Why are Nepalis Less Productive in Nepal? – II

Nepalis are more productive outside Nepal because their hiring is not based on recommendations. They are constantly aware that they will be kicked out of their jobs if they do not perform to their full potentials.

By Rameshor Prasad Khanal

There is a directly proportional relationship between productivity and wages. Wages increase when productivity increases. Similarly, wages decrease when productivity decreases.

Continued from last issue...

The second reason behind our low productivity is the 'flawed' appointment process of employees. Our appointment process is neither free and fair, nor transparent. In most sectors, employees are appointed, promoted and/or deputed to key positions on the basis of the recommendations from the powers that be, not on the basis of merit and efficiency. Naturally, the loyalty of such employees is for the person effecting their appointment, deputation or promotion, not for the organisation they are appointed or deputed at. These employees feel that they can get away even without fulfilling their responsibilities at office as long as the 'power' backing them is happy.

Nepalis are more productive outside Nepal because their appointments are not based on recommendations. They are constantly aware that they will be kicked out of their jobs if they do not work to their full potentials. Appointments based on mere recommendations is the major reason behind the low labour productivity in many of the industries of the productive sector in Nepal. And this is perhaps the only reason behind the low productivity of employees in the state-owned enterprises (SOEs). Experience shows that the employees of those offices where appointments are made through free competition have better productivity. The difference in the productivity levels of the civil service employees and those of the SOEs is an example of this. Civil servants are more productive than SOE employees though the salaries, perks and other benefits of the latter is far better than those of the former. The appointment process of the civil servants is free and fair; however, their transfer, promotion or deputation is not. That's why the productivity of even the civil servants is not as expected.

Politically mobilised trade unions are the third reason behind our low productivity. More than working for the welfare of the employees or the organizations, these employees' associations or trade unions serve the interest of and are mobilised by the top leadership of different political parties. Most of them never talk about increasing productivity or giving better services to the service seekers. The situation is much worse in the SOEs where the employees feel that they do not have to work if they are associated with the trade unions there. The trade unions in private industries

compel the workers to abandon work at the factories that feed them and their families to take part in the programmes of their parent political parties. They shut down their own factories to express solidarity with the trade union of another factory where the workers are on strike.

The fourth reason is the lack of adequate skills. In Nepal, most of the workers enter their workplaces without enough training and skills required by their jobs. Most of the private sector industries hardly invest in skill-enhancement training for their workers. The workers and employees of those companies which do make such investments have higher productivity. We cannot increase productivity without enhancing the skills of the workers or the employees.

There is a directly proportional relationship between productivity and wages. Wages increase when productivity increases. Similarly, wages decrease when productivity decreases. But in Nepal, some people argue that the reason behind low productivity is the low wages. However, the reality is wages are low in Nepal because the productivity is low, not the other way round. If the productivity goes up, wages will automatically rise. However, the general attitude of employees and workers is: Let's not talk about productivity unless the wages are increased. This wrong attitude has prevented the creation of new employment opportunities.

The story of our agricultural productivity is, however, entirely different from the above explanation. Paddy is the most important crop of Nepal. It is also the crop with the highest production among all agricultural produces. But let's compare the production of paddy per hectare of land in Nepal with that of two other countries. Paddy production per hectare of land is 1.5 times more in Vietnam and twice more in China than that of Nepal. Why? This is not solely because of Nepal's low labour productivity. Nor is it because of less use

of chemical fertilizers. The main reasons behind our low paddy production are: Our dependence on monsoon rain and lack of improved paddy seeds that would suit our different soil types. Our agricultural research is not result-oriented. As a result, our agricultural productivity remains low.

Low agricultural productivity has evolved as a major structural problem of our economy. It is also the major reason behind our poverty. According to Nepal's latest labour force survey, nearly 74 per cent of the workforce is dependent on agriculture. Still, what this huge chunk of our labour force produces is just about one-third of our Gross Domestic Product (GDP). In simple terms, what this means is the income generated by 74 per cent of the working population comes to be about only 33 per cent of our total national annual income. Thus it's clear that the productivity of our agricultural sector is far lower than that of the other sectors of the economy. This is a very serious problem.

Comparatively, the labour productivity of our agricultural sector is higher than that of the industrial sector. This means low labour productivity is not the reason behind our overall low agricultural productivity and that there are other reasons. The major one among these reasons is the lack of irrigation. Half the areas of the "fertile" Terai region still lack access to irrigation round the year. The result is, instead of three crops a year, farmers in these areas are producing only two crops – and that too depending on the "favours" of the monsoon rains.

Lack of market access is another major reason behind our low agricultural productivity. The potatoes produced by a farmer in the Kolti village of Bajura district can never compete with the potatoes imported from India's Nagpur. The reason is the high transportation cost that the Bajura farmer has to bear while taking his produce to the nearest market. Why would he bother about producing more potatoes if he doesn't have an easy and economically viable access to the market? Similarly, why would a farmer in Dolpa try to increase his walnut and almond productions if it's easier and cheaper to import these fry fruits to Kathmandu from India's Kashmir? Lack of road connectivity and easy and reliable means transportation round the year is another reason behind our low agricultural productivity.

Concluded.

(Former Finance Secretary, Khanal is the Economic Advisor to PM Dr Baburam Bhattarai)