Development Perspective: Changing
Paradigm of the Development and
Priorities
Pushpa Lal Shakyaao oe
Presentation Flow
Background
Development: Meaning
Main Objectives of Development
Changing Paradigm of Development
Basic Requirements for Development
Actors of Development and Pillars of Nepalese Economy: Public,
Private and Co-operatives
The Current Plan, National Development Priorities and
Development Scenario
Development /ssues and Challenges in Nepal
Suggestions and Way Forward1. Background
* The ultimate aim of development is to help address the
challenges of development in the country to improve
the living standard of the people.
* Every country wants to increase the living standard of
their people and to be called developed.
* However, development can not be achieve in a short
span of time and it is multi-dimensional issue.
* There are certain number of indicators to categories a
country as a developed or underdeveloped.Traditionally, development meant the capacity of a
national economy to achieve high growth rate in GDP or
per capita income.
Development was also viewed as change in the structure
of production i.e. decline in the share of agriculture in
the GDP.
Before the World War Il most of the developing
countries of the world were colonized by the western
colonial powers.
After the World War II most of the developing countries
of the world were decolonized. Then they (the Third
World) began to adopt new strategy for the
development of their economies. As a result, a new
development approaches has began to emerge.However, especially after 1970’s development
was redefined in terms of reduction in poverty,
inequality and unemployment and began to
get focus.
Actually, there is a big difference between
economic growth and development concepts.
Initially, some problems were seen in the
definition, approach and criteria of economic
growth and development.
In this regard, various experts of this field have
tried to define it.Generally speaking, economic growth means
increase in gross domestic product (GDP) and/
or GDP per capita of the country.
Some economists define 'Economic growth is a
process whereby an economy's real national
income increases over a long period of time’
which is measured by the GDP.
In sum, economic growth refers to increase in
production or income.
However, economic growth sees only ‘value add’
in the economy but not the ‘quality of life and
inequality’.2. Development: Meaning
* In general terms, development means economic
growth plus positive changes in the country or
economy.
* Development refers to the adoption of
new technologies, transition from agriculture-based to
industry-based economy, and general improvement in
living standards.
* Michael P. Todaro says that development must be
conceived of as a multi-dimensional process involving
major changes in social structures, popular attitudes,
and national institutions, as well as the acceleration of
economic growth, the reduction in inequality, and the
eradication of poverty.Therefore, development is a multi-dimensional
phenomena.
Amartya Sen says ”Economic growth cannot sensibly
treated as an end itself. Development has to be more
concerned with enhancing the lives we lead and the
freedom we enjoy”.
Therefore ‘capability to function’ is what really
matters for status as a poor or non-poor person.
The above definitions indicate that it is difficult to
measure the development.
However, it is necessary to make a workable formula
by which we could measure the development.For example, we can say development means to move
from the low level of development to high level for
which we can say ‘betterment of economic life of the
people’.
But the living standard of the people does not increase
automatically or spontaneously.
For this to happened we need appropriate planning
and policy measures.
In sum, to measure development we need to measure
the following indicators besides measuring the
economic growth and per capita income.
Now, sustainable development is the key agenda of
any country. So we are focusing more on attaining
Sustainable Development Goals (SDGs)Some Important Development Indicators
Economic Indicators:
* GDP/GNP, per capita income, Inflation rate, Savings,
Govt. revenue, Government Expenditure, Per capita
real consumption, Unemployment rate, Distribution of
income.
Social Indicators (Demography, Socio-political variables):
* Poverty Rate, Human development, Infant Mortality
Rate, Maternal Mortality rate, Adult Literacy Rate, Life
Expectancy, Gender parity, gender empowerment,
Degree of decentralization, and Level of people’s
participation in the government etc.3. Main Objectives of Development
1. To raise levels of living including, in addition to higher
incomes, more employment opportunities, better
education and greater attention to cultural and
human values.
2. To increase the availability and widen the distribution
of basic life-sustaining goods such as food, shelter,
health and protection.
3. To expand the range of economic and social choices
available to individuals and nations by freeing them
from dependence, ignorance and human misery.4. Changing Paradigm of Development
1.
Before 1930 laissez-faire Policy was adopted for
economic growth. (Free Market Economy, Less
Government Intervention, Less Tax, Private sector led
growth.)
After Great Economic Depression, 1930s Government
intervention was encouraged. (Deficit finance,
demand management policy,)
After WW II -1970:
After WW Il - adoption of planned economic
development approach by the developing world.
(Mixed economy- Public enterprises, private sector,
market, Economic Development Planning)
)Economic Growth was focused- ‘trickle down
mechanism’ for development.
Inward looking approach
Protectionism
government intervention, and
Import substituting Industrialisation
Nepal’s Plan of that period also focus on
economic growth like doubling of national
income by 15 years time period, establishment
of various PEs, quota and license system, control
regime was adopted.. 1970s: - Basic Needs Approach
To reduce poverty basic human needs like food,
clothing and shelter needs to be provided.
Nepal’s Six and Seventh Plan’s objectives were also
based on this approach.
In 1985 (B.S. 2042) Nepalese living standard will
achieve the Asian Standard by 2000
Six basic needs were identified.
. 1980s:- Structural Adjustment Program
(SAP in 1986, Economic Liberalisation, privatisation,
globalisation)
Outward looking approach
Export led growth, Trade as a engine of growth e.g NIE,
Asian Tigers (Hong Kong, Singapore, Taiwan and South
Korea development)
Role of government limited as a facilitator.Economic Liberalisation in Nepal
* 1986: Structural Adjustment Program (SAP)
* 1992: Enhanced Structural Adjustment Program (ESAP)
* Economic reforms
N
veve¥FK-YKFK EK
Devaluation
Privatisation
Deregulation of interest rates
Tax reduction
Tariff reduction
Reduction in deficit financing
Reduction in recurrent expenditure7. 1990s: - Human Development Approach
* In 1990, Mahbub ul Haq launched the first Human
Development Report. The objective was: “to shift the
focus of development economics from national income
accounting to people centered policies”.
* Moreover, its objective was to set out a comprehensive
approach to development, including an agenda of policy
priorities, tools of analysis and measurement, and a
coherent conceptual framework.
* Strategies for human development initially emphasized
the three dimensions of the HDI- investing in education
and health, and promoting equitable economic growthMahbub ul Haq: Human Development is important for
poverty reduction or human aspect of poverty needs to
be look at.
Social capital generation
Amartya Sen defined human development as the
process of enlarging a person’s ‘functionings and
capabilities to function, the range of things that a
person could do and be in her life’”.
Sustainable Development (Bruntland Commission
Report Our Common Future), Rio Conference 1992
(Earth Summit).
One of the objective of the Eight Plan was sustainable
development.8. 2000s:- Growth with Equity, Pro-poor/ Inclusive
Development Approach, MDGs
(PRSP/Tenth Plan, Three Year Interim Plan, Three Year
Plan, 13* Plan)
9. Since 2016:- Sustainable Development Goals
(SDGs) 17 Goals, 169 Targets and 230 indicators
( 14* Plan and Forthcoming Plans),
* Today, the world community is concerned more about . There are
three pillars of sustainable development identified in Rio
Conference, They are:
1. Economic aspect
2. Social aspect, and
3. Environment aspect
* These three aspects are interrelated and interlocking.Sustainable
Development
Environment
conservation
Social
Development1.
Economic Aspect
Initially, development was used to taken as
economic growth.
Now the dimension of development has been
widened and covers other aspects such as poverty
reduction, reduction in income inequality and
unemployment, human development, technological
change.
Economic growth is only means of development the
end is development.
Economic growth and increase in per capita income
is essential for development but it is not sufficient
to sustain the development and prosperity.2. Social Aspect
* Development should address the social aspects
such as education, health, water supply, sanitation
facility, gender empowerment, social evils and
equality.
* Social indicators such as school enrollment, adult
literacy rate, maternal, infant and child mortality
rate, life expectancy, water supply and sanitation
facilities, social justice, inclusion etc are also
important to measure the development.
* Moreover, situation of social and geographic
discriminations, change in outdated traditional
values and traditions are also important aspects
and indicators of development.3. Environment aspect
Development has also environmental aspect.
The climate change, global warming has negatively
impacted the development gains.
During the infrastructure building we need to consider
the environment protection aspect.
While working for development we need to sustainably
manage all types of forests, halt and reverse land
degradation.
We need to ensure the conservation, restoration and
sustainable use of inland freshwater ecosystems and
their services, in particular forests, wetlands, mountains
and dry lands.
We need to ensure the conservation of mountain
ecosystems, including their biodiversity, in order to enhance
their capacity to provide benefits that are essential for
sustainable development.In conclusion, broadly we can see that there are three phases
after 2"¢ world war development policy:
. Post- WW II to late 1970s period there was more consensus on
economic growth focus with adoption of state intervention;
. During 1980s focus on neo-classical or liberal policies such as
reducing subsidies, reducing inflation and private sector led
growth or market or liberalising economy; and
. After 2000 focus on market-led with inclusive and pro-poor,
sustainable economic development
The changing global development paradigm clearly shows that
there is a great debate in the world among the economists and
political thinkers about the proper role of the state in promoting
economic development.
At the theoretical level, the neo-classical economist or the
liberalist argued for the least intervention of the state, letting
freely functioning markets to achieve Pareto optimality or
OM i
eeHowever, in contrast to these theories, a number of emerging
economies have been adopting more state-interventionist
approaches and also been successful in achieving development.
The history of many developing economies during the 1970s
reminds us — when state-led or intervention development
approach reached its greater height - interventionist policies may
create great risks, and can increase of rent-seeking behaviour
and failure of state situation. On the other hand there is also
market failure situation of Great Economic Depression of 1930.
Therefore, after the world economic crisis of 2007-08 there is a
more or less consensus on the role of the state or government in
regulating the economy.
Moreover, in order to reduce poverty and to achieve the SDGs,
and also to develop the infrastructure, to improve water supply,
health and education facilities and to facilitate export-led
growth, a re-expansion of the role of the state seems vital.5. Basic Requirements for Development
1. Capital Formation:
N Increase in savings
N Development of financial institutions to mobilise
savings
N Use of savings for investment
2. Structural change ( industrialisation)
3. Technological development and innovation
4. Infrastructural development
5. Human capital development
6. Change in social-cultural attitude (mind set)
7. Good governanceTo achieve development we need:
Achieve high, inclusive and broad-based economic
growth
Macroeconomic Stability
Control inflation
Reduction in poverty
Reduction in unemployment
Capital formation
Transformation in socio-economic structure
Reduction in income inequalities
Development of socio-economic infrastructures
Development of human resourcesMaintain political stability
Adoption of decentralized governance system
Ensure good governance
Development of technology
Industrial development
Human development
Social justice and equity
Regional balance
Environment protection
Removal of social superstations
Uplift the living standard of the people6. Actors of Development and Pillars of Nepalese
Economy: Public, Private and Cooperative Sector
Followings are the main actors in the development
of Nepal.
. State (Government/public sector)
. Central/provincial /local government
. Private sector
. Cooperative sector
. NGOs/ INGOs
. Civil society
N ODOU PWN PB
. Community organisations/user groupsThe overall development of the country is primarily the
responsibility of the government,
However, the government, with its limited resources
cannot adequately address the ever rising aspirations of
the people.
To ensure maximum development and to involve all
people, it is necessary to clarify the roles, functions and
duties of each sector and to develop its capacity.
People do not feel a sense of ownership in any
development endeavor unless they participate in it;
Therefore, their spontaneous involvement is imperative
and indispensable.Importance and Inter-linkages Between the
Three Pillars of the Economy
* All the three sectors of the economy are equally
important in development because of their features
and role.
* The public sector is important because it plays a lead
and “crowding in” role for the private and the
cooperative sector
* Moreover, public sector formulate the policy for all the
sectors. So the size and role of the private and public
sector in the economy depends on the policy and
initiatives of the public sector.With out the support of the private and cooperative
sector government can not increase its revenue and
the service delivery capacity.
Moreover, the trade, employment and inflation rate
all depends upon the role played by the private and
cooperative sector.
More _ significantly the poverty — reduction,
infrastructure development, PPP all depends upon
the private sector supports.
So, there is interlink between all the three sectors of
the economy in the development process.7. The Fourteenth Plan (2016/17-2018/19)
Vision
¢ Self- reliant, prosperous and socialism oriented national
economy and affluent Nepalese people.
Goal
* To reach the level of meddle income country through
welfare state with social justice.
Objective
* To achieve economic and social transformation by rapid
poverty reduction through high economic growth rate
along with employment oriented and just distribution.
Strategy
* Following five key strategies have been set to achieve the
above vision, goal and objectives:To increase production by transformation of the agriculture
sector and expansion of tourism, industrial and small and
medium enterprises.
To build infrastructure for energy, road and air transport,
information and communication and rural-urban and
development of trilateral connectivity.
To achieve high and sustainable reform in human development
by emphasizing on social development, and social security as
well as social protection.
To promote overall good governance by economic, social and
governance reform, efficient and accountable public finance,
clean, transparent and people friendly public service as well as
protecting and promoting human rights.
To enhance institutional capacity along with gender equality,
inclusion, environment protection and maximum use of science
and technology.Economic Growth Rate and Investment Requirement
in the Fourteenth Plan
* Annual economic growth rate in the 14** Plan period will be
7.2 percent, with growth rates in the agricultural and non-
agricultural sectors maintained at 4.7 and 8.4 percent
respectively.
* The incremental capital output ratio (ICOR) is estimated to be
5.2:1.
* Gross fixed capital formation at the constant prices of FY
2015/16 will be Rs.2424.96 billion, Rs. 954 billion (39.4%) will
be invested by the public sector, Rs. 1327.30 billion (54.7%) by
the private sector and Rs. 143.24 billion (5.9%) by the co-
operative sector.Nepal’s Development Practices and Priorities
Issue: Market Vs Planning
Nepal adopted Planned Development Approach
since 1956
Since the First Plan to Seventh Plan it has adopted
Mixed Economy.
However since the early 1990s it has been adopting
Liberal market economy.
After the early 1990s the role of private sector has
been increased.
People centered development is focus of the
government.
.As it is considered that the public sector alone
can not fulfill the development requirement of
the country, the federal democratic constitution
of Nepal has mentioned about adoption of
Three Pillar Economy: Public, Private and
Cooperative sectors.
Therefore, state and other actors’ of
development should play an active role to
achieve development targets such as LDC
graduation by 2022, SDGs, and reaching middle
income country by 2030 set by the government.Priorities of Development
* Participative Development (Top down and Bottom up)
Approach
* Market based Indicative Planning for development
* Result Based (RBP)/ Strategic Planning
* Sustainable and inclusive development
* Good governance
* Growth with equity (High, Inclusive and sustainable
growth
* Poverty reduction
* Reduction In unemployment
¢ Infrastructure Creation and Energy GenerationDevelopment Scenario of Nepal
1.
Nepal is among the poorest and least developed
countries in the world, with per capita GNI of US $
1004. The average GDP growth rate is low
compared to its neighboring countries.
. 21.6 % of its population living below the poverty
line.
. The HDI is low (0.54).
. Nepal is heavily dependent on remittances, which
amount to as much as 24.3% of GDP.
. Agriculture is the mainstay of the economy,
providing a livelihood for almost 64% of the
population and accounting for about 28.2% of
GDP.6. Industrial activities are limited to few products
mostly processing of agricultural products, including
pulses, jute, sugarcane, tobacco, and grain.
7. Nepal's economy lacks the entrepreneurial
dynamism needed for stronger economic growth and
long-term development.
8. Political instability and a poor investment business
climate have hampered domestic as well as foreign
investment.
9. Moreover, it has weakened the capacity to
implement economic reform or create a_ stable
development environment.
10. The private sector is not well developed.10. Nepal has considerable scope for exploiting its
potential in hydropower, with an estimated 42,000 MW
of commercially feasible capacity. But only about 2%
of its total potential has been exploited.
11. However, gradual structural change has been
seen in the economy. The share of service sector is
gradually increasing and that of agriculture share is
decreasing.
* The share of agriculture in the GDP is reduced to
about 28.2%, that of industrial sector 14.2% and
service sector 57.6% in 2074/75.Major Development indicators
Indicators
Population below poverty line
Extreme poverty
Unemployment rate %
Life Expectancy at birth
MMR (Per one lakh)
Literacy rate (15-24yrs)
Net enrollment in primary level %
Basic Sanitation facility %
Human Development Index
Gender empowerment index
Water supply facility
Women in parliament %
2017/18
21.6%
16.4
2a)
69
258
88.6
97.2
94.0
0.54
0.56
87.9
338. Development Issues and Challenges in Nepal
Issues:
+ Low economic growth rate
Poverty and backwardness
High inequality
Inclusive and high economic growth
High unemployment and underemployment
High dependency on agriculture
Low level of industrial development
Socio- economic transformation of the
economy
Increasing UrbanizationHigh Migration
Regional, Gender Imbalance and Exclusion:
Under utilization of human resources:
Large trade gap
Centralized governance system and lack of good
governance:
Resource mobilization and its efficient and
effective Use
Population growth
Balanced growth
Gender mainstreaming.
Low level of technological development
Lack of skilled human resources
Low capital formation
Poor socio-economic infrastructures
Overall, the static approach to economic
management and development has been a serious
drag on business activity.
Lack of transparency, corruption, and a
burdensome approval process impede much-
needed expansion of private investment and
production.
Inefficient judicial system, which is subject to
substantial corruption and political influence.Challenges:
+ Reducing poverty
+ Reducing income inequality
+ Increasing employment opportunities and reducing the
problem of unemployment and underemployment
+ Attaining inclusive high growth and development
* Increasing resource mobilization and its utilization
+ Reducing external dependency for development
+ Attaining SDGs
* Controlling inflation
+ Gender mainstreaming
+ Managing the increasing population appropriately.
+ Mitigating the impact and potential impacts from the global
economic recession.
+ Improving human development indexImproving human resource management
Increasing export trade and reducing trade deficit
Effective and efficient utilization of remittances in productive
sector.
Improving service delivery system
Protecting environment and addressing climate change
issue
Providing sufficient and reliable energy supply
Availing local cooperation in infrastructure development.
Ensuring the returns of development to the regions,
communities and groups those are left behind in the
process of development.
Managing disaster
Improving the living standard of the people.
Improving governance and strengthening and implementing
federal democratic and planning system9. Suggestions and Way Forward
There is urgent need to address the development challenges
faced by the developing economies like Nepal.
More participatory development approach is required.
Political stability is essential for achieving high inclusive
growth and development.
Political commitment should be ensured for effective
implementation of development plan
Implementation capacity need to be enhanced.
Proper coordination between development actors needs to
be strengthened
Linkage between federal, provincial and local level
development planning mechanism needs to be established.
Reduction in unnecessary expendituresIncrease in government revenue,
Effective mobilisation and utilisation of foreign aid
Increase allocative efficiency
Prioritizing development projects/programs
Allocation in productive sectors
Develop project bank
M & E should be strengthened and quality of supervision
should be improved.
Development cooperation from the developed world and
neighboring countries is necessary for development.
However, socio-economic and political reforms and
improvement in the governance system is very crucial in the
developing countries like Nepal to improve the living
standard of the Nepalese people..Thank You