1. Introduction
The state of interdependency of countries in many ways of lives like economic, social, educational, technological, capital, market is called globalization. It is actually the state of not isolating any part of the world from other parts by economically, technologically and other aspects. Globalization refers to the flow of goods and services, capital, labor, technology, religion, culture, education from one country to rest of the world crossing the political as well as geographical boarders. The situation of borderless international activities which is mainly due to revolutionary development in information technology, transportation and science and technology is the globalization. Globalized world is the the shrinkage of world into a small village due to information technology, transportation. In globalization free market system, multinational corporations, tourism,international trade, multinational and bilateral institutions and teements, foreign employment remittance, foreign studies, international investments, foreign aid information super highway world transportation development, flow of technologies, world sports, migration are the major action and effects of globalizations. In another sentence, by globalization, we mean the process of international integration arising from the world views, products, ideas, and cultures, Globalization refers to the widening, deepening and speeding up of global interconnection. It is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world.
In 2000, IMF identified four basic aspects of globalization -trade and transactions, capital and investment movements, migrations and movement of peoples and dissemination of knowledge Globalizing processes affect and are affected by business and work organization, economics, socio- cultural resources, and the natural environment. Five main empirical dimensions of globalization are economic, political, cultural, ecological, and the ideological. It is the free movement of Product, service, capital, culture, technology and human from one state to rest of the world. The state of borderless economy can be called as the globalization. Now a day, for any country, or, city or village, of family and individual it is Impossible to become isolate from rest of the world. This kind of world interconnectivity is known is the globalization. In another way the access, open- up and competition are combined features of the globalization. Mainly there are many aspects of globalization, but mainly some important aspects can be summarized as political, Administrative, Socio-cultural, Technological, Ecological and Economical but major is Economic.
2. Definition of globalization
The term globalization is derived from the word globalize, which refers to the emergence of an international network of economic systems. Economist Theodore Levittfirst coined the term globalization in an article entitled "Globalization of Markets". In view of Martin Albro and Elizabeth King globalization is all those processes by which the peoples of the world are incorporated into a single world society. In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and moverment of people and the dissemination of knowledge. After the Second World War, the Breton Woods conference, an agreement by major governments Initially, the General Agreement on Tariffs and Trade (GATT), led to a series of agreements to remove trade restrictions. GATT's successor was the World Trade Organization (WTO).
3. Historical development of globalization
Humans have interacted over long distances for thousands of years. The overland Silk Road that connected Asia, Africa and Europe is a good example of the transformative power of trans- local exchange that existed in the "old world. Marco polo was the first European who visited china; Vasco de Gama discovered India and Columbus discovered USA. In the 15th and 16th centuries, Europeans made important discoveries in their exploration of the oceans, including the start of transatlantic travel to the "New World" of the Americas. Early in the 19th century, the development of new forms of transportation (such as the steamship and railroads) and telecommunications that "compressed" time and space allowed for increasingly rapid rates of global interchange. In the 6.2 Changes in Monetary policy
Liberal monetary policy
More emphasis on indirect monetary instruments
Market based interest rate determination
Market based foreign exchange rate determination
6.3 Financial Sector Reform
Open up license for bank and financial institution
Current account fully convertible
Financial account partially convertible
Open for foreign bank and financial institutions (by 2010)
6.4 Public Enterprises
Privatization act, 1993
Privatization proceed up
Up to now 30 public enterprises are privatized and 36 are remaining to the state.
Reform of SOEs by structural reform, pricing decision autonomy, managerial autonomy
6.7 Trade Policy Liberalization
Free trade policy
Open general licensing (O.G.L.)
Trade diversification policy
Dismissal of import export license
One window policy for trade promotion
Aid for trade policy
New commercial policy
Dismissal of quota system
Current account fully convertible
WTO membership and follow the principles of WTO.- promoting rule based international trade, non discrimination by national treatment and most favored nations, transparency in international trade, special and differential treatment for least developed countries and effective dispute settlement mechanism.
6.8 Foreign Investment
Open up for foreign investment
Multinational companies are established
Bilateral investment protection and promotion treaties (BIPPA)
Attraction of foreign investment policies adopted towards globalization. After, Nepal got membership of WTO, SAFTA, BIMSTEC, WCO may more UN organizations and other international organizations
5. Steps towards globalization in Nepal
Thapathali treaty with Tibet in 1856
Friendly treaty with British India:-1923
Peace and friendship treaty with India:-1990
Legal trade route with India:-27
Legal trade route with china:-6
Trade policy:-2009
Trade integration strategy:-2010
Relation with International customs:- 181 nation
Import + export destination:- 127 nation
Only import-42 nation
Only export:-12 nation
Member of UN:-1956
WTO member:-2004 April 23 (147th)
1987-1990: IMF SAP implemented.
Liberation policy adopted after SAP
Privatization act and policy, 1993
Laissez faire economy
Reformulated trade, foreign aid, foreign investment and industrial policies
6. Major changes for adopting globalization
6.1 Government finance reform
Removal of non-tariff import barriers
Self-assessment taxation system
Implementation of Value Added Tax
Lowering the rate of customs duties
Tax rate lowering and base widening
Double taxation avoidance treaty
Tax laws are made compatible with international laws
Structural, procedural and organizational reform in taxation system.
Formulation of foreign aid policy
Deficit financing is maintained from foreign aid, grant and borrowing both from bilateral as well as multilateral donor agency
Internal debt management by Nepal Rastra Bank through open market operation.
6.2 Changes in Monetary policy
Liberal monetary policy
More emphasis on indirect monetary instruments
Market based interest rate determination
Market based foreign exchange rate determination
6.3 Financial Sector Reform
Open up license for bank and financial institution
Current account fully convertible
Financial account partially convertible
Open for foreign bank and financial institutions (by 2010)
6.4 Public Enterprises
Privatization act, 1993
Privatization proceed up
Up to now 30 public enterprises are privatized and 36 are remaining to the state.
Reform of SOEs by structural reform, pricing decision autonomy, managerial autonomy
6.7 Trade Policy Liberalization
Free trade policy
Open general licensing (O.G.L.)
Trade diversification policy
Dismissal of import export license
One window policy for trade promotion
Aid for trade policy
New commercial policy
Dismissal of quota system
Current account fully convertible
WTO membership and follow the principles of WTO.- promoting rule based international trade, non discrimination by national treatment and most favored nations, transparency in international trade, special and differential treatment for least developed countries and effective dispute settlement mechanism.
6.8 Foreign Investment
Open up for foreign investment
Multinational companies are established
Bilateral investment protection and promotion treaties (BIPPA)
Attraction of foreign investment policies adopted
6.9 Tourism sector reform
Tourism is considered as the main pillar of economy
Tourist places marketing and development projects are implemented
Privatization of tourist industries Tourist attraction by economic diplomacy
Tourist year, tourist festival, tourist show are used to develop this sector.
6.10 Foreign Employment
Open up for foreign employment
Foreign employment policies are made
Foreign employment is considered as the main source of receiving foreign reserve
Labour contracts are done with many countries
For labour welfare, government established many labour contact offices in destination countries
New destination of foreign employment is coming now days.
6.11 Pricing System
Market pricing system adopted
Acts against car telling, syndicate and monopolization has been made No government intervention in pricing
Competition based market pricing system
Diminishing role of government for market operation but increasing role of government for regulation, facilitation,
Decrease in government subsidies
Administrative reform
7. Globalization in Nepal:-present scenario
Got membership of many more international organizations
Got involved in bilateral and multilateral agreement
Privatization policy: among 70 SOEs, now only 36, other are privatized.
Foreign aid, foreign direct investment and portfolio investment
Currency exchange rate determined by market.
Global export:- garments- USA, carpet-Germany, Grain- Bangladesh, honey - Norway etc
Global import:-Singapore, china, USA, Korea, Thailand, Vietnam, Japan India etc. (import goods:- petroleum, machinery, gold, electronic etc.)
Open sky policy
Liberal monetary policy,
Open up international bank and finance organizations
Trade diversification,
Tax and custom reform,
Foreign exchange determined by market
Tourism is the main GDP component
Nepal is the transit in trade between India and china.
Foreign studies: Europe, USA
Foreign employment:- Europe, USA, Arab, Malaysia, Korea, Japan,
Donor agency based budgeting
Internet access, telecommunication access, flight transport and land transport
8. How does globalizations affect national economy?
Due to globalization, movement of peoples from one part to another part of the world is common. This movement of people is mainly for economic activities, entertainment, meeting, sightseeing, participating sports, religious functions, study, medical treatment, diplomatic purposes and many more. Such movements are called tourism. Now Tourism is considered as one of the major components of the economy. Economic activities are increased by tourism. Globalization causes increases in tourism and tourism causes increasing in economic, social, cultural, educational aspects of the country. New destinations are found for tourist and this causes increase in tourist. Many countries of the world are largely depending upon tourism like, Thailand, Switzerland, Mauritius, Nepal etc.
By globalization, international trade is largely growing up day by day. Trade diversification, export promotion, free and comparative benefit trade becomes the main trade agendas for every country, International trade in the globalized world is only the main weapons to enhance the national development. Globalization opens the free and competitive trade. Trade becomes fruitful for economy if one can capture the opportunity for free trade and diversified trade. If export can be increased, through global trade then positive effects for economy and if not, then negative effects. Import can be minimized by improving national industrial development. So, global partners largely affect the national economy in globalized era.
Foreign investment in the form of portfolio or direct are another factors that affect the national economy, Globalized economy needs large investment and the large investment cannot be supported by national capital. So there is required a foreign investment either by portfolio or by directs. All of the governments are willing to attract foreign investment. This can be guided by the policies of the governments, infrastructures, labor relation, energy availably, and political desire towards foreign investment. If one successes to attract huge foreign investment, he will be able to enhance national economy. So, this factor largely affects the national economy and this is mainly due to the globalization.
Globalization facilitates the global foreign aid. Low income economy are largely depends upon foreign aids. Their national budgets are always in deficit and due to this, they required extra fund for infrastructures, capital accumulation and capital formation. Foreign loan and grants are two forms of aid. This aid can be received either by another country or by multinational international agencies. These kinds of aid can change the economic structure of the country.
Foreign exchange rates and quantities are now determined by international market system. Foreign exchange reserve is necessary for economic growth. If sufficient foreign exchange is not available then nation will be in crisis. This foreign exchange is hardly affected by globalized economy. Multinational companies are becoming more powerful than the governments. They can change the trend of business; affect the demand and supply of the economy. Foreign Bank and financial institutions can be established in national economy. These can directly affect national financial systems.
Globalization opens another door of the prosperity of economy through global employment, This phenomenon is the main effect of globalization. The process of movement of national labor force crossing the national political boarder is called foreign employment. Opening International labor market is one of the way of poverty reduction. This process can be affected by global labor relations, Inbor organizations, national as well as international laws. So, these are highly affected by globalization and these can affect the national economy.
One country should become the member of many international organizations. These organizations pressure national economy to make more liberal, world compatible. Sometimes these can become a political intervention. To adopt globalization relations among different countries and organizations is required. WTO, WB, IMF, UN and its specialized organizations are major international organization which promotes globalization. These organizations advocate free, competitive, worldwide, trade. According to WTO principles, international trade should be in accordance with international laws, no discriminations should be done for foreign goods and services through national treatment and most favored nations and transparency in international trade. These principles of international trade can be harmful to small, least developed economies. This may affect national economy
9. Is Nepal is a most liberalized country in south Asia?
Nepal is considered as the most liberalized economy because of the following reasons: less government subsidies
Less government role in market operation
Liberal monetary policy
Financial sector open to foreign bank and institutions by 2010
No quotas, no licensing in trade
Privatization of SOES
Least Import duties
Tax reform, VAT, Income progressive tax,
No protectionist policies
Membership to major global institutions like WTO
10. Impacts of Globalization in Nepal
10.1 Positive impacts
GDP growth rate increase
Per capita income increase
Private sector empowerment
Market structure changes
Trade diversification
Positive BOP
Surplus foreign reserves
Banking and financial institution established
Competition increased
Access to global market like USA, Germany, Norway,
Foreign investment
Foreign aid increased (loan and grants)
Foreign employment /remittance
Foreign studies/sharing of ideas
Technology transfer
Open to global services like medical, banking, entertainment, travelling
10.2 Negative impacts
Capital flight, Brain drain
Human trafficking
Cross boarder crime
Social cultural shift
Economic colonial
Decay of national industry
Environmental issues
Increased inequality
Social disintegration
Spread of new disease
Local, small & cottage industrial deterioration
Dual Economy (urban and rural economy)
10.3 Globalization: Negative or Positive?
It is the consequence of human development in the world, so it is unavoidable.
It has some negative aspects but positive aspects are much important
Negative aspect due to inefficiency of catching the opportunity
LDCs are unable to take opportunity created by globalization as their trade is less than 1% of global trade.
11. Challenges of Nepalese Economy due to globalization?
Following are some of the challenges that are raised due to globalization:
How to attract international capital?
How to save capital flight?
How to save brain drain?
How to control cross boarder crimes
How to control money laundering?
How to sustain and develop national industries?
How to develop competitions?
How to make quality product?
How to dialogue with international organizations?
How to select the national agendas to international organizations for alliance building?
How to identify comparative benefit sector and how to develop them?
How to establish national interest among multinational companies?
How to expand global market?
How to address inequality?
How to address environmental issues?
12. Opportunities
Following are major opportunities created through globalization:
Global market access
Technology transfer
Foreign investment
Employment in foreign countries
Tourism
Foreign aid
Quality of goods and services
Comparative benefit sector development
Global issues: global solution
Alliance building
Job creation
13. What should be done to get benefit from globalization?
Nepal strictly consider trade as the main agenda
Policy integration and reformulation is required to make national economy compatible with global economy.
Anti-dumping, safeguard and countervailing act should be formulated
More emphasis towards making investment friendly environment
Enhancing capacity of regulatory body
Aid for trade mobilization
Productive use of remittance
Develop trade intelligence diplomacy
More focus on research and development
14. Conclusion
The process and effect of globalization will be more rapidly increasing day by day. Without developing comparative benefit, competitiveness, and innovation, no one can be benefited. Globalization is inevitable and irreversible; the forward march of technology makes it so, Government can no longer control the flow of information now that the cell phone and satellite television have come to the most remote village. Day-to-day economic decisions can no longer be decreed from above by corporate CEOs, much less government planning ministers, now that markets mutate with frightening speed. Finance can no longer be dominated by "white shoes" commercials banks now that anyone can be a day trader. Capital can no longer be bottled up within borders now that billions of dollars can be moved with the click of a key. And in an age when instantaneous communications let U.S. software companies outsource product development to India, participation in global markets affords the world's poorer countries more opportunities than ever before. States will still continue to respond to globalization in different ways, and how they respond will determine their economic success or failure. Where they capitalize on globalization's opportunities will depend on whether they succeed in attracting international investors. And whether countries attracts investors will depend on privatizing enterprises, balancing budgets, lowering tariffs, removing restrictions on foreign investments, and eliminating subsidies for state-owned firms.. No one can be benefited. The response to the globalization is only the route toward economic growth. So, every country must take the strategy of THINK GLOBALLY, ACT GLOBALLY
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