Role of Service Sector in the Economy of Nepal

1. Role of Service Sector in the Economy of Nepal Presentation by Dr. Ramesh C. Chitrakar Rameshc977@yahoo.com Expert 1 At Second National Stakeholder Workshop on Services (27th – 28th October 2009) Co-organized by UNCTAD-Ministry of Commerce and Supplies Kathmandu, Nepal October 27, 2009

2. I. Importance of Service Sector to Nepalese Economy • Emerged as major contributor to GDP in the world: more than 70 % in developed and around 50% in developing countries. • Investment and growth associated with services can contribute to poverty alleviation and human development if the right policies are in place • The GON’s increasing emphasis in services considering its contribution to GDP (> 51% in 2007/08), employment, international trade and balance of payments. • CBS/ Nepal introduced a new series of National Accounts Statistics since 2006/07 taking 2000/01 as the base year • Follows System of SNA 1993 adopted by a number of countries around the world. Prior tothis, Nepal’s national income statistics was based on SNA 1968.

3. Under SNA 1993: Economic activities classified into 15 sectors unlike 9 sectors in SNA 1968. The ISIC, Revision 3 has, in fact, classified the entire economy into 17 sectors. • In Nepal, the classification brought down to 15 sectors as the contribution of workers in the private households and from activities of foreign mission, and INGOs to the GDP is found negligible & so these two sectors included in the Other Community, Social and Individual Services category. • New series includes many activities not included before - like microbus, cable car services under transportation; PCO, mobile telephone, internet, cable television, communication; renting; services of employment agencies, cooperatives, consultancies, computer and photography, private postal services, private sector education services, community forestry and others. • 9 Economic Sectors under service • 30 new surveys and studies conducted to strengthen the national income statistics

4. Figure 1: Sector wise contribution to GDP according to the new classification (FY 2007/08)

5. Table : Sector wise GDP Composition in Percent, 200/01-2007/08

6. Table: Sectoral contribution to GDP and GDP Growth Rate Source: GON/MOF, Economic Survey, Fiscal Year 2008/09 R: Revised. Note: Primary: Agri, Fisheries & Mining; Secondary: Industry, Energy & Construction.

7. Service Trade FIows: Contributionto Trade • The imports and exports of services in the world are at about the same levels, with developed countries exports being higher than imports & developing countries imports higher than exports • In case of Nepal, exports exceeded imports until 2004 indicating importance of the sector to the economy. • Deteriorated from 2005 onwards

8. Table: Trade in Services in Nepal by Major Sectors (Million US$)

9. Table : BOP Contribution (Rs. Million)

10. Table: Industries Permitted for Foreign Investment by Mid-March 2009 • Of 1743 total industries permitted for foreign investment by Mid-March, 2009, the number of service industries including tourism services is 941 (54%). Source: Department of Industries, Tripureshwore

11. The social contribution Table: Employment in various services sectors, 2007 Poverty reduction, employment including those of women, rural development, and development of transport and communication, education, health and cultural development. Source: GON/ CBS, Statistical Year Book of Nepal, 2007

13. Table: Rural Employment in Various Services Sectors, 2007

14. Table: Urban Employment in Various Services Sectors, 2007 Source: GON/ CBS, Statistical Year Book of Nepal, 2007. Note: 1.The employment number becomes much higher if indirect employment is included. Also does not include the contribution made by various services sectors in terms of trainings and capability building programmes. 2. More role played by education and transport and communication in urban areas compared to rural

15. Institutional Overview

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