[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I submit it is not an outdated concept even with globalization for the following reasons:(a)there is a dire need for national politicians, planners and academicians, together with the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
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.
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.
Despite foreign aid’s emphasis on good governance Nepal
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
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
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
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
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 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
The second strategy is more challenging and requires that we negotiate this sector more completely with India
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
Agenda No 3: Maximize the Utilization of Water Resources
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
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 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
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.
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
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 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 China Tibet
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
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
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
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.
Conclusions
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 Nepal
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
With China Nepal Nepal Nepal Kew , so to speak.
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 China Nepal Afghanistan Pakistan
A strategic partnership is eminently desirable with Bangladesh
Recently, the IMF has advised Nepal India
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
Andrei Schleifer (2009) Peter Thomas Bauer and the failure of Foreign Aid; The Cato Institute
Dambisa Moyo; Dead Aid (2009), Farrar, Strauss and Giroux,
Ratna Sansar Shrestha (2010); Electricity Crisis in Nepal
Madhukar SJB Rana (2005); Indo-Nepal Strategic Partnership for the Asian Century: From Dependency to Interdependency, Landlocked to Transit State Bridge State
The Journal of Agriculture and Environment Vol: .9, Jun.2008 Review Paper
. 72 NATURAL RESOURCE AND WATERSHED MANAGEMENT IN SOUTH ASIA : A
COMPARATIVE EVALUATION WITH SPECIAL REFERENCES TO NEPAL
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
[The author is Professor at South Asian Institute of Management and Former Finance Minister of Nepal
