Sunday, May 27, 2018

Book Review: Arthat Arthatantra (अर्थात् अर्थतन्त्र)

It was published in The Kathmandu Post, 26 May 2018

Arthat Arthatantra underscores a need for an ergonomic realignment as well as for change in the economic development mindset

Economics and business books written in Nepali language for general audience are pretty rare. Sujeev Shakya—author of Unleashing Nepal, published in 2009 by Penguin Books India (revised edition in 2013)—has attempted to fill that void with his new book titled Arthat Arthatantra-Nepali Illam ra Udhyamko Yatra, published by nepa~laya. It is largely based on his English book but some updates contextualise political and socio-economic developments since 2009, offering fresh perspectives that interestingly depart from well-worn narratives.

Shakya wants readers to wear an optimistic lens when it comes to assessing economic prospects. Sometimes labelled as a Chief Eternal Optimist (CEO) for his witty newspaper articles and workshop presentations, Shakya has a particular distaste for consultants and narratives that project Nepal as one of the poorest countries inflicted with a third world economic malaise. Instead, he prods the readers to think big: Nepal is not small as it is the 94th biggest country geographically, 43rd biggest by population, and has a US$25 billion economy that has started to clock in economic growth rates of over 5%. That said, readers are reminded of six major interrelated issues that define our political economy: land ownership intertwined with political and economic power; symbiotic relationship between government agencies and non-governmental organisations; protectionist mentality; rent-seeking behaviour; perception that outsiders have forced a development strategy upon us; and large-scale out-migration for jobs. Historical and contemporary political and economic developments can be constructed around these six issues.

The book focuses on three main aspects of the Nepali economy. First, in a historical background to the current economic trends and our consumption habit, the author lays out a simple narrative of rent-seeking behaviour among politicians and the business community, which thrive on oligopolistic market that restricts competition and uses political and economic influence to protect the market share. This has been the trend since the unification of Nepal by Prithivi Narayan Shah (around the same time Adam Smith published The Wealth of Nations, in which he explained market dynamics dictated by an invisible hand). Our status as a ‘rentier state’, elitism, nationalism and outmigration for work due to sluggish economic activities have been defining features since the country’s conception.

The second section focuses on political and economic development after the people’s movement in 1990, an era characterised by an armed conflict and massive out-migration for work. That was also a time when the economy started to shift from being state-led to market-led, the credit for which goes to the then Nepali Congress-led government. There was a compulsion to liberalise the economy and divest the state’s share on lossmaking public enterprises due to economic troubles in India—which itself was liberalising and to whose currency the Nepali rupee was pegged to—and large fiscal and external sector imbalances.

This increased private sector investment in industrial and services sectors, and technology transfer facilitated communication within and outside of Nepal.  Unfortunately, this was also the time when botched management of the liberalisation process, and intra and inter party wrangling for leadership led to the emergence of stronger middlemen, an armed conflict, party-affiliated trade unions, derailing of Arun III, corruption, strikes, syndicates, remittance-dependent economy, and an erosion of the state’s capacity to implement reforms for greater public good. The development sector sprang into action reinventing the wheels of reform and development agenda, churned reports that supported their existence and often operated without much financial and government oversight. Consultancy and I/NGO jobs became the most sought after career path for new graduates. The government too relied heavily on foreign aid to finance its expenditure commitments, resulting in aid dependency. Meanwhile, the private sector survived on political patronage and the capture of sectoral business opportunities. One of its interesting outcome is the transformation of some Brahmins into ‘business tycoons’, which traditionally were from Newar and Marwari communities.

The most interesting part is in the third section, where Shakya cautions the government and public to rectify mistakes made in the past and lay the groundwork for youths to reinvigorate the economy. He underscores a need for an ergonmic realignment as well as for fundamental change in the economic development mindset if the vision of being a middle-income country and to achieve Sustainable Development Goals by 2030 is to be attained. Increasing investment and generating, as well as sharing, prosperity is essential in order to change the structure of the economy where market forces dictate demand and supply dynamics, and the government facilitates the process as well as implements targeted social protection programmes. The private sector needs to enhance efficiency, practice good corporate governance, and deliver services in an innovative way. Shakya outlines general investment reform measures in six key areas (although non-distinct), namely land, tax, capital market, financial sector, labour relations, and general economic reforms. Meanwhile, he sees opportunities in agriculture, hydropower, tourism, services, education, ICT, infrastructure development and financing, and pooling remittances for investment in productive sectors.

Readers looking for a good narrative of historical and contemporary economic and development trends and future prospects will enjoy the book. However, those looking for analytical data and causal arguments for the myriad of issues and developments over the last five decades may find themselves a bit disappointed. However, they should also keep in mind that this book is for general readers and the insights come from the author’s 30-year career in domestic and international private sector and development assignments. Some historical and economic assertions are just observations coming from the author’s decades-long experience and may sound speculative because of the lack of substantive evidence.
The book doesn’t offer a detailed diagnostics of the problem and solutions to the most pressing macroeconomic and development issues currently faced by the economy. Nor does it include much statistics, figures and causal relationships. Instead, it weaves a lucid narrative, in Nepali language, of individual, business and government’s contemporary traits and links them to our history. In that respect, the book is a pleasure reading, where the author also encourages readers to be cautiously upbeat about future prospects.