November 11, 2013 Sujeev Shakya

Hung Economy?

During Tihar festivities, many statements are made as people start setting aside money and get into gambling. Across economic strata, one hears that “I will do so and so if I win”, be it cajoling the wife, child or sibling. The behaviour of politicians as they go to polls also has this fundamental adage ingrained, “I will do so and so if I win.” Yes, politics reflects the society we live in!


Economic agenda
As I wrote in my last column, Nepali politics has yet to be fought along the lines of the economy. Everyone tends to get to the distributive form of economics, where doling out favours to citizens probably gives them the security of political power. With the elections now definitely happening, it is important for everyone to shift the focus to the economic agenda.
We have yet to see strong statements from leaders on economic reforms. They have yet to answer many questions: How will they ensure that Nepal will be seen globally as a potential investment destination? What will they do to ensure that global investors find their investments secure? How will they change labour laws? How will they provide incentives to investors to be able to compete with other countries that are moving from ‘fragile’ to ‘frontier’? How will they ensure that the cost of doing business is reduced? When will electronic transactions be made legal so that e-commerce will boom? How will they mobilise bipali money and use the remittances for infrastructure building? How will they make regulators not only stronger but more global in their outlook? How will access to finance issues be tackled? When will they bring laws that will allow the development of a bond market, private equity funds, venture capital, social entrepreneurship fund, philanthropic trusts? How will more jobs be created?
There are many such questions that everyone needs to ponder. A new Constituent Assembly (CA) can surely write a constitution but there is no indication that it will script the process for economic growth. Working on the economic agenda has to be a parallel exercise for the newly elected leaders from all parties.
Decentralisation is key
There are enough highest per-capita reports available on how the federal structure in Nepal has not worked. However, there are no clear-cut prescriptions available on how to make alternative structures work. Fiscal decentralisation will be a key challenge as Nepal embraces federal structures. How will taxes be collected and shared? Who will subsidise states/districts that do not have economic resources? How will states/districts compete for investments and jobs? How will economic planning takes place at the federal as well as state/district levels? How accountability be ensured that money will trickle down to different levels?
There are many questions again to answer. The key lesson we need to learn from the past is that Nepal was a pioneer in the decentralisation and devolution of power in the 1990s, until the Sher Bahadur Deuba-led government decided to dissolve the Village Development Committees (VDCs) and District Development Committees (DDCs) in 2002. The devolution of power to DDCs and VDCs saw some good initiatives launched, be they hospitals or community schools. Roads started getting built, irrigation projects started to take shape, dissemination of information started happening and involvement of the grassroots populace in shaping discourse and policies began. For a country of close to 30 million people to be governed in an accountable manner, it is going to be important how quickly post-CA elections, local bodies are elected and the devolution of economic power will begin.
Whichever party wins a majority or whichever coalition of however many parties will come to power, the process of holding that next local elections has to be a top priority. Empowered municipalities will ensure regulations that people who do business will pay taxes and follow the law. For example, lawlessness and a lack of local bodies have made doing business at the micro-enterprise level difficult. As streets are widened, shacks and sheds appear illegally and put shops who pay rent and taxes out of business. Taxis and buses park at public places placing taxis and buses who pay rent in a disadvantageous position. Local groups are constructing illegal structures and charging rent recklessly. Before these situations, currently completely out of the radar, get out of hand, it is important that local governance be restored.
Societal transformation is key to economic transformation
Another exercise that needs to move simultaneously with constitution writing is societal transformation. Politics will not change if society does not. A person who does not like to use a clean toilet or does not keep their toilet at home clean cannot be expected to keep the toilet at their office clean once they become minister. A parent who shouted slogans on the streets protesting against students not being allowed to cheat will not be against cheating one they become minister or CA member. A person who wields all his power to get ahead in the queue at the temple will surely not be against putting files on priority for a certain sum of money once they start to wield political power. These changes in mindset and behaviour are fundamental to changes in society and only such changes can lead to economic transformation.
When my next column is published, the new CA will have already taken shape. It will be interesting to see how many of these issues will feature in the initial commitments of the political leaders.

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