Abstract
The proponents of aid argue that aid helps improve growth and export performance by addressing underdevelopment (Hansen & Trap, Journal of Development Economics, 64: 547–70, 2001; Dalgaard et al., The Economic Journal, 496: 191–216, 2004; Sachs, The End of Poverty: Economic Possibilities for our Time, New York, Penguin Press, 2005), while the opponents point to the evidence of lacklustre performance (Easterly, Economic Development and Cultural Change, 49: 697–706, 2001; Rajan & Subramanian, What undermines aid’s impact on growth? NBER working paper no. 11657, 2005). As the debate continues, the literature on aid effectiveness has been mushrooming, but there is no consensus. Our aim in this chapter is to shed light on this debate using the experience of Nepal. Despite several decades of support from the donor community, Nepal’s export performance has been lacklustre. Obviously, Nepal needs to embark on a wide range of reforms. Donors’ commitment to giving more aid without fundamental reforms will be counterproductive in accelerating growth and improving its export performance.
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Notes
- 1.
Aid for trade is about helping poor developing countries to build trade capacity and trade infrastructure to facilitate growth.
- 2.
This section draws heavily on Sharma (2015).
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Appendix 1: Nepal’s Trade Performance in Comparison with Some South Asian Countries, 1970–2015
Appendix 1: Nepal’s Trade Performance in Comparison with Some South Asian Countries, 1970–2015
1970s | 1980s | 1991–1995 | 1996–2000 | 2001–2005 | 2006–2010 | 2011–2015 | |
|---|---|---|---|---|---|---|---|
Bangladesh | |||||||
Trade (% of GDP) | 18.3 | 18.8 | 20.8 | 27.4 | 29.0 | 39.0 | 44.8 |
Exports of goods and services (% of GDP) | 5.4 | 5.1 | 7.6 | 10.9 | 12.1 | 16.5 | 18.9 |
Tariff rate, applied, simple mean, all products (%) | Na | 105.4 | 84.9 | 22.2 | 19.0 | 14.2 | 12.8 |
Total debt service (% of exports of goods, services and primary income) | 24.3 | 27.0 | 22.4 | 12.6 | 9.2 | 6.2 | 5.8 |
Foreign direct investment, net inflows (% of GDP) | 0.0 | 0.0 | 0.0 | 0.2 | 0.4 | 1.0 | 1.3 |
Taxes on international trade (% of revenue) | Na | Na | Na | 31.1 | 29.7 | 27.2 | 22.2 |
India | |||||||
Trade (% of GDP) | 11.3 | 13.8 | 18.3 | 23.4 | 30.4 | 47.2 | 52.8 |
Exports of goods and services (% of GDP) | 5.4 | 6.0 | 8.9 | 11.0 | 14.7 | 21.5 | 24.0 |
Tariff rate, applied, simple mean, all products (%) | Na | Na | 81.6 | 56.4 | 29.6 | 11.1 | 10.0 |
Total debt service (% of exports of goods, services and primary income) | 15.3 | 24.9 | 31.0 | 26.1 | 19.9 | 11.0 | 9.3 |
Foreign direct investment, net inflows (% of GDP) | 0.0 | 0.0 | 0.1 | 0.6 | 0.9 | 2.3 | 1.6 |
Taxes on international trade (% of revenue) | 17.7 | 25.6 | 24.4 | 22.4 | 15.9 | 14.0 | 14.1 |
Nepal | |||||||
Trade (% of GDP) | 20.9 | 32.0 | 38.9 | 59.7 | 50.5 | 44.9 | 46.5 |
Exports of goods and services (% of GDP) | 8.5 | 11.4 | 15.1 | 24.0 | 19.2 | 13.2 | 10.2 |
Tariff rate, applied, simple mean, all products (%) | Na | Na | 20.9 | 16.7 | 14.7 | 12.7 | 12.0 |
Total debt service (% of exports of goods, services and primary income) | 3.3 | 8.4 | 10.5 | 7.6 | 9.0 | 9.2 | 9.4 |
Foreign direct investment, net inflows (% of GDP) | 0.0 | 0.0 | 0.1 | 0.3 | 0.1 | 0.1 | 0.4 |
Taxes on international trade (% of revenue) | Na | Na | 25.2 | 23.7 | 18.9 | 15.5 | 16.6 |
Pakistan | |||||||
Trade (% of GDP) | 29.5 | 34.3 | 37.3 | 35.5 | 30.4 | 34.3 | 32.6 |
Exports of goods and services (% of GDP) | 10.8 | 12.0 | 16.5 | 16.0 | 15.1 | 13.6 | 13.1 |
Tariff rate, applied, simple mean, all products (%) | Na | 25.8 | 24.3 | Na | 10.5 | 9.9 | 7.8 |
Total debt service (% of exports of goods, services and primary income) | 27.7 | 33.7 | 29.0 | 31.9 | 25.4 | 12.2 | 15.5 |
Foreign direct investment, net inflows (% of GDP) | 0.1 | 0.3 | 0.8 | 1.1 | 0.8 | 2.7 | 0.7 |
Taxes on international trade (% of revenue) | 34.4 | 30.4 | Na | 17.9 | 9.8 | 10.6 | 7.6 |
Sri Lanka | |||||||
Trade (% of GDP) | 63.5 | 66.1 | 73.0 | 79.6 | 80.1 | 65.2 | 51.1 |
Exports of goods and services (% of GDP) | 28.5 | 26.8 | 31.7 | 35.8 | 36.2 | 27.6 | 20.6 |
Tariff rate, applied, simple mean, all products (%) | Na | 25.8 | 24.0 | 9.3 | 10.6 | 9.3 | 7.8 |
Total debt service (% of exports of goods, services and primary income) | 20.0 | 20.9 | 13.8 | 10.2 | 11.1 | 10.6 | 19.0 |
Foreign direct investment, net inflows (% of GDP) | 0.2 | 0.7 | 1.1 | 1.3 | 1.1 | 1.5 | 1.2 |
Taxes on international trade (% of revenue) | Na | 26.0 | 22.2 | 15.6 | 12.6 | 15.1 | 17.4 |
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Sharma, K., Bhattarai, B.P. (2019). Foreign Aid and Export Performance in a Landlocked Country: Development Lessons from Nepal. In: Jayanthakumaran, K., Shukla, N., Harvie, C., Erdenetsogt, O. (eds) Trade Logistics in Landlocked and Resource Cursed Asian Countries . Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-6814-1_8
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