Nepal has witnessed significant economic and political events during the past 2 decades. The country’s government system has transitioned from a monarchy to republic and eventually a federal structure. Furthermore, the 2015 Earthquake and the COVID-19 pandemic further altered the country’s overall course of policy priorities.  Currently, Nepal has entered its second cycle of federal governance where the 7 provincial governments will be elected later in 2022.  It is, therefore, essential to understand the provincial competitiveness.  The Nepal Competitiveness Index aims to guide Nepal’s current and future economic policies both at national and provincial level.

Key Highlights

• The [competitiveness ranking] gap between Bagmati and the rest of the provinces is massive. Historical development may have helped Bagmati leap ahead in job opportunities and access to finance but distributed developed practices by the federal government can contribute to other provinces increasing their competitiveness.
• In addition to aid and FDI, Nepal relies heavily on remittance to manage the country’s overall public finance. The growing remittance in recent years has also allowed the remittance recipient families to have additional expenses for their household, educational and health needs.
• The FDI stocks are concentrated in Bagmati Province, where the Capital city is located. On the other hand, Karnali and Sudurpaschim are lagging behind in terms of attracting FDI. These provinces have huge potential for attracting FDI if they are able to leverage these strengths in the hydro and tourism industries respectively due to the presence of the Karnali river, national parks and mountain ranges.
• Madhesh handles the largest cargo among all the provinces, followed by Lumbini and Province 1. In comparison to FY 2018/19, there is a slight decrease in the trading of goods in 2019/20 due to the strict lockdown imposed by the Nepal government while the volume of goods traded has increased again in FY 2020/21.

By VAID, Rohanshi