Thursday, October 18, 2012

Comments on Immediate Governance and Economic Action Plan 2012

On 16 October 2012, the BRB government unveiled Immediate Governance and Economic Action Plan 2012, which has 201 reform activities in 15 different fields. Earlier, BRB government also introduced Immediate Action Plan on Economic Development and Prosperity 2012 and Immediate Relief Program 2011. It also introduced a good governance action plan.

The major points from the latest ambitious action plan are as below:

Economic progress and prosperity
  • Get eight aircrafts (two for international and six for domestic) for Nepal Airlines within six months. Fire employees who fail to ascertain procurement process initiation within a month.
  • Operate an appropriate manufacturing activity/industry inside the defunct Janakpur Cigarette Factory within six months.
  • Invite private sector to construct an exhibition and convention center in the premises of the defunct Himal Cement Factory within three years.
  • Lease Birgunj Sugar Factory to either cooperatives or private sector within 18 months.
  • Revive Hetauda Clothing Factory and mandatorily use its products by government agencies that get clothing allowance within a year.
  • Revive the sick industries within a year.
  • 24 hour security in major trade routes and industrial corridors to be enacted immediately.
  • Dedicated Security Force to firms employing more than 500 employees within a month.
  • Operate Nepal Orient Magnesite Factory under PPP model within six months.
  • Open track of Kathmandu-Terai and mid-hill postal road within a year.
  • Start construction of regional airports to be built in Bhairawaha and Pokhara within six months.
  • Prepare DPR of Budhi Gandaki hydropower and West Seti hydropower projects within two and a half years.
  • Start civil works of Tamakoshi hydropower project within two years.
  • Seal agreement with a new constructor for Melamchi Water Supply Project within six months.
  • Construct at least 25 kms of canal in Sikta irrigation project within a year.
  • Disburse Rs 3 billion under Youth Self-Employment Program to 15000 youths within six months.
  • Establish think-tanks related to security, foreign affairs and strategic affairs within six months. Similarly, establish economic and social issues related think tank within six months.
  • Prime Minister National Award to investors investing more than Rs 2 billion (to be implemented within three months)
  • Organize high level economic summit within six months.
  • New Nepal Development Fund to be established within six months by collecting at least one day of income from Nepali and NRNs.
  • Publicize 50 bankable projects by Investment Board within six months.
  • Provide at least 100 days of employment within a year to those having poverty identification card.
  • Increase number of public servants in PM’s Advisory Council within six months.
Corruption control and transparency
  • Facilitate corruption related complaints, salary to be indexed to NRB’s data on inflation rate; random sampling of at least 3 percent houses in urban areas to check compliance with building codes and standards; plug leakages by at least 25 percent in supply of electricity, water supply and petroleum products; one door policy to all money coming via NGOs and INGOs and make mandatory for all to make public their accounts and activities
Transport management
  • Terminate driving license if caught five times for drunk driving; no passengers on the top of vehicles; parking space management in Kathmandu valley; passenger pick up and drop off only at designated bus stops; operate Sajha buses in Kathmandu valley and other major cities
Supply of essential items
  • Import 200,000 MT of fertilizers for this year; discounted price shops to be established during festival season; stop illegal collection of duties along highways; at least 25 percent veggie supplies in Kathmandu valley to come from cooperatives; market monitoring
Power sector
  • Include supply of petroleum products in emergency items; plant twice the number of trees for each tree cut until 5000 MW of electricity is produced; construct at least six transmission lines to connect at least 30MW additional electricity to the grid; import 200MW of electricity; operate multi fuel plants in Duhabi and Hetauda; limit load-shedding to 12 hours in dry season


On an optimistic note, let us hope that the government will be able to fulfill at least 50 percent of the promises made in its latest action plan. That much should suffice given the difficult political transition and weak economic fundamentals.

It is a ambitious, long list of work and set action plan. The problem is that similar plans have already being unveiled by the same government and there has been no systematic evaluation of the achievement of targets. At the outset, the core issues here should be: (i) Why do we need a new plan with lofty targets and aims, which have in one way or the other been the main topics in pretty much all of the earlier short, medium, long and ad hoc plans and programs?; (ii) What new does this plan offer other than seemingly unattainable hope?; (iii) Can the nature of this government (caretaker) bring to fruition the plans within the stipulated deadline?; (iv) Given the history of non-implementation of similar plans and programs with the same kind of bureaucracy and political culture, are these realistic?

First, if growth and prosperity are the two main concerns then we already know what is required to kick-start the growth engine in the first place. It will be hard to bring in new investments in sectors other than hot potato ones (infrastructure—mainly energy and transport—and some services sector) right now. The ones that is most important in terms of attaining decent growth rate and creating employment opportunities are manufacturing and agro-processing sectors, which are beset by lack of adequate supply of electricity, labor problems, lack of innovation, uncompetitive production structure, inconsistent policies, corruption and lack of finance among others. Simply solve these by using the already available policy tools and implementing the already introduced policies. Keep it simple. Keep it real.

Second, difficult labor relations are eating up whatever investors’ confidence there was after 2006. We need a solid understanding and setting up of parameters for labor unions to operate both in public and private sectors. Several firms, both domestic and foreign, have closed down due to labor disputes. Labor unions are way too politically motivated and less concerned about actual welfare of workers. It is not inappropriate to have a policy that anchors pay and benefit hikes to productivity. Furthermore, the distortions created by middlemen in veggie and fruit markets are not touched upon.

Third, what good it is to revive the defunct state-owned enterprises and sick industries? Without the solution to the issues mentioned above, reviving defunct firms will serve no purpose other than employing party faithful and draining state’s coffers filled with taxpayer’s hard-earned money and loan from development partners.

Fourth, getting aircrafts for Nepal Airlines will not solve the core problems, which lie in the excessive politicization of the once healthy institution. Keep politics out of Nepal Airlines, rightsize and downsize redundant staff, and give it plans, things will get better. No master plan is needed at least in the initial phase. Is six months timeframe realistic given that even with more than six years of talks and planning, Nepal Airlines has not seen its fleet of airplanes increased.

Fifth, preparing DPR of hydro projects and expediting works are commendable. Hopefully, these will be done within the given timeframe and without much opposition from one or the other political parties in the name of sovereignty! Playing by the international rules, let investments come in, especially in infrastructure and manufacturing sectors, regardless of the source country.

Sixth, the commitment to expedite the process to again kick-start Melamchi related works and establishing think-tanks is also commendable. The only worry with the latter one is that it should not be a parking space for retired bureaucrats, should be demand-driven and independent, strictly focused on policy analysis and advisory services, free of political interference, and staffed with competent people that can be retained as and when required. Also, why need a foreign affairs think-tank when Nepal already has Institute for Foreign Affairs to do the job (at least in principal)?

Seventh, there should be a rigorous evaluation of Youth Self-Employment Fund (YSEF) as reports of mismanagement of funds and doling out money to party faithful are coming out in a regular basis.

Eighth, most of the plans and programs included in this list are the ones that have either already being featured in previous plans by the same government or were in pipeline to be included in budget. Also, are the deadlines realistic given the political constraints, particularly legislative constraint?

Ninth, and the most important of all, is finance. Where will the money come from to implement these plans and programs? Even if a full budget is unveiled, it is impossible to incorporate all of these in the two-third budget and garner political support/consensus. Granted, some of the works don’t need to wait for budget, but then given the quality of executing and implementing agencies, it is quite unbelievable to expect that the set targets will be achieved in time.

With adequate financing, political and bureaucratic consensus and will, cooperation from development partners, responsive public and private sectors apparatus, and the guts to meticulously and painstakingly follow up on the targets and compliance by executing and implementing agencies, the hope is that some of them will be achieved. Even 50 percent achievement of the targets would suffice for now.