Roads and development in Nepal

Much of the donor money which was spent in Nepal after the 2006 Comprehensive Peace Agreement was spent on infrastructure. For tourists, the effort to build roads stands out, as many classic trekking routes have lost their charm because of the road-building drive. Indeed, it is not so nice to trek along a dirt road, or to see jeeps on dirt roads nearby bring the locals to the same place as the ancient trail you’re following – but in an hour or so, while you will be walking all day. According to the third Nepal Living Standards Survey (NLSS-III), which was carried out last year, not less than 94% of the Nepali population in rural areas now has access to a dirt road within 30 minutes. Access to basic health care centers, primary schools and other facilities also confirm a huge improvement since 2005/2006 (i.e. when the second survey (NLSS-II) took place).

The quality of these dirt roads is abominable. I biked along such roads between Trisuli and Gorkha, thereby avoiding the main highway Kathmandu to Pokhara (which I find too dangerous for biking), and then I also cycled further west of Beni and Baglung, in an attempt to cycle to Dhorpatan and then on to Dolpo. In the Indian Himalayas (I’ve biked through Himachal Pradesh, Uttaranchal, Ladakh and Kashmir), I would easily cover 100 to 150 km per day. Not here: 50 km per day is a very good average. It’s not the gradient of the slopes: the Manali-Leh road has, most probably, the longest and steepest climbs in the world and, while they’re tough, I don’t mind. It’s the poor quality of the roads. Nepal’s dirt roads are extremely badly constructed: bulldozer roads really – extremely rocky, extremely muddy, or extremely sandy: it is difficult to move on them (the Census reveals that the population qualifies about a third of the roads as vehicle-impassable) and, if you do, it is at the expense of a lot of material wear and tear. Only jeeps, trucks and 4WD buses can go on them, and they break down too. As for me, I had to replace the whole drivetrain after the ride.

But so the roads are there, and they do bring cheap rice and other consumables from the plains. They also bring satellite dishes and TVs, along with other household investment items – but I am mentioning the satellite dishes and TVs in particular because of their cultural impacts. These cultural impacts are not very different from what happened in my home country forty or fifty years ago. My father was the first to buy a black-and-white TV, and the whole neighborhood came to gape at what they presumed to be the American lifestyle. They saw it in color later, which led them to buy their own TV. So that is happening here too (but the black-and-white phase is skipped of course). However, as an economist, I am more interested in the economic effect of these roads – i.e. the effect of the cheap rice and other consumables. What does it do to a village?

Economists tell us that better connectivity – i.e. not only roads but also mobile telephony – integrates markets and reduces transaction costs: roads make it cheaper to ‘export’ or ‘import’ goods and services from one region to another, and the phone makes sure you are not taking too much risk when doing so because price differentials (the price of a bag of rice in the nearest town for example) can be ascertained instantly. There are no surprises any more. Hence, farmers in the hills and mountains can sell their surpluses of rice, wheat or barley – or whatever they are able to sell – and buy cheaper… well… cheaper rice and wheat basically. Huh? How does that work?

It doesn’t. Cheap imports do reduce the incentive to produce food stuffs locally. It is a well-known fact that cheap food imports (e.g. cheap wheat flour) have a negative impact on local food production, changing consumption patterns (who eats manioc in Kinshasa nowadays?) and introducing dependency in the process. Economists do not look at that as a problem. On the contrary, it is part of a process of economic specialization during which countries or regions exploit their comparative or relative advantages vis-à-vis each other. Let me recall the basics of that theory: comparative advantage refers to the ability to produce a particular good or service at a lower marginal and opportunity cost over another. There is no need to have an absolute production advantage. Even if one country (or region) is more efficient in the production of all goods than the other (i.e. if it has an absolute advantage in all goods – which is probably the case in Nepal: whatever product we are considering, it is cheaper to produce it in the plains than in the mountains), both countries or regions will still gain by trading with each other, as long as they have different relative efficiencies. For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes.

That’s the theory. So what products or services should be produced in the hills and mountain zones? What is their comparative advantage? In practice, the theory of comparative advantages and/or specialization does not work. If anything, it is labor which is being exported. Indeed, most people in the more remote areas are happy to stop cultivating their land, and families push their men and sons (and their able young women as well) to seek some kind of employment in Kathmandu or, even better, somewhere abroad. Yes, the equivalent of the American Dream in Nepal is to become a dish-washer in Dubai, a security guard in Kabul or a nanny in London (of course, women are also being offered more sinister possibilities for employment abroad: trafficking of women is a huge issue in Nepal).

The roads make it easy: your beloved ones can use them to visit you during the weekend when in Kathmandu (it only takes a dreadful journey on bus and/or by jeep), or once or twice a year when abroad.

The statistics don’t lie. The Census data shows that, over the past decade, Nepal’s population has grown from 23.1 to 26.5 million people but that, at the same time, not less than 27 districts (out of a total of 75 districts) recorded negative population growth during the last decade. [The Census uses the same nice economic euphemism: negative growth. Decrease doesn’t sound right I guess.] These 27 districts are all hill and/or mountain districts and, hence, the conclusion is quite straightforward: the newly built roads in the hills and mountain zone make it easy to leave. There are 17 districts with a population of less than 150,000 now, and they account for 6% of the population only (1.6 out of 26.5 million). All of the districts in the mountain zone (except for Sindhupalchok north of Kathmandu valley) have a population of less than 200,000 people. A quarter of the population now lives in a town (defined as a village of more than 20,000 people) or one of the larger municipalities.

The Census also took stock of the above-mentioned phenomenon of seeking employment abroad or in the capital: in one into four households, one or more members of the household are absent or working abroad indeed. The total number of such absentee family members adds up to close to 2 million people, as opposed to about 760,000 only a decade ago (i.e. in 2001). These people are currently the main breadwinners of Nepal – even if they’re not present in the country.

It is an inconvenient fact that economic development is, more often than not, disruptive and, hence, comes at the expensive of huge social-economic costs. Some win, some lose: one can only hope there are more winners than losers. In Nepal, however, the social costs of development seem to be enormous. Grandmothers or uncles and aunts take care of kids, as their father or mother is trying to earn some money for the whole family in Kathmandu or abroad. As they grow older, they will be sent to a private boarding school – if the family can afford it – because that’s the gateway to a job in Kathmandu or abroad. In the worst case, they will only make the army of the unemployed swell even larger. While Nepal’s social fabric has not broken down – as yet – the current political quagmire would seem to indicate that the system may be close to it.

But so what do the locals think of it all? That question is easy to answer. All of the people I met think the new roads are good: they bring development. So who am I to criticize?

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