Nepal’s economy is becoming steadily more urbanised, according to the government’s Economic Survey for 2014-15. Indeed, cities and towns make up 33.1 pct. of the national economy – Kathmandu Valley a staggering 23.4 pct. alone – and VDCs adjacent to the urban areas account for an additional 30 pct. of the economy. In other words, almost two-thirds of GDP is generated in and around the capital and local towns! This development is linked with demographics too. The urban population is growing while 77 pct. of the immigrants to city and district towns come from the rural areas!
Is entrepreneurship concentrated in and around the urban areas too? Well, it clearly is. The capital accounts for 40 pct. of all jobs created in the manufacturing industries alone! Major district towns like Biratnagar and Birgunj, Nepalgunj and Pokhara make up busy economies too – even entire “district hubs” – where local entrepreneurship is very much alive as well. Biratnagar accounts for 17 pct. of all jobs created in the manufacturing industries, Birgunj contributes another 15 pct., and so the scope of entrepreneurship is biggest in and around the city and just a few major towns!
It’s perhaps not obvious that Kathmandu Valley should account for almost 25 pct. of the economy. Only one in ten citizens live there! Moreover, adjacent VDCs are close enough to the urban markets in the capital and various “district hubs” to also benefit but are not places of vast populations either. However, they have infrastructure. Lack of roads and transport, as well as limited services and out-migration of large parts of the male population, are just some of the factors that hinder Nepal’s many outlying areas from gaining a bigger economic role. Lack of support for small and medium sized enterprises is mentioned as another drawback.
The Economic Survey 2014-15 has a lot more to say about Nepal’s changing economy. It’s true that the country is still one of the least urbanised in South Asia, and the urbanisation rate – as noted in another recent report – is just above 3 pct. which is still lower than in several other countries in the region (down from 4,9 pct. from 2005 to 2010). But the population of Kathmandu Valley is growing with 4 pct. a year – in some “district hubs” the rate is 7 pct. – with intense settlement along some of the country’s new highways and in pocket areas in Terai. This demographic change is leaving it’s imprint on the economy and may transform the landscape of local Nepal also economically in the years to come.
PS: Remittances also play a substantial role in urbanisation of the economy. A case in point is Myagdi district where forty percent of the agricultural land now lie fallow as local farmers have received enough remittances to leave their life in agriculture behind and establish a new livelihood in employment or business in the city or local towns. Remittances are part of what has allowed for greater mobility from rural to urban areas too. Indeed, rural areas take home 85 percent of the total, annual remittance income!
See more on the urbanising economy in Economic Survey FY 2014-2015, from page 159 onwards.
PPS: Various factors suggest that further concentration of people and economic activity in and around Kathmandu Valley and relatively few “district hubs” will continue. The earthquake drove out thousands of people from Kathmandu temporarily but also led to in-migration from quake-affected and landslide-threatened villages. Add to this an ongoing construction of new highways, opening up of new border posts to China, projected railway trails in Terai, planned international airports in Pokhara and Lumbini, proposed twelve “model cities” in the districts – all covered here – and the urbanisation trend could well accelerate in the next decades.