Economic liberalization policies adopted by Nepal and their impacts
Liberalization: Concept and Rationale:
- Liberalization is an economic framework in which the role of the government is limited to facilitating and regulating the market or private sector, assuming that the private sector is more efficient than the government.
- It refers to a comprehensive package of reform in the policies and institutions to promote the private sector.
- It advocates the minimum or limited role of government, where the government should work as the catalyst of the economy (अर्थतन्त्रको उत्प्रेरक), and the market or private sector is given the responsibility to drive the economy.
- It is the economic system that assumes that, under the competitive market mechanism, the private sector mobilizes its resources most efficiently, and so the government should facilitate the private sector and also regulate to correct the market failure.
- So, the liberalization is the deregulation of the economy and promotion of the market or private sector where the basic economic issues. The market determines production, consumption, and distribution.
- Liberalization or liberal economic policies are said to have originated from the classical economic thought.
- The classical economists favoured the laissez-faire or non-intervention policies, where the private sector was given the driving seat in the economy.
- They advocate a limited role of government, such as maintaining law and order to secure life and private property, and providing the basic public goods only. However, the First World War, the Great Depression of the 1930s, and the Second World War was revitalized the role of government.
- After the Second World War, most of the countries established state-owned enterprises (SOEs), but by the end ofthe 1970s, the role of the private sector in the economy was again realized.
- Then the present wave of liberalization is said to begin from the early 1980s, which became more prominent after 1990 with the fall of the Berlin Wall, dissolution of the USSR, adoption of more liberal policies by China, and advancement of ICT.
Rationale/Importance of Liberalization
- Efficient mobilization of the available resources.
- Expansion and development of the private sector.
- Freedom in the economic activities and opportunities.
- Increase consumer choice and welfare.
- Creation of more employment opportunities and poverty reduction.
- Attraction of foreign investment and technology transfer.
- Improve competition and quality of product wit fair price.
- Increase government revenue due to increased economic activities.
- Be focused on welfare motive activities by the government.
- Promotion of R & D, innovation, and technology development for competition.
- Improvement in the supply capacity and support for economic growth.
- Repeat for individual economic freedom.
Weaknesses of Liberalization
- Weaken the role of government due to a lack of regulatory capacity.
- Growth of unhealthy market practices such as monopoly, Cartelization, and syndication.
- Increases inequality and concentration of wealth and resources.
- Regularities capture and policy corruption.
- Intervention of multinational companies (MNCs) in domestic issues.
- Threat to local technology, resources, and products.
- Huge capital flight in the form of profit repatriation, management fees and royalties. (Profit Repatriation भनेको विदेशमा लगानी गरेर कमाएको नाफा (profit) मातृदेशमा फिर्ता लैजाने प्रक्रिया हो)
- Encroachment of social values, cultures, and religion.
- Increase the regularity cost of the government.
- Expansion of illegal and informal economic activities.