As Nepalis
reel under the unofficial blockade imposed by India, calls for a self-reliant
economy have come from different quarters. These calls have come at a time when
the country faces an acute crisis of essential goods like fuel and medicine,
among others, because of the Indian blockade. Some see this as a knee-jerk
reaction while others think this is the start of a long overdue process of
freeing the country from its over-dependence on its southern neighbour for
trade as well as survival.
According to economists as well as business leaders, the blockade has
made clear the harsh reality of Nepal’s situation – its dependency on one
country for almost everything. Those supporting the idea of a self-sufficient
economy say this dependence is dangerous as it can be used against our national
interests. Therefore, they argue, Nepalis must learn the lesson they could not
from the 1989 blockade by India and reduce import and strive for
self-sufficiency.
Economists define self-sufficiency or self-reliance as the state of not
requiring any aid, support, interaction or trade with the outside world. It is
generally believed that a fully self-dependent economy or autarky is not
possible in today’s world.
So, is it possible or even advisable for Nepal, sandwiched between two
of Asia’s largest economies, to go for self-sufficiency? Is the self-reliant
economy just a theory and a myth or can it be turned into a reality?
“Self-reliance is a myth if it means a country depends on itself for
all economic activities and thereby shuts out the rest of the world,” says
former finance minister and senior economist Prof. Madhukar SJB Rana. He
further clarifies, “Not quite a myth, however, if it means a national economy
that seeks to use its natural and human capital to the maximum to generate
growth and employment and, vitally, develop an economic and financial structure
that is not excessively dependent on the outside world for markets, supplies
and investments.”
Agrees Pashupati Murarka, president of the Nepalese Chambers of Commerce
and Industry (FNCCI). “An autarky is not possible today. But that doesn’t mean
we shouldn’t try to reduce our dependency on imports and strengthen from within
and create a national economy based on domestic production,” he says.
Self-dependence or Interdependence?
According to a study carried out by economist Dr Damaru Ballabha Paudel
for Tokyo University, the Nepali economy was 80 percent self-reliant in 2010
and met 20 percent of the domestic demand through imports. The study, which was
based on Nepal’s input-output tables of 2010 and 2011, showed that Nepal was 47
percent self-reliant in the domestic demand of industrial productions and 90
per cent self-reliant in agriculture.
Similarly, the country’s self-reliance in the hotel and restaurant sector
was 95 per cent and that in electricity, gas and water was 55 per cent.
Likewise self reliance in forest products, mine-based products, construction
materials, telecommunications, transport, trade, and financial intermediation
was 80 percent, 57 percent, 80 per cent, 90 percent, 61 percent, 82 percent and
78 percent, respectively.
“Self-reliance has decreased while dependence on the outside world has
increased over the last five years,” says Dr Paudel. According to him, we
should seek self-dependence through interdependence in today’s world.
“Interdependence means if we are dependent on a country for some
products, we make that country dependent on us for some other products,” Dr
Paudel says. “This is the way of becoming self-reliant today. An isolated
economy as envisioned by Robinson Crusoe is not possible today.”
Former FNCCI president Kush Kumar Joshi echoes the same view and sees
the current blockade by India in the same light. “We have been consistently
dependent on India. This imbalance will change if we make developments to make
India dependent on us,” he says, “Had we been exporting, say, 5000MW of
electricity to India, it wouldn’t have dared to impose the blockade. That’s the
power of interdependence.”
Economists say that the idea of interdependence is based on the
production, consumption and export of goods and services that can be produced
at competitive price and import of goods and services that cannot be produced
or provided at competitive price. “This is the formula based on which the world
economy functions today. Interdependence means self-dependence,” explains Dr
Yubaraj Khatiwada, the newly appointed vice-president of the National Planning
Commission and former governor of Nepal Rastra Bank.
However, achieving self-reliance through interdependence is not easy
for Nepal, either. What can it possibly export to other countries, including
India to make such countries really dependent on Nepal? In the current
situation, it is difficult to think of even one single such product. We have a
vast potential in hydropower, but the bitter reality is, instead of exporting
electricity, we are importing nearly 240MW of electricity from India.
“Making a self-reliant and independent economy is not easy. It cannot
be developed immediately and to achieve everything at once is only a delusion,
says Nepal Chamber of Commerce (NCC) President Rajesh Kaji Shrestha, “If
effective steps are seriously taken, then within five to ten years we should
see some positive results.”
Storage Capacity
According to some economists, in its journey towards self-reliance,
Nepal should first increase its capacity to store stockpiles of essential goods
which it imports. “The blockade has exposed our poor petroleum storage
capacity,” says an economist and commentator, “We didn’t learn from the 1989
blockade.”
He recalls that during the 1989 blockade, there was a lot of talk about
exploring for petroleum within the country and exploiting alternative sources
of energy such as solar power and hydropower. “But we forgot everything once
India lifted the blockade and the situation became normal,” he says, “This time
too, you will see the debate of becoming a self-reliant economy will fade once
normality returns.”
Agriculture and Hydropower
According to economists, these are the two sectors where Nepal can
actually become self-sufficient. Agricultural diversification is possible in
Nepal because of the topographical and geographical diversity. “Nepal should
focus on the production of quality cash crops, vegetables and fruits and not
only consume them but also export them to the international market. This way,
we can achieve self-reliance in agriculture,” explains Dr Paudel.
He also points out that for this, the government needs to focus on the
modernization and commercialization of agriculture and provide subsidy to
farmers who purchase fertilizers, seeds and agricultural machines and equipment
to make our products price-competitive with Indian products.
Hydropower is another commodity in which we can not only become
self-reliant but also export. For this, Dr Paudel says, the government should
encourage both domestic and foreign investment in the hydropower sector. “We
can also invite the Non-Resident Nepalis (NRNs) to invest in hydropower. Some
NRNs have already invested in the 27MW Dordi hydropower project,” he says and
adds that we have the potential to export electricity to not only India but
also other South Asian countries.
Historical Examples of Autarky
• Afghanistan under the Taliban, from 1996 to 2001.
• Albania became a near-autarky in 1976, when Communist Party leader
Enver Hoxha instituted a policy of what he termed "self-reliance".[5]
Outside trade increased after Hoxha's death in 1985, though it remained
severely restricted until 1991.[6]
• Burma followed a policy of autarky known as the Burmese Way to Socialism
under dictator Ne Win, who ruled the country from 1962 to 1988.
• Cambodia under the Khmer Rouge, 1975–1979.
• Classical Greece idealized economic self-sufficiency at the level of
oikos and city-state. This ideal broke down over time, and was redundant by the
Hellenistic period.
• Nazi Germany under Adolf Hitler attempted to end international trade
and considered economic self-sufficiency to be ideal. However, tasked with
establishing full autarky in Germany as part of the Four Year Plan, (beginning in
1936) Hermann Göring failed to close the German economy.
• Guyana under Forbes Burnham's PNC dictatorship, from 1970 to 1985
• India had a policy of near-autarky that began after its establishment
as an independent state, around 1950; it increased until 1980 and ended in 1991
due to imminent bankruptcy.[7]
• Italy, under the rule of dictator Benito Mussolini, claimed to be an
autarky,[8] especially after the 1935 invasion of Abyssinia and subsequent
trade embargoes. However, it still conducted trade with Germany and elsewhere.
• Japan was partially an autarky during the era known as the "Edo
period", prior to its opening to the west in the 1850s, as part of its
policy of sakoku. There was a moderate amount of trade with Netherlands, China
and Korea; trade with all other countries was confined to a single port on the
island of Dejima.
• North Korea's official state ideology, Juche, is somewhat based on
autarky, though North Korea is not a genuine autarky as it conducts principles
of trade with a few nations, as well as benefits on Chinese capital and trade.
• Romania in the 1980s. Nicolae Ceaușescu proposed such goals as paying
the entire foreign debt and increasing the number of items produced in the
country and their quality. The aim of these policies was to reduce dependency
on foreign imports, as the relationship of Ceaușescu with both Western and
Communist leaders was worsening.[citation needed]
• South Africa was forced into partial autarky during the later
Apartheid era, when the country faced ever increasing economic sanctions from
the international community, including an increasing oil embargo that motivated
the state to embark on a successful coal-to-oil project and also establish its
own military industries, including the creation of its own atomic bomb.[9][10]
• Spain, under dictator Francisco Franco, was an autarky from 1939
until Franco allowed outside trade again in 1959, coinciding with the beginning
of the Spanish miracle.
• The United States, while still emerging from the American Revolution and
wary of the economic and military might of Great Britain, came close to
complete autarky in 1808 when President Jefferson declared a self-imposed
embargo on international shipping. The embargo lasted from December 1807 to
March 1809.[11]
• In the Dominican Republic, the rural peasants, escaped slaves, and
freed slaves that lived in the sparsely populated woodland interior of the
island nation between the 1600s and early 1900s. The weak Dominican government
had no control on these autonomous subsistence agriculture based communities.
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