liberalization And liberalization in Nepal

Economic liberalization refers to fewer government regulations and greater participations of private

entries. I.e. opening up national economy to foreign capital and investments. Liberalization implies

the freezing of trade, investments and capital flows between countries. In underlines the

simplification of business procedures involved in merchandise trade, foreign investment, trade in

service etc.

It underlines the less interventionist and more co-operative role of the government in international

business. Reduction of import duties is the core trade liberalization.

Policies that make an economy open to trade and investment with the rest of world are needed for

sustained economic growth opening up their economies to the global economy has been essential in

enabling many developing contract.

Why liberalization?

 To increase the demand of small economy, to open internal market and to increase the

access to external markets.

 To maintain high income, human development and welfare

 To increase the supply, to maintain catch up of growth of production

Impacts Liberalization has affected the different economies of the world in different ways. But in most of the

economies it has helped to bring positive changes and useful socio economic transformations.

Governments have simplified the procedures relate to economic activities, reduced the size of the

government.

Some of the global effects of liberalizations are:-

·     Growth in international trade and cross border capital flows

·     Eliminations of trade barriers

·     The privatization of previously public owned enterprises

·     Reduction in the size of governments

·     Increase in social welfare spending

Advantages

·     Optimum use of private, capital and resource, knowledge and experiences

·     Increases consumer sovereignty

·     The market controls unnatural price risks

·     Encourage investments and efficient production

·     Interest rates will be rational and maintained at market equilibrium

·     End monopolistic business and cartels

·     Creates rise in employment

·     Creates positive balance of payments

·     Increases FDI

Disadvantages

 (Liberalization has brought not only sweet cakes but also bitter nuts for some of the

worlds)

 Increase gap between rich and poor

 Increase unhealthy competition

 Increase in imports as compared to exports, results in trade imbalance

 Increase in the role of MNCs and INGOs

 Ignores distributive justice and equity

 Economy can be controlled by some influential business houses or class or some foreign

investors

 Can produce low quality goods and services in the name of competitive prices

 Inflation and money supply can rise

Nepal & liberalization

After 1985, Nepal has continuously adopted a policy of economic liberalization.

 Private sector is actively participating

 Increase in employment Development of trend of joint capital investment

 Decentralization in service delivery

 Change in the role of government

 Integration of national economy in the world economy

 Increase in foreign employment

 Increase in the interest of private sectors like education, health, agriculture etc.

 Open sky policy increased trade and tourism

Negative impacts on Nepal

 Increase in gap between rich and poor

 Unhealthy competition

 No maintenance of quality of goods and services

 Increase in trade imbalance

 No concrete results from privatization

 Decrease in export and increase in imports

 Increase in the interference of INGOs and MNCs

 National companies can’t compete in international market

Nepal has faced following challenges in its policy of liberalization

 No adequate development of private sectors

 No adequate legal controls

 Government role is inactive

 No concrete reforms

 No equity between rural and urban areas

 Export did not increase

 Open boarder created problems

 No substantive changes in agriculture sectors

 No adequate inward flow of FDI

 Peace and stability could not be maintined

Three of the fastest growing developing economies Brazil, China and India have achieved rapid

economic growth in the past decades after liberalized

North Korea has closed and self-sufficient economic system. North Korea receives hundreds of

millions of dollars of worth of aid from other countries in exchange of dollars for peach and

restrictions in their nuclear program.

Saudi Arabia and UAE do not open up their economies to foreign capital and investment since their

oil reserved already provide them huge export earnings.