
 Importance of FDI
• FDI can foster and maintain economic growth, both in the recipient
country and in the country making the investment.
• Developing countries have encouraged FDI as a means of financing
the construction of new infrastructure and the creation of jobs for
their local workers.
• Multinational companies benefit from FDI as a means of expanding
their footprints into international markets.
• Exchange technology, skills, management, capital, and marketing
capabilities and enhance economic development of developing
countries.
• Utilization of Resources (Land ,labor ,Capital and Human resource)
Trend in Foreign Direct Investment in
Nepal
Foreign Direct Investment (FDI) is an effective measure for promoting sustainable
development in the country. It serves as a catalyst for the development in an open
integrated economic system. It is the investment that is made by a different foreign
investor in the company which located in a foreign land. Foreign investment in Nepal
has been growing as the development process is speeding within the country. The
funds are transferred to purchase and acquire physical capital that includes machines
and factories. Nepal has been introducing a different provision to increase and attract
FDI including a set of the legal, institutional framework and regulatory. FDI has been an
increasing trend over recent past years. There are many different companies in Nepal
that have been participating in the FDI process in Nepal.
Nepal is participating nowadays to increase foreign direct investment in
Nepal. Many different investors from 39 countries have made an investment in 252
firms in Nepal. The FDI stock in 2015/16 was reached around Rs.137.7 billion i.e. 6.1
percent of GDP. This is mainly driven by the rise of different FDI-based industries that
are in existence. The service sector for highest share that is 70.2 percent of outstanding
FDI in Nepal. The highest FDI existing in Nepal is from India.
 There is certain foreign direct investment policy in Nepal that attracts FDI within the country
that helps in the economic development of the country. FDI serves as a principle complement to
the domestic investment and capacity building for the development of the Least Developed
Countries. In the least Developed Countries, the negative trend remains a matter of concern for the
policymakers where the international investment is indispensable for the sustainable development
of the country. The unique aspect of FDI is that it helps to bring a package of resources including
technology, skills, management, capital, and marketing capabilities. These resources and
capabilities are utilized in the host-country and help to optimize profits for the investment of
transnational corporations. This also has an array of direct and indirect impacts that comes under
suitable conditions and is very beneficial to the host economy. This not only helps in the production
of products for domestic consumption but also linkages and spillovers that bolster the capabilities
of different domestic firms and human resources. The foreign direct investment law in Nepal helps
various investors from a different country to invest in Nepal which is known as the net transferred
fund.
Foreign Direct Investment is one of the essential elements that help in the economic growth of the
country. There are many contributions of foreign direct investment in the Nepalese economy. FDI
can be said as one of the roots for the development of the country. Nepal has been implementing a
number of policies to promote a competitive investment from different countries and create a large
number of investment opportunities.
FDI Trend in Nepal
Governing Authority for FDI