Trade, Investment and Poverty Reduction in the Himalayan Region of Nepal

By Dilli Prasad Bhattarai

Of the total 75 districts of Nepal , 16 in the northern part of the country fall within the Himalayan (mountain) region. The districts are Taplejung, Sankhuwasabha and Solukhumbu in the eastern development region; Dolakha, Sindhupalchok and Rasuwa in the central development region; Manang and Mustang in the western development region; Dolpa, Mugu, Humla, Jumla and Kalikot in the mid-western development region; and Bajura, Bajhang and Darchula in the far-western development region.

The Himalayan region is the most inaccessible and poorest part of the country. It covers an area of 51,817 sq. kms. and a total population of 1.7 million (in 2001). The population in the region grew at an annual average rate of 1.6% during the period 1991-2001. The region, excluding Sindhupalchok district, has a very low density of population, ranging from 4 persons per sq. km. in Manang, Mustang and Dolpa to 61 persons per sq. km. in Kalikot. Agriculture is the means of livelihood of most of the people in the region. However, due to high altitude, unavailability of enough cultivable land and low productivity in the agriculture sector, the region has constantly become a food deficit area. In 2002, cultivated land per person in the region was 0.3 hectares.

Transport infrastructure is very poor in the Himalayan region. Eleven out of the sixteen district headquarters in this region are not yet connected by motorable road. Traders, therefore, cannot easily transport food and non-food items to and from these districts. The 7 districts of the mid and far-western development region are particularly hit by food shortages every year. Majority of the people in these districts are very poor. They do not have ability to buy food even when it is available in the market. Thus, hunger and malnutrition are the common features of the region.

The farmers in the Himalayan region use traditional technology to produce food, vegetables, fruits, livestock and forestry products. They have limited savings, which limits their capacity to make more investment. Low level of investment (both private and government) in the agriculture sector has resulted into low productivity per hectare of cultivated area. Off-farm business activities are also restricted by the unavailability of transport, communication and electricity in the region. Low level of economic growth of the region is the result of low level of investment. This has helped perpetuate extreme poverty in the region.

In 1996, 56% of the population in this region was under the national poverty line. The poverty gap index was 18.5%, which means that there was a shortfall of 18.5% of income of the poor from the poverty line. The inequality of income within the poor group in the region was also very high, 8.2%, as indicated by the severity index (i.e., the squared poverty gap index).

The region also has a low level of social development. In the health sector, in 2001, infant mortality rate and under-5 mortality rate were 112 and 157 persons per 1,000 live births, respectively. Maternal mortality rate for 2001 could be guessed at over 539 per 100,000 live births. This is one of the highest in the world. Although fertility is declining in the region, it is still at a high level. In 2001, the total fertility rate was 4.6 children per women of reproductive age.

In the education sector, in 2001, the overall literacy rate of the population over the age of 6 years in the region was 43.5%. However, literacy rate among the women was much lower. Only 30.0% of women over the age of 6 years were literate. Percentage of girls enrolled in primary school ranged from 41.3 in the far-western Himalayan region to 50.7 in the western Himalayan region. Similarly, net enrollment ratio for girls ranged from 67.8% in the mid-western Himalayan region to 97.4% in the western Himalayan region.

According to UNDP 2004, human development index (HDI), which shows the level of human centered development, was less than 0.4 in 8 of the 16 districts of the Himalayan region. In the rest 8 districts, the HDI was between 0.4 and 0.5. The value of HDI ranges between 0 and 1 (zero for the lowest level of human centered development and one for the highest level). It is based on three indicators: (1) longevity, as measured by life expectancy at birth (Life expectancy is the function of health status of the population.), (2) educational attainment, as measured by combined adult literacy rate (two-thirds weight) and the combined gross primary, secondary and tertiary enrolment ratio (one-third weight); and standard of living, as measured by GDP per capita (PPP US$). The above-mentioned human development index reveals that human development in the Himalayan region is at a very low level.

We have both constraints and opportunities for reducing poverty in the Himalayan region. The major constraint is the availability of funds for investment in this poverty-stricken region. Nepal’s tax revenue base is very small. Most of the revenue generated through the tax system goes to general administration, including fighting against the insurgency, which is currently taking place in the country since 1996. Development expenditure is generally met through foreign aid, including grants and loans from the bilateral donors and multilateral institutions, such as, UNDP, the World Bank, Asian Development Bank. Direct foreign investment is also another avenue for financing development projects. But, so far, the quantities of these grants, loans and foreign direct investments are too small compared to the needs of the country.

(Bhattarai is Economist and Demographer. He can be reached at dillimail@yahoo.com)