Two years ago, Nepal was struck by a devastating earthquake. It displaced nearly 2.8 million people and shocked the country’s economy, with an estimated US$ 7 billion in damage and losses in a country whose gross domestic product (GDP) stood at only US$ 19 billion. But the earthquake and Nepal’s struggle for relief and recovery also brought to light other chronic issues with the way that social and economic development have – and have not – unfolded in the country.
One of the most evident issues is the economy’s inability to provide high-quality jobs – compelling Nepali workers to look outside the country’s borders in search of better paying, though often precarious, work. Nepal’s people and economy are highly dependent on labor migration and the associated repatriated income for managing unemployment, alleviating poverty, and sustaining its GDP growth. As of 2014, Nepal ranked third in the world in terms of the ratio of migrant worker remittances to GDP, surpassed only by Tajikistan and the Kyrgyz Republic.
The dependence on income earned abroad not only has social costs; it is not a sustainable strategy for economic development. As much as 80 percent of income sent to Nepal in the form of remittances is used for household consumption and repayment of debt. In other words, these earnings may be contributing to household income in the short run, but the state’s lack of proactive investment in job-creating sectors leaves the country’s workers stuck in a repetitive cycle of working abroad to spend at home. This cycle of migration has led to a kind of policy inertia, where the short-run benefits of remittance income disincentivize the adoption of long-term policy solutions to rectify the country’s chronic lack of economic opportunity.
Nepal must adopt a new approach to economic development – one that focuses on sustainability, inclusion, and the creation of good jobs. Reconstruction and migration are challenges, but also opportunities to inspire a shift in the way Nepal rebuilds its economy and looks to the future. By leveraging the country’s economic potential, granting more agency to workers – including return migrants – to play a role in inclusive development, and broadening its vision of the reconstruction effort, Nepal’s government can harness this moment as a turning point.
This report examines what existing policies might dovetail with this vision; identifies assets in Nepal that can be further developed to sustain a “just jobs” ecosystem; and, based on this assessment, recommends policy actions to build a job-rich economy in Nepal.