On wrong track

First published in Republica Daily

Nepal-China-India
Last January, the Department of Industry (DoI) released updated statistics showing that China had overtaken India to become the largest contributor of foreign direct investment (FDI) to Nepal over the previous six months. Does this increased FDI inflow from China mean anything at all, or is it just another statistic? Is it time for Nepal to rethink its economic and political ties with its two giant neighbors?
Yes, we believe this is the right time.
It is naïve to believe that China and India are interested in a prosperous and stable Nepal. The only thing they care about is their interests, whether security-related or geostrategic. The idea of being a ‘vibrant bridge’ between the two rising economies seems a distant fantasy, since Nepal can neither bring them to a common table, nor are they interested in any such mechanism.
Traditionally, compared to China, Nepal has been much closer to India. But Nepal needs to revisit at least the last few decades and evaluate what it gained by being closer to India. Nothing!
If Nepal wants to speed up its economic development by attracting FDI from both China and India, first it has to maintain ‘equi-proximity’ with the two neighbors. Nepal needs to work on scientific management of its border with India, and India needs to support Nepal in the same since border issues have been a major problem for both the countries.
The establishments of China and India are not very interested in dealing with Nepal and acknowledging it as a partner in development. Rather, both of them are inclined to deal with Nepal through their intelligence agencies and bureaucracy. Nepal has to understand this and be firm in dealing with its neighbor with clarity and respect. This is also the reason Nepal should maintain an organized border with India.
It can be argued that Nepal has gained a lot from the open border, but it has also lost a lot. In bilateral talks, Indian officials use issues of illegal re-export of beetle nuts and Chinese umbrella to Indian market to bully Nepali government officials. It is reported that Nepali businessmen import lentils from India and re-export to Bangladesh. Officials at Indian Embassy in Kathmandu try to humiliate Nepali officials for letting businessmen carry out these illegal imports, but do not take action against Indian businessmen who export those lentils illegally in the first place.
The South Block does not hesitate to deploy officials in its Kathmandu embassy to deal with journalists, opinion makers, and of course, businessmen and political cadres. Officials at the Indian Embassy allegedly distribute money from their drawers. But their beneficiaries would rather cover their eyes than admit this dirty truth.
Coming to China, it does not seem interested in dealing with Nepal as a special case and as a neighbor. Rather, it puts Nepal in the basket of ‘least developed countries’ along with many African countries. A good example is China’s decision to provide zero-tariff facility to 7,787 goods and services from all LDCs. China does not give any special treatment to Nepali goods and services—in which Nepal has comparative advantage—that it does not give to other LDCs. China is more interested in African countries to counter the West and prove its rising economic and political power in world politics.
In September 2013, Prof Wang Jisi from Peking University gave a talk in Beijing, China’s dilemma: marching West, thinking East. He mentioned India and other neighboring countries like Burma several times as he talked about China’s development, its foreign policy and neighbors, but there was no mention of Nepal. When asked about his views on Nepal, he briefly stated that Nepal is important to China because of Tibet. This shows that China and Chinese scholars are not much interested in Nepal.
Nepal neither has military strength to compete with its neighbors, nor the ability to deploy intelligence officials in Beijing, Delhi or border areas. Being a poor country between two giants, it has let itself be used by its ‘friendly neighbors’. Sometimes, they seem gentle and sometimes anything but..
Political parties should understand that the country’s future relies largely on their policies. They are the ones who should steer the country’s economy and politics.
The China-Nepal-India trilateral cooperation proposed by Nepal in 2010 has been taken very lightly in both Beijing and Delhi. That means neither country is ready to sit down with Nepal again. China and India are emerging giants in world politics. The two compete in many areas, from trade to military strength. Nepal should understand there is no space for it in the same table. It should not take any kind of action to please the southern neighbor at the cost of alienating the northern neighbor, or vice-versa.
Nepal should understand that having a scientifically organized border with India and allowing Chinese investors into Nepal without the fear of India is the only way of filling the infrastructure gaps. If Nepal allows India to build a 1,450 km highway in Tarai with its own contractors, then why not let China build a railway network in northern Nepal?
This does not mean Nepal should allow its land to be used by either power as they want. But if it wants to maintain equidistance with its neighbors, it should be more organized in dealing with India. The long relationship with India didn’t help us develop, but rather made Nepal more vulnerable, both politically and economically. Now it is time to be more professional and diplomatic with both neighbors and focus on building the country’s economy.
Poudel is a graduate student at Tsinghua University and Sapkota is a PHD candidate at Renmin University in Beijing

Between the lines

First published in Republica Daily

Privatization in NepalIn the midst of the Great Depression of the 1930s, John Maynard Keynes wrote in his magnum opus The General Theory, “I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas…. Soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”
I am taking this reference from Keynes to explore some recent arguments from intellectuals on Dr Govinda KC’s recent fast to ‘purify’ health and education sector, and subsequent attacks on the privatization drive post-1990. I want to clarify that I am not against KC’s admirable steps for the sake of the country’s poor people, who cannot afford quality health service at private clinics.
The debate begun by KC’s fast is not just limited to health and education sectors now. It has touched a wide range of issues, from the country’s post-1990 privatization drive to the difficult political philosophical question of whether political parties are shopkeepers. I take Yubaraj Ghimire’s “Should political parties be running profit making ‘institutions’?” from Setopati and Mahabir Paudyal’s “Alarming signs,” (Republica, Jan 30) to build arguments.
Both the articles give enough reasons for a strong government mechanism that can ensure quality health services to people. Yes, the government should provide quality health services to people, mostly to the needy. The argument goes that the health sector is going to be polluted by corruption and politics. True, but these are the results of vested interests, and they do not hold much meaning in the long run. But the dangerous thing is denouncing the whole privatization drive that was started in 1990 and attacking political parties with the provocative question of whether they should run profit making institutions. The latter question demands careful and honest debate in society. We have to be clear that political parties are the result of our civil society, media and entire composition of people.
Yes, political parties are shopkeepers, and even the nation-state is a collective force of many shopkeepers. If we go back to the history of human civilization in the 17th and 18th centuries, progress has been made by small and large shopkeepers. Slowly states started to do what shopkeepers used to do, from providing health services to selling fuel. And most of them are inefficient; we have enough examples of that.
On the one hand, shopkeepers are not as bad as Ghimire connotes in his piece. On the other hand, political parties are not interested in keeping a distance from state-owned agencies, in a country where a Finance Minister’s success is measured by his ability to raise higher amount of revenue. Our dual nature of demanding everything from the government and asking political parties to stay away from appointments does not work. Of course, political parties will play important roles in all sectors if you ask for everything from the government! Public’s lack of faith in the private sector gives enough space to political parties to get involved in businesses. Either we have to be careful about the government’s size and believe in the private sector, or let government and political parties do their business. There should be a balanced approach—that’s what Keynes suggests. The government should have the ability to monitor the private sector, but the private sector should be running business as usual.
The attack on people with vested interests should not dismiss ideas that largely drive the society and leave a long-lasting effect on the social, economic and political framework of the society. Dr KC’s fast and aftermath happened under a government led by the country’s Chief Justice Khil Raj Regmi. This is the result of the shameful act of having the same person head two institutions—judiciary and executive. This is just one result of our collective failure to stop that from happening. The Regmi-government was formed in the name of conducting the Constituent Assembly II election. But that was ‘rape’ of the beauty of democracy—the separation of powers. We will have to pay much more for this horrendous act. Political parties are not the only ones responsible for that action. History will hold each of us responsible. This gross sin will not go unstudied in the coming generations.
Regmi is a self-centered person with vested interests, who could not even give up one position for the sake of purity of democracy. And definitely he is not uncomfortable in letting the ‘vested interest groups’ flourish. That’s what forced KC to sit for a fast-onto-death.
Regmis will come and go, but intellectuals and philosophers in economic, social and political fields should be careful about protecting the ideas that we believe in.
The arguments from Paudyal in “Alarming signs” do not come from careful research. “Government health institutes and education establishments used to command respect until 1990,” he writes. This statement has come in a daily run by a fortune made in the country in post-1990 open society. The post-1990 privatization drive has definitely created a level of inequality in society, and it certainly has some vices. But we have to look at how much we have been able to achieve since then.
Public services are free to the people, but often unavailable to those who work hard to earn it. State-owned service providers are nothing more than brokers in the stock market. They spend one person’s money on another. If we think that privately run firms are making unnecessary profit, then we have to ask government to take actions against it, or civil society should stand up against it, as KC did.
Ideally, we look for better services at relatively low price from the government. At the same time, we should not forget that our society is hesitant to pay tax, let alone pay on time. And, even if we pay our tax on time, it might not be spent on any of the areas that we would like. As I am referring to Keynes and his words to explore the effects of vested interests and ideas in society, I definitely believe in some sort of government intervention. But denouncing the entire privatization process and its result just to get rid of people with vested interests in some sectors is short-sighted. The whole debate has been possible in privately run media outlets, which is the fruit of privatization drive. We should not forget that!
Of course, KC is a man of principles and high moral integrity. But he never denounced the private sector. The government officials involved in the monitoring of the sector might be corrupt, but that should be dealt with separately, not lumped with privatization.
Lastly, political parties definitely should not be running profit making institutions, but they always work with rigorous analysis of gain and loss. No matter how you define it, human history is the result of calculation of gain and loss. Our political parties will definitely turn all state-owned institutions into profit making institutions if we let ideas be killed in the name of controlling interest groups.

Path to prosperity

First published in Republica Daily

“I have never been to Nepal, but the first thing that comes to my mind when I think of Nepal is tourism. I want to visit there one day,” one of my German friends said over dinner as we talked about Nepali economy. He further added that he assumed tourism sector made significant contribution to Nepal’s gross domestic product (GDP). In reality, tourism contributed a mere 1.8 percent to our economy in 2012/13. But my friend’s assumption is not wrong, as our government has acknowledged that tourism sector might help us maintain a healthy balance of payment (BoP).
Tourism’s paltry contribution to GDP indicates we have failed to tap the resources we have. The tourism sector—which neither demands large-scale investment nor requires significant policy reforms—can lead us out of underdevelopment. This sector can create job opportunities for all sorts of people—skilled and unskilled, educated and uneducated. Already, more than 160,000 people are employed in this sector in Nepal.
As our conversation progressed, we started talking about how, historically, no country has become rich without a foundation of industrialization. Nepal is not going to have an industrial revolution in the near future that will help it break the vicious cycle of underdevelopment. And even if it does, it cannot penetrate big markets in the world. Constraints like difficult geography and weak competitive edge will severely limit it. The services sector, especially tourism sector, is our only hope for prosperity.
Nepal can neither invest big to increase economic growth, nor does it have a competitive advantage in manufacturing sector. Our agricultural sector is still at subsistence level, remittance is not being utilized productively, and manufacturing is under pressure from long power cuts and trade unionism. In this scenario, focusing on the tourism might give it the impetus to economic development.
Additionally, the most beautiful part of focusing on tourism sector is that it gives us the incentive to preserve our culture, natural resources and customs. We can become an exemplar country by attaining economic growth without ruining the environment and natural resources.
In a recent report, Nepal Rastra Bank (NRB) stated that the country can accommodate around 7.44 million tourists annually. The report, based on field study, also highlights how Nepal’s failure on tourism promotion impacts tourist inflow. This was reflected in tourism’s decreased contribution to GDP: 2.8 percent in 2008/09 to 1.8 percent five years down the line.
We have had different programs in the past to promote tourism, but we could not achieve as much we wanted. Tourism’s contribution to GDP never reached higher than 2.8 percent. Given our comparative advantage in the sector, we could achieve much more. The economies of China and India are growing, and the emerging middle class of these countries are looking for short and reasonably priced holiday destinations. We could attract many of them.
We don’t have to build star hotels or construct multilane highways or invest billions to attract tourists. We already have many things tourists like. What we have to do is coordinate among ourselves, come up with different packages, and advertise them around the world. People make decisions based on the information they have at hand or receive easily. So we need to make our country’s name familiar across countries.
We need not focus too much on high-end tourists, though they are important. We can be a destination for tourists who seek places that are natural, calm and spiritual. Many such tourists are backpackers. If they venture into hidden nooks and crannies of the country, that will create jobs at the local level.
There are certain things, however, that we need to do to make tourism sector more productive. The first is to improve the quality of our international airport and create a smooth transportation system. We have to stop frequent bandas and our habit of making too much political noise, which spreads fear among potential tourists. If the government could ensure this, there are many local entrepreneurs who would be happy to serve tourists who come for short vacations.
The United Nations believes that sustainable tourism can contribute to achieving Millennium Development Goals (MDGs) in least developed countries. The tourism package program called KONSO Project in Ethiopia is an example of how this sector can help create small scale jobs and reduce poverty. The project was launched by World Tourism Organization (UNWTO) in 2007 in response to a request from the Ethiopian Ministry of Culture and Tourism. It was supported by other development agencies in Konso district in Ethiopia. Following the example of this successful project, we too can urge different agencies working in Nepal to help launch different programs to accelerate the development of tourism sector.
Our expenditure in the tourism sector is limited to 2.4 percent in 2012/13, which we can increase in coming years. Increased focus on tourism might encourage entrepreneurship among the youth who leave for the Middle East in search of jobs.
“Achievement from tourism sector could not be made as expected despite abundant potential of this sector, as it could not be developed to its maximum,” reads the economic survey of 2012/13. Development and marketing of touristic commodities and services is our challenge. Let’s overcome it.

Public eyes needed

First published in Republica Daily

Civil society and economy
It is believed that a society is largely driven by its political framework. But the history of human development hints at something different. It is often the economic status of a country that gives it a stable political framework.
Historically, Nepal’s civil society has been concerned, perhaps too much, about politics and political institutions. Its role in guarding politics and political institutions has been impressive throughout history. During every major political change, civil society has perhaps been more important than political actors themselves. But we never had a strong civil component to watch over economic institutions.
Theoretically, civil society need not be involved in the economic sphere at all, as all individuals are rational beings and can make decisions for their own betterment. But that need not be the case. Our government’s expenditure is large, and not transparent. To make government aware of its inefficiencies, we need a civil society focused on economic activities.
The civil society’s role is not limited to overseeing the management of tax money. It should also speak out against corporate giants. The recent attempts to bring Monsanto into the country, and Rajya Laxmi Golchha’s entry into the Constitution Assembly are extreme cases that call for a strong civil society on the economic front. Economic development is a collective effort of the private and public sector; the problem is that our private sector has become rather irresponsible.
Economic development is not a single incident. Prosperity is the result of many small and large scale activities and sound economic policies. But at the bottom of all these things, there should be an honest private sector and functional public sector.
The opening up of the economy in 1990 brought significant changes to people’s lives, but they were not enough to improve daily lives of people. The private sector in other countries has been able to create jobs and increase production even when the political situation is not favorable. Bangladesh is an example. In our case, private sector is always demanding one thing or the other. The umbrella organizations of the private sector, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Confederation of Nepalese Industry (CNI), both are inactive.
In our country, economic development is not synchronized with social and political development. Our social and political awareness are way ahead of our economic awareness. In theory, no economist, policymaker or businessperson would agree to have a civil society that is a hindrance to economic activities of the private sector. But in practice, it has been a necessity in a country where there are far more traders than real entrepreneurs, and there is a vast difference between the two. Making profit is neither bad nor dishonest, but it should be fairly gained and socially responsible.
Francis Fukuyama writes that economic activity represents a crucial part of social life and is knit together by a wide variety of norms, rules, moral obligations and other habits that together shape society. The idea of a civil society that looks after economic activities is to build a society where trust prevails.
The question here is whether media can be that civil society that safeguards the ethics of the economy, as it does in politics and governance. No media seems ready to speak against private sector ‘mafias’. Government and political dictators have repeatedly failed to manipulate the media. But corporate interest groups, unlike the government, can easily make a media house blind to their wrongdoings, and thus prevent them from being honest watchdogs of society.
The need for a civil society that carefully watches over economic and development activities that have a significant impact on people’s lives has been felt in many instances, including in Upper Trishuli 3A and the development of Melamchi Drinking Water Project. But we hardly get news of such activities because the media is run, directly or indirectly, by corporate giants that are involved in these activities. Most journalists have had their journalistic freedom compromised while covering issues related to private sector’s mischief.
The media should be able to play the role of civil society in any area. Journalism’s roots come from gossip-mongers. Historian Yuval Noah Harari from Hebrew University in Jerusalem writes, “Gossip usually focuses on wrongdoings. Rumor-mongers are the original fourth estate.” This historical background of journalism should enable it to warn society about cheats and freeloaders in the private sector. But it has failed to do so in many cases.
A strong civil society in the economic sphere has become necessary as the country’s political situation seems more and more uncertain. Therefore, it is time to call for an effective civil society that monitors the economy. We need an independent civil society that works to make economic institutions accountable and urges public offices to perform better.