25-31 December 2015 #788

The wreckage of 2015

The April earthquake was followed by an even more devastating economic upheaval
Siran Liang

GOPEN RAI

For Nepal the past four months under the border blockade has been an economic earthquake, leaving most businesses and industries in ruins, consumers and investors reeling.

In September, the country was just beginning to recover from the earthquake, and indeed experts had forecast sharp growth as reconstruction money kick-started the economy, when the Madhes agitation and the Indian blockade dashed all hopes. 

“It’s a totally disastrous situation,” says Saurabh Jyoti whose factories in the Simara- Birganj corridor have been shut since August. The Jyoti Group is into steel, oxygen, textiles and represents Honda and Phillips in the Nepal market. “The stock is zero and sales are nil,” Jyoti summed it up.

Prominent Nepali industrialists estimate that the blockade did not only ruin Nepal’s trade but lowered long-term confidence of both the consumers and investors home and abroad. Even more worrying is the rise in an informal economy dominated by smuggling of fuel and essentials that will have far-reaching consequences for government revenue in future, they say.

The decrease in consumer sentiment has affected everything from services to manufacturing to media. The blockade has put nearly 200,000 people out of work, and the shortages of food fuel and price hikes even when they are available means that the middle class is spending all its disposable income on essentials.

“The mood of most businesses is very low, many are withholding new investment and are just trying to consolidate,” says industrialist Shekhar Golchha who is also vice-president of FNCCI.

The blockade hit hardest at a time when auto and consumer electronic companies used to do most of their sales during Dasain-Tihar festivals. Business this year was down by 60 per cent. The blockade has also seriously eroded the investment climate, which was already not in good shape because of the political instability.

In a meeting at the Finance Ministry last week, Nepal-based multinationals and business chambers said consumer confidence was at an all-time low. In order to ride out this crisis and to just pay salaries, some are taking loans from the banks which happen to be flush with cash.

The tourism industry, which had taken a direct hit after the earthquake, has been further affected by the fuel crisis. Benasir Khan Shrestha of Turkish Airlines in Kathmandu said the operator was reducing its frequency from daily to four times a week. Other airlines make unscheduled refueling stops because their planes can’t tank up in Kathmandu.

“With this crisis, we’re not able to promote Nepal at all, we need this crisis to end,” Shrestha told Nepali Times.

The tourism slump has hit Pokhara hard with hotels, restaurants, adventure sports companies and everyone dependent on it affected badly. However, Biplob Paudel of Hotel Barahi sees the signs of hope: “The crisis has at least raised the awareness of the local people about standing up on our own feet. We have to be better prepared for tomorrow.”

The economic slump has affected the media industry as well. Although readership has gone up, advertising revenue has been wiped out, and media companies are taking a direct hit. Joydeb Charkavarty of J Walter Thomson Nepal told Nepali Times last week: “No one is buying non-essentials, if it is so difficult to find fuel for a motorbike why would you want to buy a new motorbike?”

Remittance earnings from Nepali migrant workers abroad is keeping the economy afloat for now, and there is a belief that Nepal can come out stronger if the government learns its lessons. 

Says Shekhar Golchha: “We will probably recover faster from this crisis than we think because of the unbelievable strength of the Nepali people.”

Read also:

Economic crisis, political solution

Full-blown economic crisis, Om Astha Rai

Vicious circle, Editorial

Media suffers blockade, Xiaotong Xu and Siran Liang

Jump-starting the economy, Sarthak Mani Sharma

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