Tuesday, December 20, 2011

Relevance of Nepalese PM’s Economic Advisory Council

[It was published in Republica, December 18, 2011, p.6]

Programmed to fail

When former finance secretary Rameshwore Prasad Khanal agreed to be an economic advisor to Prime Minister Baburam Bhattarai there was euphoria in one circle but disappointment among well-wishers who were skeptic of the Maoist leaders. Euphoria in the sense that amidst frustrating political turnaround and decision logjam at least someone who fathoms the importance of accelerating economic progress was attempting to give direction to the PM’s economic agenda. This was enough to rekindle hope among frustrated youth and public.

But skeptics argued that Khanal is committing a ‘career suicide’ not because they doubted his competence but because they thought his good image would be unfairly used by the UCPN (Maoist)-led government to drum up support for its political agenda. They argued that his position is basically defunct for all practical purposes and there is very little he can do.

Several people, including myself, were elated and offered help in whatever way possible because after a long time the PM had an official economic advisor and wanted to drive his economic agenda with inputs from informed experts. Importantly, people expected Khanal to convene a small team to stay focused on key economic issues, provide strictly technical advice on mitigating the impact of existing economic ills, and lay out various policy options for and consequences of the PM’s core economic goals. So far the progress on these fronts has been as elusive as the double-digit growth rate.

With the administration’s slackness in resolving labor disputes plaguing the industrial sector, forecast of high load-shedding hours, increasing trade deficit, unstable financial sector and lofty talks of high growth rate without a credible and workable plan, the optimists are already turning into skeptics. They are looking for answers as to why the PM’s and government’s economic agenda are no different than what had been trumpeted in the past. Also, if the advisory council is to repeat the already tested and redundant ideas, then what is its relevance in terms of value addition to the ongoing debate on economic transformation?

With the announcement of a huge 16-member advisory team, which consists of people from a range of backgrounds as well as those with vested interests, it’s very likely that it will veer from the intended objectives. Worse, it is likely to continue advocating the failed economic ideas and programs that did not take a critical look at our binding constraints to economic growth. Given the huge number of members and their background, the advisory council has already lost its focus. It has become no better than the jumbo cabinet, both in terms of relevance and likely effectiveness..

Khanal argues that the advisory council is modeled along the US’s National Economic Council (NEC), which advices the President of the United States on economic affairs. The NEC assists in coordinating policymaking for domestic and international economic issues, gives economic policy advice to the president, ensures that policy decisions and programs are consistent with the president´s economic goals, and monitors the implementation of the president´s economic policy agenda. Policy specialists and economic analysts work in the NEC and coordinate with different agencies of the public administration responsible for the execution of the government’s economic agenda. Unfortunately, the PM’s advisory team is not even close to the objectives of the NEC, even in its composition.

First, why would the PM need a jumbo advisory team when we already have the required agencies to offer advice on economic planning and policy execution? It would be understandable if the PM had a team with members capable of advising him on matters related to his government’s economic policy agenda and coordinating with other relevant government agencies to execute them.

This is the primary function of an advisor and the advisory council under his chairmanship. To some extent it is already being done by National Planning Commission (NPC), which advises the government on economic affairs and helps it execute them by coordinating with various bureaucracies. Also, we have Nepal Rastra Bank (NRB) to advice the government on all matters related to monetary policy. It is unclear what different role this jumbo advisory council would play and how it is going to differentiate itself from the function of NPC and NRB. The answers to these questions have not been adequately vetted.

It brings me to my second argument on the origin of the very concept of an advisory council. The skeptics who argue that Khanal was tapped by PM Bhattarai to boost his image have a point. A substantial chunk of the intellectual circle, analysts and public servants has a generally good opinion of Khanal and PM Bhattarai was very shrewd to win their sympathies by convincing Khanal to join his administration. Now, in the name of incorporating views and ensuring representation of stakeholders, the advisory team is expanded to include people from almost all fields. It would help silence criticism and cement support even if things go wrong or nothing substantial happens at all.

Notably, they have completely overlooked conflict of interest of the members. The advisory team has representatives from various sectors such as business community, NRN, aid, financial, education, energy and tourism, among others. It is beyond doubt that the well-known names in these sectors will have vested interest while advising the PM on economic affairs. They represent sensitive sectors that have a direct bearing on our budgetary, taxation and development agenda. Most of the members won’t be able to add much value to the debate on economic transformation and workable policies required for this because if they have some, then it has either already been spilled out or have come through their associations.

It cannot be ruled out that the members will use the platform to further their own personal and business agenda and influence policy to suit their needs. This will be disastrous as no new ideas will come out of this advising exercise and few would gain at the expense of many. Consequently, the planned monthly meeting might be no better than the multiple ‘focus group discussions’, which hardly are focused on core topic, and are held pretty much every week in major cities around the country. At the end of the day, neither will there be any new actionable ideas coming out of the meetings nor will adding more members germinate new ideas out of the blue.

To save whatever integrity they have let us hear from them, or via the PM's team, what credible plan they have to lower high food prices, solve energy crisis, abolish regulatory hurdles for businesses, tackle labor disputes, stabilize financial market, increase competitiveness of our exports, and solve impending petroleum shortage and its impact on inflation. The country needs short term solution to these problems as well as long term plans to avert economic hardships engendered by these. Importantly, to stay relevant the team should concentrate on advising the PM on furthering his core economic goals, coordinate with relevant administrations to execute them, sell effectively the PM's economic vision to the public, and not encroach upon the function of NPC and NRB.

Else, the meeting of the jumbo advisory team, which could still be expanded if the PM wants, would be like a jamboree where there will be loud and lofty talks, no germination of new ideas, mundane discussion based on perfunctory analysis, and collection of allowance from the state coffers. Eventually, it will be looking for the relevance of its own existence. Good luck!

[Published in Republica, December 19, 2011, p.6]