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Dude ! Where is Nepali Money!

Published by Octron on January 10, 2010

First it was the big industries plight due to security reasons. Then came the phase where small to medium all industries came to stand still due to regular strikes, workers hefty demands, extortion and above all 18 hours load shedding. We had such huge inflow of remittance from our only export low level skills in the Middle East, Malaysia and some high level brain drain to US/UK/EU/AUS region. Unfortunately, due to lack of proper infrastructure, rampant outlaw ness and unstable political system the hard earned money flown from abroad could never be used for the proper development of the country.

With very few opportunities for the investment, the only thing that increased rapidly in the recent times was inflation. From realty market to daily commodities, price was skyrocketing. Even stock market was rallying (NEPSE hitting 1400 pts) due to some naive and new investors pumping their remittance money in order to diversify their investment. Commercial banks mushroomed like never before in order to manipulate the supply and demand flow of the remittance cash.

But, whatever goes up always come down.

The global economic recession was slowly hitting our inflow of remittance. Nepali workers were slowly being laid off from their respective jobs abroad due to economic slowdown. People studying and earning in US/UK/AUS/EU were finding difficult even to find menial job to earn their living. How would they send back money home?

Lack of industries, stable government and ill vision policy makers could not save even the existing industries. Sadly, despite being one of the richest countries in water resources, the country is facing 8 hours of load shedding per day. Having one of the most fertile lands with excellent climate regions still has to import daily commodities from rice, pulses and vegetable from neighboring countries. Its an irony, the country known for producing best warriors (Gurkha’s) and brave soldiers (Victoria Cross Holders) has civilians living in the fear from their own people.
Due many socio-economic-political factors the country was spending much more than what it was earning from remittance. Now the biggest question was, where did that billions of rupees go which Nepali people had send to Nepal within last one decade?
We can understand, currently the remittance is low compared to what we spend in the import. But we had already stashed Billion of rupees before the recession hit the international market and reciprocated to our nation.

1. Gold: Believe it or not ! within last few years Nepal has imported astronomical amount worth of Gold. According to studies, the only purpose of gold in South Asian market is to be made into golden ornaments, jewelry and gold sculptures. Especially in country likes Nepal where there isn’t any industry where Gold could be used as raw material. But hardly, we notice anyone wearing even a tola of golden ornaments even in lavish dinner parties due to frequent robbery incidents even in the day light in the capital. So, what was the purpose for such huge import by spending billions of rupees in gold when there isn’t any demand for such metal in common market?

Simple answer, Gold is a medium to flow the cash out of the country. People can easily carry gold bars and sell it whenever they want and wherever they want (sp. India). Its one of the secure assets, which doesn’t depreciate, instead appreciates. Also its much easier to store and hide gold coins than cash (security for black marketers).

2. Foriegn Insurance Policies, Bonds and Stocks: National daily Kantipur had reported last month, Nepali cash is flying to Indian soil through Insurance policies. Civilians and business houses alike trust foreign insurance policies than national Beema Sansthan. For one thing, they are accepted universally during inter country trade. Also for normal people they give what they promise without much of hassle and hidden agenda. Plus they have fabulous schemes (higher interest rates), which gives you much return on maturity of the premium than Nepali Insurance companies. Prevailing security condition is one of the major factor for people running towards well established Indian Insurance companies and banks (FD’s).
Though legally Nepali cannot invest in foreign bonds and stocks, but people are trying their hands upon Indian market as its booming with larger field with small cap, mid cap to large cap companies with better returns. The day by day deteriorating socio-political condition of the country has also forced people to invest for their future in foreign land. If the situation in homeland gets out of their hand, they (or their off children’s) could have bread and shelter in foreign land with their foreign investments.

3. Foreign Realty Market: The recent reports published by embassies in Nepal came bit as surprise. The statistics of Nepali’s living abroad buying property over there has increased in recent few years in many man-folds. US residents who have all social security privilege, job preference over third country population are losing their home due to unpaid mortgages. Nepali’s on the other hand, who have to pay hefty tuition fees compared to in-state population, having menial job are buying those foreclosures. How could that be possible?

Simple answer is instead of sending money to Nepal, people studying and living abroad have started selling the property in Nepal to buy property over there. In USA realty market price are all time low due to low liquidity and recession aftermath. While in Nepal, realty market is skyrocketing at an abnormal pace due to lack of investment opportunity. There is also prevailing fear that Nepali realty market might crash soon like in US due to worsening country situation. Instead of buying assets in Nepal at highly overpriced rate, its better to buy in abroad at nominal price. For someone who has been living abroad the amenities, lifestyle, security and society in foreign land (US/UK/AUS/EU) seem light years ahead of Nepal. Nepal lacks even the basic infrastructure for life; Water, Electricity, Road, Sanitation and above all security. Add to it yearly 100 Nepal Bandhs !

Billions of rupees every month is flowing to foreign land through above means. Unless the socio-political situation of this country improves the outward flow of cash will never stop. If the trend continues in this pace, we will soon deplete all our cash and our financial system will come down like house of cards.

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