Impact of Liberalisation on Industrial Structure: The Nepalese Experience

Abstract

The consequences of liberalisation on structural change are examined using data from Nepalese manufacturing. This is important because doubts that liberalisation may not solve the problems of low income developing countries remain strong due mainly to low supply elasticities and the early stage of industrialisation. Results suggest some structural change in manufacturing output and trade orientation. However, no significant improvements were recorded in productivity growth and spatial distribution, which appears to be due to the lack of basic infrastructure and the shortage of skilled manpower. Thus, appropriate investment policies – which channel resources to improve human capital and infrastructure – appear to be a crucial if the potential benefits of liberalisation are to be fully achieved.