July 21, 2015 Sujeev Shakya

Art of Spending

In 2006, after the Jana Aandolan II, fear gripped the Nepali business community as they wondered whether the Maoist ideology of state-owned and driven economy would be the future strategy for Nepal. People were worried about fundamental issues such as: Can I own land? How much land can I own? Can I own businesses? Can the government nationalise private property? At that time, the World Bank brought Professor Ashraf Ghani (now President of Afghanistan) to share his experience on state building and to help key political leaders and the utopia-driven segment of civil society groups. He recommended market building as one of the key areas which would help rebuild Nepal. At that time, Nepal had just emerged from a ten-year conflict which had its shattered economic growth and the socio-cultural fabric.

No to Socialism

Perhaps, we need to turn back the clock and learn from those leaders who agreed not to make the Interim Constitution a ‘dated-socialist’ propagating tool, and instead chose to focus on the needs of the market, enterprise and entrepreneurs as one of the key pillars for Nepal’s growth and development.

It seems as though we again need to educate  the lawmakers and politicians that in the past two and a half decades, no country has been able to take strides in economic growth and welfare by pushing for socialism. If we take into account the top 15 economies with the highest growth as per the World Economic Forum, it is led by Ethiopia and more than half of the remaining countries are also from Africa. With countries like Cuba and Iran shedding their old baggage to integrate into the global economy, it is surprising that Nepal is moving towards giving North Korea a company.

Budget Blues

The annual budget festival is now over. The ribbon-encased briefcase has been shown around like the vest of Machhindranath, followed by a long speech and a spate of comments and programmes which the media is interested in. However two weeks later, economic issues take a back seat and the fundamental issues that plague our budgetary system remain unaddressed.

First, budgetary controls are not a part of the day-to-day life of Nepalis. How many of us actually create annual budgets for our organisations or ourselves and actually follow it sincerely? We live in a society where a person goes to buy a car worth Rs 2.4 million but ends up purchasing a car worth Rs 4 million instead due to lack of knowledge on how to balance one’s finances. This is true in every aspect of our lives. Ask any consumer in large stores whether they have a budget for spending today or not. Most consumers are likely to give a no for an answer. Therefore, the challenge is to transform a country in which individuals, families, communities or organisations do not believe in the process of budgetary control into a country that runs on a budget efficiently.

Second, our budgets have swelled dramatically over the past 25 years. Currently, our revenue stand at $4.5 billion which is not a result of economic activities but the sheer growth in consumption due to changes in lifestyle, urbanisation and remittances that encourage spending. The government does not have to do much to obtain these revenues as it seeks rent from 28 million people who are left to their own devices to make their lives better. Therefore, there is no intention to make the budgetary process robust, accountable and growth-oriented or join them with long-term plans. While the revenues are guaranteed, any lobbying for tax changes and other provisions  allegedly becomes windfall profits for individuals who have made this process a money-spinner. A complete change of mindset is, therefore, required, to make budgets work.

Third, people who cannot even plan to efficiently spend their own $500 have been saddled with spending millions of dollars in their departments, ministries or other offices. Therefore, the capacity to spend becomes a critical issue. The procurement rules are outdated and are designed more to allow leakages than to ensure the execution of the projects. While decades of consultation fees have been spent on studies on better procurement policies, little progress has been made. The fact that multilateral and bilateral agencies still want to provide money despite the archaic procurement policies speaks volumes about their commitment in achieving reforms in Nepal.

Panchayat Hangover

The transition in 1990 and in 2008, from different monarchies to democracy, has not brought any change in our society. The hunt for privilege is always on and only political powers can guarantee the biggest set of privileges; be it security vehicles, the red beacon light, the usage of VIP culture or other different benefits to demonstrate that one is different than the rest. These same people are in the Constituent Assembly or  occupy privileged positions in the government are now responsible for the new constitution. For their future survival, maintaining their privileges is crucial and consequently discrimination is paramount. This discrimination could be towards certain ethnic groups, gender or an economic class. So, for Nepal to achieve economic growth, it is important to do away with discrimination and to level the playing field for every citizen. Until this happens it will be difficult to achieve the change for which we have waited for 25 long years, and lost thousands of lives and billions of dollars.

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