Unequal distribution of financial resources


Introduction

This project is based on the political and economical factors which have been affected due to the Unequal distribution of financial resources. This project is only focused on how the Factors affect Nepal and its Unequal distribution of financial resources.

This document will show you how the Political & Economical factors have affected the Nepal and its Unequal distribution of financial resources.


Introduction about Nepal

Among all the country in this world Nepal is called the poorest country. Nepal is also a part of this world if other countries are able to develop why only Nepal can't develop its country.
(Adhiraiya, 2005)

Nepal is really in a bad situation these days, Nepal is basically a rural economy with over 84 per cent of the population in rural areas. Over the last three decades the pace of development in rural areas has been slow and variable. In general the Mid- and Far-Western Regions have the lowest population densities and are far behind the other three regions in almost all development indicators. These two regions have the lowest access to health, education, roads, telephones, radio, electricity, water supply and sanitation services. Nepal's overall poverty rate is 31 per cent, but this increases to 45 per cent and 41 per cent in the Mid- and Far-Western Regions, respectively. In contrast, the urban poverty rate is only 10 per cent. Over time the gap between rich and poor regions has widened, adding to the Economical and Political tensions that underlie the armed conflict. Conflict and poverty have caused the most productive people to leave the villages. This has generated a rising trend in woman-headed households and the feminization of agricultural labor. (Anon n.d)

Nepal also has the ability to come to a breakeven point comparing with other countries it only has to maintain the Political and Economical factors which are

mainly effecting the Unequal distribution of financial resources. If Nepal is having a capital Kathmandu Why can't the country shine and be stable in this world.


What is Unequal Distribution of financial resources?

Its better not to have equal distribution nor unequal distribution. Let me first of all quote what happens when you have unequal distribution and when you have equal distribution.

If there is a family with four members

And another with five members.

The ten buns are divided and is distributed

only ten buns not more than that.

Unequal distribution doesn't exist only for financial resources they exist from other scares resources like Land, Capital, Labor and entrepreneurship.

If the countries Financial Resources are in a good condition then the businesses can develop more and more. It's really good to have financial resources so it can implement new technologies and new creations.

The Political factors which are influenced in Unequal distribution of financial resources are;

  • Stability of a Country

  • Trade and Tariffs regulations

  • Favored Trading Partners

  • Price Regulations

  • Taxations

  • Wage legislations

Stability of Nepal

It's very important to know that any country's stability is the first and foremost important factor for an organization, even if it is a developed country. Because of the instability faced by Nepal only the level of poverty and crisis all has increased. There are many children suffering in poverty, they would like to go to school and get educated but for that there should be good governance and they are the people who have support
(Google Images, n.d)

With the political people which brings students into streets for riot, Nepal has a high quality products which can travel around the world easily, due to the Unequal distribution the trading has reduced to certain extend, Even though at a time the stability was perfect but then also it was not enough to develop Nepal. The war that has been continuing for 10 years has effected Nepal in a very large basis children have died in thousands and they were also used for the fights, inflation, and corrupted government that misuses the public resources available


Trade and Tariffs regulations

The great majority of agricultural production is either consumed for subsistence or traded locally. Agricultural trade accounts for only 15 per cent of total exports in value terms. Nepal joined the World Trade Organization in 2004 and is a party in regional trading blocs such as the South Asian Free Trade Area and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). Due to the resources being unevenly distributed through the world and the mobility of the factors of production is limited. Nepal has a good extend in trading More than 95 per cent of two-way trade is with India and other member countries of the South Asian Association for Regional Cooperation. Agricultural exports have been reduced in recent years mainly due to more stringent quarantine, phytosanitary and quality requirements in importing countries. Nevertheless, the proximity of India and China offers opportunities for access to huge markets for agricultural products in which Nepal has a natural comparative advantage such as fruits, vegetables, spices, herbs and a range of other high-value commodities including non-timber forest products. (Anon n.d)

(Central Bureau of Statistics n.d)


Favored Trading Partners

This means a country favoring another country and enforced by the World trade Organization. (WTO) This is mainly done because the favoring country takes advantages on reducing tariffs on imported goods. Because of the Unequal distribution in Nepal it will reduce the countries from favoring. This will affect the trading and will reduce consumption in Nepal; they also can develop Nepal by bringing foreign currencies into the country. Due to this problem exports can decline and the organizations level of output can fall too. Nepal's merchandise trade balance has improved some what since 2000 with the growth of the carpet and garment industries. In FY 2000-01 exports posted a greater increase (14%) than imports (4.5%), helping bring the trade deficit down by 4% from the previous year to $749 million. Trade with India rose rapidly after conclusion of the 1996 bilateral trade treaty between the two countries, and now accounts for 43% of all exports.

(Anon n.d)


Price Regulations

These are some regulations set by the government for some goods and services. Nepal's financial sector has encouragingly progressed after fiscal liberalization in the country. Consequently, establishment and operations of Banks/Financial Institutions, and non-Financial Institutions has substantially increased. The range of financial inclusiveness has widened, environment for capital mobilization eased, and opportunities in the banking sector extended with the expansion of the financial sector. As the banking business operates at high-risk environment, the degree of risk grows in proportion of its expansion. Hence, scope of regulation and supervision needs to be widened for overall enabling and strengthening of the financial sector by constantly guarding the trend of steadily escalating risk. It is harm full for the people when the price regulation increases. Governments will impose high taxes in order to

Cover they expenses. In this case the purchasing power will reduce from the consumers and they will start buying cheaper stuffs.


Taxations

Taxations are also strongly effected by the Unequal distribution of financial resources; Taxes are compulsory payment levied on every single individual. Its really bad for the government to increase tax because when the companies fail to pay taxes and when they go in a loss the government won't have a way of getting taxes from the companies its better to keep a limited amount in taxes, due to this unequal distribution taxes can be increased and many individuals business men who buy luxury items will reduce.


Wage Legislation

This also can effect the Unequal distribution of financial resources, Wage legislation is a type of law used when paying employees workers for there labour. The wage legislation can increase only when the country is politically stable; if Unequal distribution takes place then the company can't effort to pay high salary for the employers. Workers won't like to work and they will get rid of stress, and the cost of living can reduces. When it reduces the economic growth decreases. (Google Images, n.d)

The issue of minimum wage has seen a lot of debates around the globe. While the salaries in government jobs have been fixed with little to no annual adjustments, the private payments have been largely based on personal judgments in Nepal. Some of the countries around the globe like United States have minimum wage laws that prohibit the employers from paying its workers below the prescribed minimum wage. There seems to be a long way to go before any such laws could be established in Nepal. However, is it worth the effort to bring minimum wage legislation into effect in Nepal?

The proponents of minimum wages argue that to let the lower income groups come out of poverty trap, there has to be a minimum wage. We all have seen the unskilled workers languishing in abject poverty in Nepal. Continuous work of 8 hours does not earn enough to sustain the life of thousands of Nepalese. We not only need higher wages but also a continuous adjustment on the wages. The supporters of minimum wages believe that there has to be a continuous change in the minimum wage so as to adjust for inflation.

(Wage in Nepal, n.d)


Opportunities and threats of Political Factors

  • We have to first of all scan the Nepal external environment which does not touch the short run of the activities of the organization. Scanning will give a brief idea of the current situation in Nepal, To scan the Macro environment of Nepal the pest tool is used to gather information from political, economical, social and technological. The results and outcomes are threats and opportunities.

  • We also scan the internal environment to know whether Nepal is weak or strong in developing, this only takes advantages from opportunities and avoid threats. The first two elements are used to scan the internal environments are SWOT Strength and weaknesses.

  • There is potential for innovations that build on the experience of IFAD and partners in recent years, and the need to find solutions to long-standing issues of poverty and social exclusion that will work in a fragile and uncertain peace-building environment.

  • Under SO I and SO II there are opportunities to use innovative targeting, partnerships and incentive mechanisms to develop markets that are inclusive and benefit the poor, test and demonstrate new means of connecting farmers to markets and services using a combination of information and communication technology for market and technical information, and improved physical infrastructure including marketing and storage facilities, and tertiary roads/trails linked to major road-building programmers (the "development corridor "concept).

  • Greater involvement of farmers' organizations, microfinance institutions and private sector enterprises will be crucial to commercial integration. Some of these ideas are already being piloted under existing loan- and grant-funded programmers and offer potential for future scaling up. SO III presents perhaps the greatest challenge: to develop the means of overcoming the causes of social exclusion that are deeply rooted in rural communities. (Anon n.d)

Opportunities - Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company's strengths? Is there a product/service area that you could do well in but are not yet competing?

Threats - Look both inside and outside of your company for things that could damage your business. Internally, do you have financial, development, or other problems? Externally, are your competitors becoming stronger, are there emerging trends that amplify one of your weaknesses, or do you see other threats to your company's success?

These will help you to know the Nepal's current situation.

The Economic factors which are influenced in Unequal distribution of financial resources are;

  • Economic Growth

  • Unemployment Rate

  • Discretionary Income

  • Economic Indicators
  • Inflation Rate

  • Interest Rate

Economic Growth in Nepal

Overall macroeconomic stability continued to be preserved despite rising inflation, increased pressure for public spending in the post-conflict period, and the adverse external environment. Prices continued to rise with average annual inflation climbing to 13.7% in the first nine months of FY2009 from 6.7%during the same period in FY2008 despite the sharp falls in India's inflation (to which Nepal's inflation is normally correlated) and global oil and commodity prices.

n Nepal the economic growth rate is really slow, and the economic growth has been in a low percentage for three years and now currently it has reduced more than the percentage it was before three years. And now it has come to minus level which is very bad for the economy and this shows that that the government is making in effective use of the resources that they have, because of this business men don't take risk in starting a business.

(Google Images, n.d)


Unemployment

Employment is really important for every in individual in this world, Due to backward economy, the country is reeling under the problem of unemployment. As the government fails to provide enough jobs a large number of youth remain outside the mainstream of national development exercise.

There are tell-tale signs of youth bulge in Nepal's population with 60 percent of them being under the age of 40 years. Twenty percent of the population is between the ages of 15-30 years. But with astronomical percentage of unemployment, huge volume of young people is left out of the mainstream. According to figures, there are 1.5 million youths in the country who are totally unemployed. Moreover, since 1996 the country has been facing insurgency and terrorism problem. This had added another dimension to the problem of unemployment as insurgents find easy recruits among unemployed and disoriented youths. As the state fails to chalk out proper strategies to provide jobs, the problem is gaining urgency day by day.

Unemployment & Underemployment:

Among the total Nepalese population of 23.1 million, 47 percent (around 11 million) are underemployed. Underemployment, here, is defined as the state where if you put out the additional labor force from a particular household, there will be no change in productivity. This is just subsistence work. Underemployment especially in rural countryside where families depend on farmlands is a very big problem. Likewise, there are 1.5 million people, mostly youths, who are totally unemployed. This is a big number and in absence of economic growth this figure is likely to increase in coming days.Every year Nepalese youths between 300,000 to 350,000 enter the job market. Only ten percent of them are absorbed in the domestic market. More than 100,000 of these leave the country in search of jobs and the rest remain here. Worse, the economic slowdown has resulted in closing down of several industries and has rendered thousands more jobless. The carpet and garment sectors, which used to be big employers, are also laying off their employees and so are other service sectors like hotels and airlines, to name a few.

A recent news report is enough to indicate the gravity of the situation. When Nepal Electricity Authority, a government-owned power corporation, sought for applications from eligible youths (for mid-level jobs) they received 120,000 applications for the 600 vacant seats. The Nepalese job market is able to absorb merely ten percent of the prospective aspirants. The(Nepal Country Report on Youth Unemployment, n.d) Because of unemployment many children and families suffer a lot from poverty. (caritas.org, n.d)


Discretionary Income

The amount of an individual's income available for spending after the essentials (such as food, clothing, and shelter) and as well as reducing the tax amount. Discretionary income is one of the most important income, when the country financial resources are not distributed properly then businesses won't be running in a flow. Nepal's income is very low. Because of the wars and poverty taking place in Nepal it is reducing the discretionary income level to a very low standard. The consumption will reduce a lot and many services decrease.

(Google Images, 2009)


Inflation Rate

This is another economic factor which means that the cost of living has risen and the purchasing power has decreased. And the prices of the consuming goods have increased. If the unequal distribution of financial resources continues then inflation can occur and the good and services will be high. In Nepal the inflation rate is high in 2006 it was 8% , 2007 it was 8.6%.Indicating tough days ahead for the frail economy of Nepal, the rate of inflation during the first four months of the current fiscal year scaled up to 8.5 percent compared to 2.7 percent recorded during same period last year.

(Anon, n.d)

A monthly economic report released Monday by Nepal Rostra Bank, the central bank of the country, blamed upward revision made in the administrated petroleum products in Sept. 2005 and unexpected rise in prices of agro-products for the sharp rise in inflation. The trade deficit, during the period, widened by an alarming 51 percent to almost 36 billion Nepali rupees (514 million US dollars), thanks to a sharp rise in imports compared to exports."Rise in imports of industrial raw materials and capital goods caused the overall imports to go up," the report stated. The total remittance recorded an almost 18 percent rise during the first quarter of the fiscal year started on July 16, 2005, to 18.49 billion rupees (264 million dollars), the report said. The total international reserve also went up by 7.1 percent to 139.16 billion rupees (1.98 billion dollars) and the reserves were enough to cover 8.3 months of imports of goods and services of the country, the report stated.

(Xinhua, 2006)


Interest rate

This is the last factor I am going to talk about, if the distribution is not equal yet then interest rate can change respectively. Borrowing money can be an interesting way to be able to make investments (free in a business, house, study), bridging financial difficult times or to buy expensive (consumer) goods like cars, motorcycles or household appliances. As interest rates may vary dramatically amongst different financial institutions it is wise to carefully study these differences before getting a loan.

(Google Images, 2009)


Opportunities and threats of Economical Factors

We Use the same tools which are used to scan the political environment.

The World Trade Organization (WTO) deals with the rules of trade between nations at a global or near global level.

It is an organization for liberalizing trade and a forum for governments to negotiate trade agreements and to settle trade arguments.

It also operates a system of trade rules.

The WTO began life on1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules for the system.

The WTO agreements cover a wide range of activities such as agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards

And product safety, food and sanitation regulations and intellectual property.

Under the WTO agreements, countries cannot normally discriminate between their trading partners. Imported and locally produced goods should be treated equally.

The same should apply to foreign and domestic services, and to trademarks, copyrights and patents.


Conclusion

I have come to know that the Unequal distribution has made a huge impact on the Nepal organization. To that extend the political and economical factors have also been affected.

If they have a proper method of using the factors then the Nepal organization can come to a high level.

If the government has to stop in having support with the political, and the Nepal is a country which can come with new technologies and new innovations.


Referencing

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Source: ChinaStones - http://china-stones.info/free-essays/business/unequal-distribution-of-financial-resources-nepal.php



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