Shadow economy expands thanks to govt fecklessness-My Republica


KATHMANDU, Nov 9: The shortage of essential goods in recent weeks and months, caused by the Tarai unrest and the Indian blockade, has spawned a shadow economy. The increasing reach of the shadow economy — due to structural deficiencies and market anamolies — is going to bring about another catastrophy in the country, warn economists.

The spread of the shadow economy will hurt the country in the long run, they said. Former finance secretary Rameshwor Khanal said the economy is slipping out of the government's hands.

"The economy is being hijacked by black-marketeers, smugglers and criminals," he said, adding that in the long run these elements will run the economy into the ground and that will be bad for cross-border trade.

According to the Central Bureau of Statistics (CBS), Nepal's economy is worth around US $21 billion.

"That is also about the size of the shadow economy," claimed economist Madan Kumar Dahal.

"In economic parlance it is called the parallel economy," he said, adding that earnings from smuggling, corruption and black-marketteering are all part of this parallel or black economy.

Suggesting that the government declare an emergency in view of the increasing shadow economy, Dahal said, "Nepal has turned into a banana republic."

According to him, the country is suffering because of its complete dependency on one country and failure at trade diversification over the past few decades.

The prolonged blockade has pushed the prices of essential commodities, includes petroleum products, to more than double. People are forced to pay anything between Rs 250 to Rs 500 per liter of petrol that used to cost Rs 104 per liter. Likewise, the price of edible oil has increased to Rs 250 per liter from Rs 120 a month ago, whereas rice, lentils and pulses have also doubled in price.

"But the government is nowhere to be seen," said Pabitra Man Bajracharya, president of Nepal Retailers Association (NRA), during an interaction with Nepal Republic Media on Sunday.

Admitting that the prices of some commodities have jumped, he said wholesalers have been charging retailers high prices, citing supply constraints and increased transportation charges due to the fuel shortage.

The government has been doing nothing to control these market anamolies, he said, adding that officials at the Department of Commerce and Supply Management (DoCSM), who are responsible for controlling such malpractices in the market and maintaining uniformity in prices, are in no mood to intervene.

"They just say that the need of the hour is to increase the supply of goods," he added.

Government fecklessness has not only left consumers helpless but also boosted the shadow economy.

Madhav Timalsina, president of Consumer Rights Investigation Forum, has seconded Bajracharya's views.

"Nepali consumers are probably going through the toughest time ever," he said, accusing traders of creating artificial shortages to push up price. "As the government has been doing nothing by way of intervening in the market, unscrupulous traders are having a field day," he added.

Despite the open black-marketeering, the government has done nothing, Timalsina said and suggested that it should scrap the consumer laws altogether if it is not going to enforce them.

Likewise, Finance Secretary Suman Prasad Sharma — talking to Republica — accepted that high demand and low supply had encouraged black-marketeering.

"The government has to act fast to stop the economy from going to the dogs," he said.

Sharma, however, claimed that the government is trying to build confidence in the market by regularizing the supply-side.


Published on: My Republica(November 9, 2015)