July 28, 2010


 [Doing business as usual will not suffice as a ‘demographic bombshell’ haunts Nepal unsuspectingly with Malthusian devastation if the oligarchy of politicians, bureaucrats, labour unions and the mafia do no change their behaviour and put Nepal first and foremost. Three million are unemployed and each year another 300,000 are added to this pool of labour. One may safely expect that youth will be even more alienated and in angst and violence prone. Giving political and market space to youth power and enterprise is a dire need that should tackle the brains of our sociologists and religious elders.]

By Madhukar SJB Rana
Democracy is about Rule of Law, Justice and Choice: Justice and Choice are maximized by good Economics .
 Any Economic Policy that reduces or can’t maximize Choice is undemocratic.

Introduction: Purpose of Paper and Definitions 
The aim of this paper is to provoke debate and dialogue on the economics of national interest. In short, to promote ‘economic nationalism’ which, some participants here may feel, is a phrase that is passé in the 21stcentury’s era of globalization.

I submit it is not an outdated concept even with  globalization for the following reasons:(a)there is a dire need for  national politicians, planners and academicians, together with the private sector, to jointly set the economic agenda for the nation; as well as, first and foremost, jointly designing economic strategies in the wake of the emergent geo-strategic forces to maximize national interest; (b) strategists need to keep an open mind set for exploring every avenue for import substitution as and when opportunities arise, and (c) makers must be perceptive, at all times, to minimize risks arising from the open economy by ardently following policies favouring national self-reliance and safeguarding national security.

Needless to say, being an ‘economic nationalist’ in the new era of globalization calls for great expertise in economic diplomacy to negotiate the best deals for Nepal in the context of WTO laws and regulations and, not least, UNCTAD principles in favour of landlocked and least developed economies. Not to discount the emergent negotiations over global warming and the clamour for eco-economics that bodes pretty well for Nepal’s future with so much scope for carbon trading, through import substitution, from the vision envisaged in this paper.

National economics must be synchronized with national politics in all national decisions and they should not be completely divorced from each other; as has been the case, historically since 1955—with the possible exception during a period in the early 1960s when Nepal actually took a plan holiday break.—what little was planned was executed with grand success.

In short, the contextual basis for modern ‘economic nationalism’ is not simply political nationalism but an information-age nationalism that is fully cognizant of the forces of geo-economics, geo-politics and geo-psychology.

 Forward: The Economic Agenda for New Nepal
Given the time limitation, I propose to take up in the style of a set of prioritized action agendas to underscore the economic opportunities, issues and approaches that are vitally in the national interest. These ‘economic nationalist’ actions are the following.

 Agenda No 1: Demolish Aid Colonization
 Nepal is blessed by Nature with ample natural resources, which our politicians, systemically, and their planners have failed to harness. This sustained, systemic failure is mainly due to their lack of vision caused by their overarching aid dependency resultant from their neo-colonial mindset, inferiority complexes and the rent benefits accruing to them from aid.

Despite foreign aid’s emphasis on good governance Nepal’s chronic mal governance is also due to this because of the overarching aid dependency as politicians, planners and policy-bureaucrats are spoon fed with alien ideas, money, material and machinations that go to serve their global interest –not ours.

 Let us, today, pay homage to Lord Peter Bauer who first warned us of the pitfalls of foreign aid as early as the 1970’s. It was Bauer who had first had argued that central planning, price controls and protectionism perpetuates poverty especially nurtured by foreign aid. His wisdom was recognized even by the World Bank in its 1997 World Development Report when it acknowledged the outdated and naive assumption that good advisers and good technical experts by formulating good policies would lead to good execution and rapid modernization.

They simply forgot that modernization necessitates transformation from within based on indigenous leadership pursing the concept of organization development and change management over a sustained period. Considering how frequently the World Bank changed its development themes it is no wonder that their enterprise became a self-serving venture with a rapid fire, fit-for-all prescriptions. Never mind the culture of that nation nor its level of institutional development to be able to absorb the recommendations designed externally and expeditiously with very little participants by the stakeholders.     

Aid is the primary source of graft and corruption. Let me quote International Alert’s Phil Vernon. When asked “Is Aid Working” he said:   “Despite billions of dollars being spent on development assistance over the past 60 years, it is doubtful that aid is really working as intended, i.e. providing sufficient impetus to overcome the strong forces that keep people poor…If asked to project ourselves forward in time to 2030 and imagine whether, looking back, we would call today’s aid policy and practice successful, many of us would find it hard to say yes.”

"Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to a staggering 66%" - roughly 600 million of Africa's billion people are now trapped in poverty” says the Zambian economist Dambisa Moyo 

Aid, therefore, is part of the problem and not part of the solution for good governance. Is it any wonder that politicians have least regard for their duties to national tax payers as they merrily submit to populist, vote banking politics that has backfired in youth alienation, angst and the unrealistic, rising expectations that are the root causes of crime, violence, insecurity and the breakdown in the rule of law.

To be honest, Nepal is merely a clog in the wheel of development being propelled by the western industrial nations in their mission for universal liberal democracy, human rights and security (from radical social movements; international migration, terrorism and global warming).

Such is the ideological weapon being unleashed upon the developing countries for the ‘end of history’ and to maintain their cultural domination-- underscored by the savage debt burden unleashed through tied aid.

Aid agencies located in situ (e.g., USAID, DFID, and DANIDA) are glaring symbols of colonization through aid. They bypass, completely, the foreign ministries and are not accountable in any manner or form to national parliaments.

Aid bureaucracies, as well as national bureaucracies, must be down sized and right sized by having just a few core ministries that are constructed with the aim to have both strategic and macro-economic impact. For example, the Ministry of Industry, Supplies and Commerce should be appropriately amalgamated into the Ministry of Finance and Economy while the Ministry of Agriculture henceforth should be made responsible for agro-industrialization.

Why merge ministries? For better coordination, communication and control and strategic impact by creating self-contained synergies within related sub sectors to maximize multiplier benefits through backward and forward linkages . 

Is this not a parody of democracy and sovereign equality of nations? In the quest for human rights the industrial nations resort to non-governmental organizations, created and funded by them, to protect and promote human rights under the guise of ‘civil society’ so as to ensure weak, compliant states. Worse, it completely destroys the developing nations’ social capital as traditional voluntary organizations are annihilated from the national socio-political scene.

The first act of nationalism, therefore, must be to set limits to foreign aid which is a self-perpetuating institution by: (a) developing one’s own development and growth strategies; (b) bringing under the Ministry of Foreign Affairs’ fold all bilateral and multilateral foreign aid, including those from INGOs, and (c) deepening and opening alternative avenues for international finance massively (remittance, tourism, transit trade, international financial centre, carbon trading and  mobilization; and (c) downsizing the bi-lateral international aid bureaucracy in situ and also requiring them to hire national experts especially educated and trained in the countries concerned.

Aid driven by its mission of liberal democracy and human rights has the distinction of creating inefficient state and parastatal institutions that have weakened individual liberties and choices; and the spirit of enterprise that is possible mainly through the market mechanisms – and not through an ever expanding role of governments, political parties, labour unions and NGOs.

Total debt forgiveness is necessary as aid has robbed Nepal of its competitive advantage through padding of costs and chronic delays mainly in the infrastructure sector. Use the funds released from debt forgiveness to emancipate the people living below the poverty line as their rightful entitlements to micro- credit; sanitation; irrigation; education; health, housing and skill training—no matter what caste, creed and culture or race, religion and  region.  

As far as possible, to arrest the spread of the public sector, aid should not be accepted for sectors other than the social sectors. In the event that aid to all other sectors is necessary then it should be channelled through the private sector so that aid builds the capacity for Nepal to compete in all domains of commerce, industry and finance.

The effectiveness of aid needs to be evaluated for its impact on trade if the mantra of ‘aid for trade’ is to be meaningful. Foremost, mechanisms and methods must be found to promote massively micro and SMEs throughout the nation so that not just Kathmandu, but all other cities and towns are endowed with commodity and capital markets. This is eminently possible if aid  is channelled into private enterprises in the form of equity and long term bonds. Nepal can be socially transformed by flowering social entrepreneurs in all corners of the land.

Agenda No 2: Rediscover Agriculture and make Agro-Industrialization the engine of growth, development and modernization      

The agriculture-horticulure-floriculture-sericulture-livestock-beekeeping-muhroom farming and fisheries’ sub-sectors have to be rescued from the abysmal, continuous neglect by politicians and planners who are still fixated on paddy, maize and wheat despite waning comparative advantages to India and perhaps even Bangladesh.

How to strategize this vast sector where more resources are spent on bureaucracy than on farms and where leakages are so rampant with hardly anything trickling down?  70% of the rural households depend on this sector. 80% jobs reside here. More than 1.2 million are landless and growing annually. Neither full employment, nor empowerment of gender, Dalits and Janjatis will be possible without robust agri-growth; nor indeed ‘food security’ for the hugely scattered, self sufficient rural households.

Two strategies will have to be simultaneously formulated and executed. One, import substitution of high-value, high- income elasticity demand crops to cope with the rising household incomes in all cities and towns. In addition to being fully backed up by irrigation and extension and massive micro and SME credit best provided by a debt moratorium by both bilateral and multilateral donors for the years of misuse of foreign aid that has robbed the country of its comparative advantage with grossly excessive input and technical assistance costs: and these include costs of management consultancy reports galore which are hardly implemented due to rapid turnover or absence of staff. Nevertheless, Nepal must use its own funds to subsidize this entire strategy with all manner of financial and fiscal innovations.

The second strategy is more challenging and requires that we negotiate this sector more completely with India’s agricultural sector engaging in free trade, free movement of  FDI, including portfolio investments and free movement of labour in order to promote joint ventures; commercial farming and assistance in opening Venture Capital Funds and Land Banks to support the marketization of land. One expects that the measures will allow the agri-sector to also have equity, debt and bond markets in due course. The Agricultural Bank can play the role model in transforming the rural society from a feudal order to a capitalist one.

Last not least the shocking neglect of the supply chain system or logistics' sub sector must be signalled out for the highest investment priority especially in areas such as cold chains; modern warehouses; survey, inspection and loss prevention technologies; documentation modernization with maximum emphasis on IT; multi-module transportation and dry ports. All these investments call for public-private partnerships for optimal risk management and sharing of risks and benefits.

An FTA for the agri-sector needs to be entered keeping in mind the second agri-revolution that India is about to launch so that there is no let with either faulty competitive advantage negotiation, but also in identification of comparative advantages. The name of the game is to garner backward and forward linkages not simply on Nepali soil but also Indian in the immediate neighbourhoods.

Agenda No 3: Maximize the Utilization of Water Resources

Nepal’s hydro-energy potential is said to be 84,000 MW with at least 43,000 MW commercially viable. These assumptions have led politicians and planners to inherit the Bhutan-syndrome. Hence Senior Water Resource Expert, Ratna Sansar Shrestha, calls for a paradigm shift in energy planning.

His study shows that, in 2007-08, only 2.04% of the total national energy utilization (2,800 MW) was met by hydro-power and the rest was met by firewood (75.06%); petroleum (9.82%); animal residue (5.87%); agri-residue (4.08%); coal (2.53%) and solar energy (0.6%). Projected peak load demand in 2025-26, based on current economic structures, is 3176.6 MW 

If the economy leap frogs to the much touted 10.0% growth per annum, it would mean that total national energy demand would rise to, inter alia, no less than 11,000 MW. Now to produce 11,000 MW of hydro-energy to substitute all other sources would actually result in the economy leap-frogging as well with both balance of trade (import substitution) and payment surpluses (fdi, exports, carbon trading) beyond the imaginations of the Arab Sheikhs.

For Nepal to be a developed industrial nation by 2040 it requires a per capita energy consumption of around 10,000 kWh, which means it requires more than 60,000 MW of hydro-energy supply. To be a middle level economy by say 2025 it may require no less than 30,000 MW of electricity to power the economy as the strategic engine of growth.

Action is eminently needed, as a national priority of the utmost importance, to have an in-depth, multi-sectoral and longitudinal demand simulation study done by an independent national think tank to systematically estimate the water and hydro-energy requirements of each and every sector nationally – household; municipalities; irrigation; transportation; cold storage (national loss is around 3-5% of GDP); manufacturing industries; storage for water security and export trade.

Let us underscore that we must reject the Bhutan model of water resource development as it is against the national interest for a middle sized country that will have a population in excess of 34.2 million in 2021 and 45.1 million people by 2040. It was 23.2 million in 2001 and is growing by 2.25% each year. The urban population absorbs 14.2% of the population and is growing rapidly by 5.4% to register one of the fastest growths in urban population in Asia.

We must use the water to its hilt for total structural transformation of the economy towards ecological security; food security, energy security, employment security and massive industrialization with a view to developing agro-industrial and energy-intensive manufacturing industries together with high speed rail and ropeway transportation and also water-borne transportation for bulk goods; and export of surplus sweet water for drinking and irrigation.

Agenda No 4:Adopt Integrated Manpower-Educational Planning

Given Agenda No 2, it follows logically that Nepal will have to enter the sphere of manpower planning and integrate it with educational planning so that the human capital needs are met for the suggested economic transformation as well as the demands for human resources ensuing from the dynamic economic growth envisaged.

 Banks should be required to give loans to students of all categories with refinancing by NRB with interest to be paid only after completion of studies. Detailed global studies have shown that nowhere in the world is IRR higher and payback on investment quicker.

Investment in education is good business. The private sector knows this. It also knows that they can contribute to peace building and maintenance if they create jobs, give scholarships to the able women, Dalits, Janjatis and disabled and guarantee in the interest of inclusion and equity.

A determined policy of public-private partnership in education is eminently desirable for all this to happen in a transformational manner as the private sector can and will invest in world class universities, colleges and polytechnics to churn out engineers, entrepreneurs, technologist, technicians and apprenticeships. Hopefully, the Dalits will get a grand opportunity to be finally emancipated in their new avatar. 

Agenda 5: Adopt River Basin Planning and Integrated Watershed Management

Watersheds are landmasses drained by a stream or river. As such, watersheds can be mini, micro, meso or mega (trans-boundary river basins engulfing 2 or more countries). Invariably, watershed planning and management involve multi-sector, integrated scientific approaches and interventions to include soils, water, forests and climate to be harnessed and conserved by a community, region or nation/s to produce goods and services for the common good, including control of natural disasters.

Each river basin from the high Himalayas to the lowlands of the Terai comprises a holistic natural unit with almost all Nepalese communities permanently settled along rivers and streams engaged in farming rather than living in nomadic or tribal life styles.   All communities find themselves spiritually united by the holy rivers and streams flowing from the Himalayas—the abode of the Gods.

National planning, if it is to respect people’s sovereignty and pluralism, must give way to bottom-up planning to give space to local communities to be engaged in integrated watershed planning and management through local leadership and local panchayats based on their own felt needs, aspirations and capacities --- not those of sector specialists with pre-conceived ideas alien to one and all at the grassroots.
Empowered local panchayats are the true foundations for national holistic inclusion – be it caste, ethnic, linguistic, religious or gender. This happens when clusters of local panchayats form a commonwealth-- or call it a confederal union-- of panchayats to obtain multiplier benefits through economies of scale and scope; rendered by the expanding market mechanisms as local participatory development takes unfolds based on the principles of community self-governance, self-development and self-management. A fusion of local panchayats, all driven by the quest for community and individual happiness while being led by their own local leaders is far more holistically constructive, fulfilling, inclusive and empowering than modalities of social change based on extraneous political ideologies borrowed from elsewhere.

Nepal is a show case country as far as community-based natural resource management is concerned. It can, hopefully, be a global role model in nation building towards the desired new economy where ecology and economy are synthesized to cater to the welfare of all life – born or yet to be born–and contribute to the security of planet earth.

The practice of doing top-down watershed management in a sectoral manner for the underprivileged backward communities must give way toward making this the raison d’être of the body politic of the envisaged federal Nepal.

Mobilize local communities to be engaged in watershed planning and management and mobilize districts to draw up District River Basin Management Plans in pursuit of national and district sustainable development/environmental goals and objectives based on community participation;
Formulation of Federal/Regional Watershed Management Plans for the 3 River Basins by the respective Water Resource Councils based on District River Basin Management Plans;
Formulation of the National River Basin Plan (in harmony with and aligned to larger rivers basin plans of India and China);
Components of River Basin Planning: multipurpose dams and reservoirs; hydro-energy plants; navigation; irrigation; sanitation; drinking water; flood control;
agriculture, forestry, livestock and fisheries’ development for regional development

Take Lessons from US’ Tennessee Valley Authority; India’ Damodar Valley Authority; UN’s Mekong Commission, Australia’s Snowy Mountain; China’s Three Gorges Dam Project; Canada-US Columbia River Project ; Brazil-Paraguya River Basisn etc  

Agenda No 6: Be the Global Voice of the Developing Mountain Peoples of the Globe

Nepal must never waiver to be actively involving itself as an active UN member for its own collective security. Another foreign policy objective was to be the global voice of the mountain peoples in all international fora. With ICIMOD located in Kathmandu Nepal is fortunate to have a centre of international excellence for integrated development of the Hindu Kush Himalayas as an intellectual resource institute – the only one of its kind in the world.

Agenda No 7:  Create National Growth Centres and Economically Integrate with India and China based on River Basin Planning and Watershed Management by pursuing a neo- Model of Sub-regional Cooperation (4 x 1 economy) in an extended SAARC Growth Quadrangle (SA-GQ)

One may visualize the Nepali macro-economy as being a 4-in-1 economy that should be well integrated unto itself and outwards with the neighbouring countries of both India  and China. (Most probably, the best location to begin harnessing the Himalayan rivers is within Tibet which would be the most suitable place for high dams owing to the fact of it’s under population.)

These sub-regional economies are the following: (1) Northern Trans-Himalayan Economy to be integrated into Tibet (2) Eastern Region all territory East of Koshi to link Sikkim; Darjeeling; 7 North East states, (3) West and Central Region east of Gandaki integrated with N Bihar and NW Uttar Pradesh and Mid West and Far West Regional comprising territories drained by the Karnali to integrate with East Uttar Pradesh up to New Delhi.

Although this author does not visualize federalism as in the national economic interest , as it is economically burdensome for such a small territory, it can form the basis of the federal new Nepal with its own Regional Planning and Execution Authorities that will design the right growth poles, corridors, axes and spokes and maximize local community participation in the full spirit of ‘participatory democracy’ and maximum social inclusion and local leadership development from all castes, creeds, ethics, and linguistic communities.

The above model was for Nepal to serve not just as a transit economy, as first envisaged by the former King Gyanendra in 2005, but more as a ‘bridge civilization’ of peace and friendship between the two greatest civilizations in the world to play their due role in world affairs as the 3 major powers along with the US and Europe by 2024.

Agenda No 8: Invest Heavily in Human Capital for Inclusive Sustainable Growth

There should be GIS mapping of all communities, which may be to the tune of 25,000-35000 village clusters ,including distance from townships/growth poles and availability of basic needs’ infrastructure and social capital (tvos, cbos, ngos, guthis), resource availability – natural resources, food security; energy security; health security; employment security; livestock security; and flora and fauna security.
There should be a national demographic survey of all these communities to obtain a count of the population size by sex, age, education, health (nutrition status) , housing, ethnography—race, language, religion, household size,  migration status –national, regional and global.

Demographic Projections along with Basic Needs Infrastructure Requirements by 2025 Assess local community’s ability to self-manage and self-fund the basic needs and social infrastructure.

Agenda No 9: Create an Independent Bureaucracy: Depoliticize All National Institutions

 Constitutional means must be found to protect the bureaucracy, judicial, security and university services to be free from the fangs of politics and soundly ensured, constitutionally, to be effectively the vanguard for the modernization of the Nepali society.

These executive arms of governments must be empowered to independently develop its human capital as true professionals competent in their tasks in tune with  world standards for their ability to apply the rule of law, be fully transparent and accountable to the citizens of Nepal as servants as servants and not masters as in past.

One expects all national institutions, in this new age of the information revolution, to be imbibed by a new culture that of a ‘managerial civil service’ rather than the traditional culture-- as expressed in a universal behaviour that is aloof and impersonal, rule-bound and utterly overwhelmed by procedures and files.      
Agenda No 10: Develop R & D and S & T Capacity in Core Areas

Engineering (water; construction; transportation; mechanical ;), Biodiversity, Herbal Medicine and Beauty products, Soil Erosion; Pharmacology; Hybrid Seeds; River Basin Hydrology and Metrology.

Agenda No 11: Make Nepal the World’s Tourism Shangri-La

Primary emphasis should be given to religious tourism (Hinduism and Buddhism) where a sub-strategy for global marketing, infrastructure development and fdi mobilization should be formulated based on the 4 Ps concept – people in the manner of local communities, public sector and private sector participation.

In this strategy an important action plan should be developed to mobilize the world’s Hindus and Buddhists to, subject to negotiation with the Chinese government which is now fostering people-to-people diplomacy, to permit Nepal to lead the establishment of (as the sole Hindu state and the land of Gautam Buddha’s birth) a world heritage site and holy township in the Mt Kailash-Lake Manosarvar region.

The Nepal Tourism Board is, undoubtedly, the most sophisticated institution in Nepal’s policy planning experience to date that has been able to do strategic planning and management at a sector level. It needs to be broadened and deepened to integrate civil aviation as well as human capital planning for both these sectors so that there is better communication, command,  control and coordination with the government and between the people/communities and the private sector.

Beyond the Nepal Tourism Board’s policy giving due priority to adventure tourism and wild life tourism more thought should be given to (a) convention tourism and (b) health tourism.  Even more thought should be given to promoting ‘resident tourism’ where we invite foreign  nationals to come and live in Nepal with their families by providing them facilities like 10 year multiple visas as well as permission to buy apartments and to sell if they wish to  leave the country. Immense employment-generation benefits will ensue from this policy as well as much valuable human capital that will help product development and international marketing for the handicrafts sector.

Agenda No 12: Benefit from Forestry Resources
The Forestry sector has made great headway with the admirable success of Community Forestry and User Groups. This Nepali innovation has been recognized worldwide. What is yet to be recognized is the need to deal with the ‘second generation’ problem that goes beyond conservation, preservation and livelihood maintenance of community foresters.

It needs to be made more commercially viable by combining both afforestation and reforestation together with conservation, preservation, diversification for full realization of its revenue potential from exports, import substitution, carbon trading and building up of industrial/commercial forest products, including herbs. It is estimated that the potential for revenue harnessing might be as high as Rs 11.0 billion per year if forests are well managed as a people-public and private sector partnership.

Agenda no 13: Control the black and mafia economy by reducing all taxes--- be the lowest taxing economy in South Asia.

This is eminently feasible by reforming the public administration and security systems to be graft and corruption free. If kept out of political patronage the first need will have been met.

Technocratization and professionalization of the ministries of finance, home and land reforms would do the trick to begin with. One could start with recourse to e-governance in these ministries, as a pilot project, that will have major impact on transforming the public service across the nation. Internal resource mobilization can easily be targeted at 20% of GDP, from the current 14-15%, by actually reducing income taxes; avoiding all taxes on savings, and rationalizing VAT and the tax exemption regime.

Basic Approach and Assumptions: As we move away from the paradigm of aid-led development we need to substitute it for one that is led by private enterprise with fdi as the catalysts for economic transformation and rapid growth to make full use of the market mechanism as the hallmark for efficiency in resource allocation between competing uses.

For this to happen political stability is a sine qua non. So too the presence of an independent judiciary and autonomous bureaucratic institutions to effect due checks and balances and enforce the rule of law. It is also assumed that with well-functioning market mechanisms and autonomous civil service good governance will prevail in an environment of competitive politics and economics and speedy delivery of justice.

The late Indian management guru, C.K.Prahalad has already shown us how the private sector can, through a new social compact, as it were, can create growth, employment and distribute income through his strategic corporate vision seeking to find ‘fortune at the bottom of the pyramid’, amidst the 80% of the poor living below $ 2 per day.      

Hopefully, the 13 strategic agendas can be further researched by a multi-disciplinary team of national experts doing scenario analyses and longitudinal studies. That it is openly debated in the National Security Council to arrive at a national consensus on economic policies and strategies for the national interest using the concept of ‘comprehensive security’ that includes ‘human security’.

Doing business as usual will not suffice as a ‘demographic bombshell’ haunts Nepal unsuspectingly with Malthusian devastation if the oligarchy of politicians, bureaucrats, labour unions and the mafia do no change their behaviour and put Nepal first and foremost. Three million are unemployed and each year another 300,000 are added to this pool of labour. One may safely expect that youth will be even more alienated and in angst and violence prone. Giving political and market space to youth power and enterprise is a dire need that should tackle the brains of our sociologists and religious elders. 

Forceful mobilization, with serious negotiations to deepen economic integration, is called for. In particular, mobilize fdi along with portfolio investments and labour. The WTO rules will not apply to India and Nepal as the 1950 treaty is an exception to it.

Nepal has a great friend, and a world class intellectual research partners to support least developed landlocked countries for obtaining more equitable treatment under the principle of ‘special and differential’ treatment. 

A two-pronged strategy needs to be developed to negotiate with India (a) free trade in agro processed products, (b) Integrated Commodity Arrangement for select agro-industrials.
With China in bilateral economic relations Nepal must seek to have it relocate all of its low-wage labour-intensive industries into Nepal which will boost industrial employment in Nepal beyond the wildest dream of Kew, so to speak.

Nepal can also design infrastructure projects to take full advantage of the US 10 billion earmarked as soft loan to developing countries on far more generous terms than the World Bank with little of the stringent, costly conditions.

Negotiations with India and China need to be done judiciously without trying in any way to play off one against the other at one’s own eventual peril—especially with temptations from the US and Europe.
It is best that India and China get to jointly appreciate that a Zone of Peace may be in the best interests of all 3 countries and the entire Asian region. One feels that Nepal will be even more strategic for peace and prosperity than Afghanistan or Pakistan as the new frontiers of the economy have to be developed to combat global warming.    

A strategic partnership is eminently desirable with Bangladesh for preserving transit rights and accesses to its vast market for horticulture, livestock and floriculture products as well.

Recently, the IMF has advised Nepal to (a) keep the foreign exchange fixed as topmost priority and (b) keep interest higher than in India. We would like to know and see how with such a regime the balance of trade is to be ameliorated and over what period.

There is a very famous Japanese saying that goes like this: a vision without action is a dream; but action without vision is a nightmare. Nepal, led by sets of visionless political leaders, is in a state of prolonged nightmare that can only be ended with a unifying national vision and national mission (and national goals).So permit me to spell out here that the strategic national agendas, as outlined above, are being driven by the following national vision and mission for Nepal.

National Vision:

Be a modern, industrially developed, democratic, multi-ethnic, multi-lingual and multi-religious pluralistic nation with the best quality of life in the South Asian region.

National Mission:

(a) As a secular Hindu state strive, at all times, to establish Ram Rajya where there is harmony, justice, peace and comprehensive security for all citizens living as equals before one’s God and the common, unified law of the land. (b) As a state sandwiched between two ancient civilizations and emergent 21st century super powers serve as the bridge country for peace, prosperity and commerce between South and Central Asia. (c) Serve as the international voice of the mountain peoples around the world and be a model of an economy and society that demonstrates respect for Nature and all Life while striving for individual happiness, liberty through their multiple identities (d) Be the Shangri-La of world tourism founded on spiritualism, world heritage sites for Hinduism and Buddhism; adventure tourism and resident tourism for those wishing to retire in Nepal. (d) As the SAARC capital, envisage Kathmandu as the South Asian offshore financial service centre as well as the South Asian regional centre for commercial dispute settlements.

National Goals

Governance; unitary state with federal and con-federal features  
Keep few ministries but fully integrated
Bureaucrats not Ministers accountable to the Parliamentary Standing Committees for full  application of the rule of law       
Ministers not drawn from Parliament but from Parties by a directly elected PM for a fixed period of 4 years    
No vote of no-confidence
People- Public-Private Partnerships in all spheres of the political economy

Other References:

Peter Bauer (1957); Economic Analysis and Policy in Underdeveloped Countries, Cambridge University Press.
Dambisa Moyo; Dead Aid (2009), Farrar, Strauss and Giroux,
 Ratna Sansar Shrestha (2010); Electricity Crisis in Nepal: Its Manifestation and Ramification (http://www.ratnasansar.com/2010/02/electricity-crisis-load-shedding-in_17.html)
Ratna Sansar Shrestha (current, short and medium range scenario analysis)
Dinesh L Shrestha and Guna Paudel Water Resource planning in Karnali Basin
Madhukar SJB Rana (2005); Indo-Nepal Strategic Partnership for the Asian Century: From Dependency to Interdependency, Landlocked to Transit State and Buffer to Bridge State : Rationale, Aims Assumptions 
Krishna R. Tiwari (PhD student) 15 Roshan M. Bajracharya (PhD) 16 and Bishal K. Sitaula (PhD) 17
[ This paper was presented to the Seminar on National Interest organized by South Asian Studies Centre, Kathmandu on April 26th2010. It is not meant to be an academic paper. It is a policy paper that is based on the author’s journey in development economics learned in 1964 at Manchester University, 1964 – world’s first programme started in 1962 by the Nobel Laureate, Arthur Lewis. A journey of 56 years gaining insights from reading, observing, dialoguing in national and international conferences and researching and training senior bureaucrats (CEDA/TU 1971-73; 1978-79) and practicing as Advisor with Ministries of Industry, Commerce, Supplies and Tourism (1974-78); Foreign Affairs (1996-98), Finance (1983-84 and 2005) with the additional duty to serve as Finance Minister (2005) with 2 stints with the UN ,namely UNCTAD, as Senior Transit  Transport Economist and Project Manager  Laos and Afghanistan (1978-1982) and Senior Programme Manager for South Asia, UNDP.]]   
[The author is Professor at South Asian Institute of Management and Former Finance Minister   of Nepal. Click here for his recent paper.]