Friday, August 26, 2011

The US Ambassador to Nepal reads Nepali economy better than our own policymakers and analysts

The US Ambassador to Nepal, Scott H Delisi, delivered a speech yesterday in Kathmandu. I did not attend the program but did go through his speech. He strikes at the heart of our (read political leaders and wonks) inability to connect economic prosperity with politics. We don’t have economic discourse as we should to create a “New Nepal”, which is still illusionary among most of the people. Very few analysts have raised the pertinent and pressing economic issues as bluntly and as precisely needed (self-advertisement: yours truly have tried to do that in many op-ed columns, research, events and blog posts!). 

Below are excerpts from Ambassador Delisi’s speech:

[…] During my sixteen months here, I have been continually surprised how little public debate and discussion there is about Nepal’s economic challenges.  I have met with dozens of senior political leaders during my time in Nepal – from prime ministers to local party cadres – and invariably the discussion focuses on the peace process, the constitution, and, more often than not, their party's plans to retain or gain control of the levers of political power.

[…]my surprise, and at times dismay, that so many of those who aspire to lead the nation appear to have not devoted the same degree of attention to  the nation’s development strategy, the strengthening of the economy, and the creation of jobs, as they have to their political agenda. 

[…] I certainly believe that these issues give rise to fundamental definitional issues for the "new" Nepal.   What protections will you give to private property? How will you manage land reform?  What are the agricultural policies that can lead to food security?  How do you balance cooperatives and private enterprise?  How do you create jobs for the future?  How long can you sustain an economy built largely on customs revenue and exporting your youth to labor abroad? 

[…] I described these issues as "definitional" and I think they are.  When I ask young men and women here what it means to be a Nepali in the "new Nepal" they struggle to answer.   I think part of the reason is that these, and other issues related to fundamental values about governance and the purposes to which power should be put, have not yet been clearly articulated.  

At the same time, Nepal’s own business houses are focused only on short-term profits.  Many seek to avoid paying taxes and maneuver to sneak their money out of the country.  Young entrepreneurs who want to start businesses must deal with rent-seeking behavior from government officers who are supposed to help them.  Many State-owned enterprises -- which often are staffed through political favoritism rather than as a result of merit – are badly managed, draining resources from state coffers while failing to provide services.

[…] I was very disheartened to learn that Surya Nepal, one of the few companies that remain competitive in Nepal’s readymade garment sector, has closed down its operations due to labor problems. More than 2,000 people – mainly women –employed directly or indirectly through Surya's operation, have lost their jobs.  In my opinion, the closure was a setback for the country’s economic development and diminishes our efforts to convince foreign investors that Nepal is open for business. In a globalized world where countries have to compete for foreign investment and the success of a business depends on timely delivery of goods and services, labor disputes that hold companies' operations hostage for months inevitably lead to such unfortunate consequences.

Equally troubling, some political leaders seem to view businesses as sources of funding for their parties – or even worse – as targets to be exploited for their personal gain.  The private sector accepts the status quo as the price of doing business in Nepal.  Both the exploitation and the acquiescence undermine Nepal’s long-term economic prospects and ultimately democracy.

[…] Remittances may currently be the lifeblood of Nepal's economy but those who suggest that remittances are positive for Nepal in the long run fundamentally misunderstand economic realities. Like an addictive drug that feels good today but causes devastation in the long run, remittances provide a short term boost to the economy but only forestall the need to make tough economic choices – which are even harder to accommodate the longer government waits.  In Nepal today, remittance flows are fueling increased consumption but by all indicators, are not being channeled into productive investment.  Meanwhile, Nepal’s competitiveness and productivity continue to decline over the long term.

He believes that prospects for a prosperous Nepal are not that gloomy. Sectoral opportunities exist if we have the will to exploit them. Some of the sectors identified by Ambassador Delisi are IT outsourcing, tourism, hydropower, reforming SOEs, and agriculture.

An excellent rundown of some of the economic challenges (precisely the process—socio-political-economic— of what hinders exploiting our potential) by Ambassador Delisi. I just wish that our political and industrial leaders and those at the top echelon of policymaking at least articulately state what the ambassador has said. These are well-known stuff, but people are failing to articulate and have debate over them.

For more on some of the issues, do check out my articles listed below: