(EMBARGO : until delivery)

Statement by Hon. Dr. Ram Sharan Mahat, Minister of Finance and the Leader of the Nepalese Delegation at the Third United Nations Conference on the Least Developed Countries

Brussels, 14 May 2001

Mr. Chairman,
Excellencies,
Distinguished Guests,
Ladies and Gentlemen,

It is a great privilege for the Nepalese Delegation to participate in the Third UN Conference on the LDCs in the beautiful city of Brussels. We are grateful to the European Union and the Government of Belgium for their warm and gracious hospitality extended to us. We would like to thank the Secretary General of the United Nations and the Secretary General of UNCTAD for their untiring efforts in organizing this Conference.

This Conference is the first major gathering of the LDCs and their development partners in the new millennium to formulate the Programme of Action for the next decade. Given the disappointing performance of the LDCs in the last decade, expectations are high that the LDC-III can become a stepping-stone in providing positive impetus for our common goal of eradicating poverty through sustained and equitable economic growth.

Mr. Chairman,

Despite the general decline of LDCs' total share in the global trade, negligible FDI and reduced ODA flows and further marginalization of these countries as a group from the mainstream of the world economy, Nepal's performance has remained satisfactory in the 1990s.

Nepal initiated a strong economic reform programme in the 1990s after the restoration of democracy in the country, which to a large extent was in line with the LDCs' programme of action for the last decade. The reform measures have since then covered almost all sectors of the economy including trade and investment, fiscal and monetary policies, financial and capital markets and other social and economic sectors. Annual average GDP growth of nearly 5% was achieved in the last decade. Similarly, strong growth of exports has helped reduce current account deficit and inflation has been brought down to a desirable level. Nevertheless, GDP per capita remains low. Despite considerable improvements in the development of physical infrastructure and social indicators, the country still falls below the level of development achieved by Nepal's neighbours in South Asia.

The overwhelming objective of the development efforts in Nepal will be poverty alleviation for the coming decade. Nepal has set a target to reduce poverty by more than 50% in less than 10 years compared to the global target of halving poverty by 2015. The strategy to achieve this objective involves broad-based growth, social sector development and effective targeted programmes for the vulnerable, marginalized and disadvantaged groups with appropriate social safety nets. Improved public resource management and governance are also the priority reform programmes of the Government.

In the process of achieving sustainable growth, private enterprise development plays a paramount role. To attract productive private investment, an enabling environment including supportive macro-economic policies, institutional and legal frameworks and solid physical and social infrastructure are critically important. His Majesty's Government of Nepal has accorded high priority to these issues. The Government's policy initiatives aimed at deregulating and liberalizing the market have been the most prominent aspects of Nepal's reform programme of the 1990s.

Despite many policy initiatives and their positive outcomes, Nepal faces a number of problems and challenges. The country has adopted a democratic constitution with full respect for human rights. Meeting the rising aspirations of the people in an age of communications revolution under a democratic framework with a very limited resource base makes our task extremely difficult. Some of our market-oriented reform actions entail increased burden on common people in the short term. Weak institutional capacity, rising cost of internal security, widening resource gap, declining net external assistance, declining grant to loan ratio and consequently the increasing debt burden make our task of economic development even more challenging.

The land-locked countries including Nepal are also in a very disadvantaged position with their high transportation cost, inadequate infrastructure network and poor trade facilitating environment. Freight and insurance as a percentage of import value for Nepal is more than 25% compared to the global average of less than 5%. This cost has continued to erode the competitive edge of the land-locked countries. The international community should provide special assistance, both technical and financial, for the improvement of infrastructure and trade facilitation.

Mr. Chairman,

At this point of time, I would like to reiterate our call for more favourable support from the global community. This includes bound, duty-free, quota-free market access for all products of the LDCs and removal of non-tariff barriers that impede exports of the LDCs.  In this context, we welcome the recent Everything But Arms (EBA) initiative taken by the European Union and urge other major trading countries/groups to extend similar facilities to the LDCs.  LDCs should be allowed speedy accession to WTO, special and differential treatment provisions should be implemented, and extension of transitional period should be automatically granted to acceeding LDCs.

External debt has become a severe obstacle to the development for many LDCs including my country. Much of the scanty resources of the LDCs are directed to debt servicing. Approximately one third of Nepal's internal revenue is utilized in servicing the past debts. This, together with the increasing administrative and civil service expenses leave practically no internal resource surplus for capital investment and human development needs. Debt cancellation will release significant amount of resources for investment in social sector and infrastructure development of the LDCs, which are crucial components of poverty alleviation. Nepal, therefore, urges the international community to design and implement immediately measures towards full cancellation of all outstanding debt owed by the LDCs. The countries that have already announced cancellation of their debts should immediately go for implementation. Any delay or failure to take bold action on this front will make the goal of achieving poverty alleviation a distant dream. While welcoming the recent decision of the European Union to eliminate all debts owed by the highly indebted least developed poor ACP countries on special loans, I urge the European Union to extend this facility to other non-ACP and non-HIPC LDCs.

In conclusion, Mr. Chairman, HMG of Nepal sincerely wishes great success of this Conference. I assure you that our support to the common cause of the LDCs will remain as strong as ever and we are willing to assist in whatever way we can support your endeavours in future.

Thank you.