May 26, 2015 Sujeev Shakya

Quake Effects

A month has gone by since the April 25 quake and we have had a lot of time to introspect and observe society, the nation, the physical structures and externalities around us. We have figured out how vulnerable we are and also realized how lucky we were—things could have been much worse had the quake occurred on a weekday or at night. In the aftermath, the situation felt similar to 2006, when we were scared about what the king would do. Would he abdicate quietly? Would the Maoists take over Nepal as thousands of their cadres were rumored to be in the Capital? How would the Nepal Army react? What would India do? Things turned out for the better. Nepalese abandoned violence and restored democracy through legitimate processes.

Nepal continues to arrive at junctures where everything looks hopeless, but again, we rise to the occasion and life moves on. We have seen this happen many times.

There is a section of Nepalis, especially in the Capital, that spends time manufacturing rumors, analyses, Face book statuses, Tweets, and sound bites for the media. At the same time, there is the larger section of Nepalis who are trying to get back to normalcy, as they have to survive. There are people who have put up one mere tarp for their family and have headed back to work in Kathmandu because if they don’t work, the family could get into further trouble. In the villages, people are picking up what they have and moving to places where they can find work so as to at least afford food and medicines. This silent majority is building Nepal and that is where our hopes for recovery lie.

Budget Woes

The Post Disaster Needs Assessment (PDNA) process has been started by the Government of Nepal, as it starts to rebuild after the quake. This will help figure out how the programs and money needed can be included in the next budget. But just as the credibility of the Prime Minister’s Disaster Relief Fund, the credibility of our budgetary process is poor. Despite doling out money to the pet projects of politicians, large amounts of money remain unspent at the end of the fiscal year. Our budgetary system and capacities were designed to spend millions and it does not have the necessary processes and capabilities to undertake the spending of billions of dollars each year. Many hours are spent in discussing the purchase of motorbikes, computers, printers, and other sundry where it is easier to find the petty interests of requisitioning departments.

How will the government redeem itself to sanction, say, a billion dollars for the restoration of heritage sites? Post the Indian Prime Minister’s first visit to Nepal, I had written about how many people, especially at the political level, were dazzled when a $1 billion credit line was announced. People could not figure out how many zeroes this meant! We are now talking about spending $8 to $10 billion each year for recovery, rebuilding, and reconstruction. How are we going to handle this?

Our procurement processes are designed not to get the best to execute the work but with enough levels of red-tape so that there are enough opportunities to interpret the fine print. Each year, as the budget is announced in July, the tendering processes, followed by complicated evaluation processes, push announcements close to March and then, you expect people to do in three months what they would have taken a year to build. The best introspection into these processes can be undertaken by asking why is it that the newly-built walls around Singha Durbar collapsed or why the new buildings inside the complex were damaged and why there are more government vehicles in the junk yard than working ones?

It is now time to not only prepare for a budget, but also explore how we can make the budgetary system more effective. The government spending system was exposed when dealing with the Turkish airliner crisis and more recently, in the aftermath of the quake. In many quarters, the bogeyman of the Commission for the Investigation of Abuse of Authority (CIAA) has kept bureaucrats from taking decisions that may invite questions. A complete makeover of the government decision-making system relating to budgeting and spending will be required.

Incentives for Investments

It is imperative that the rebuilding and reconstruction exercises not be undertaken through aid money alone. We need large investments in infrastructure, so we need to provide incentives for investments to be made by providing tax breaks on the level of investments brought in and the number of jobs created. If satellite cities are to be built, we will need firms that have the confidence to invest in the country. This also means a change in our mindset. We need to open up foreign exchange laws to make payments to international experience and not hold on to dividends of firms that have been able to make good money in Nepal.

At the same time, regulating the entire private sector is important. The majority of the homegrown Nepali private sector love to focus on arbitrage opportunities. From smaller arbitrage opportunities of obtaining building permits to trading on tarps and corrugated metal sheets, they will try to find ways of creating rent-seeking opportunities and potentially block the entry of large international firms. This area will need constant regulation.

The budget this year will move away from earlier cut-and-paste strategies to recalibrating the discourse on rebuilding Nepal. The earthquake has shaken Singha Durbar enough; hope there is intent to change!

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