Book Review: Arthat Arthatantra (अर्थात् अर्थतन्त्र)

It was published in The Kathmandu Post, 26 May 2018

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ERGO, ERGONOMICS

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.

Arun-3 hydroelectricity project: Return of the damn plan

It was published in The Kathmandu Post, 25 May 2018

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Return of the dam plan

The Arun 3 saga is a case of squandered opportunities and politics before progress

On May 10, Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi remotely laid the foundation stone for the Arun 3 hydroelectricity project. This 900 MW mega project located in Sankhuwasabha district is unlike any other infrastructure project the country has seen so far. Its significance in terms of total electricity generation, free supply to Nepal, export to India, revenue generation and boost to local economic activities is immense. The scale of the proposed investment and required work is so large that it will take some time for people to appreciate its transformative nature in terms of potential to boost economic growth and job creation.

Looking back

Ironically, Arun 3 is also one of the most contested hydropower projects in Nepal, especially owing to non-governmental activism and the buy-in of exaggerated logic by the CPN-UML which has now merged with the Maoist Centre to form the Nepal Communist Party (NCP). The Arun 3 saga is a glaring example of opportunities squandered due to INGO and NGO activism and the communist government’s giving priority to politics over development. As per the agreement signed between Investment Board Nepal (IBN) and Satluj Jal Vidyut Nigam (SJVN), an India public enterprise, in November 2014, Arun 3 should be starting production by 2020. However, its failure to financially close the project on time has pushed the project completion deadline to 2023.

The Indian government and the State Bank of India are the top financiers of the $1.5 billion project. The project has already paid Rs5 million to IBN as licence fee. Nepal will receive about Rs348 billion in revenues and Rs107 billion in royalties over 25 years, after which the project will be handed over to the government. The benefit to local communities is also appealing: 30 units of free electricity per month to affected households, 12 percent of total royalties to project affected areas, 3,000 jobs, generous resettlement scheme and development of local infrastructure.

In the early 1990s, Arun 3 was originally envisaged as a 404 MW hydroelectricity project costing $1.08 billion which multilateral and bilateral donors, led by the World Bank (WB), were ready to finance with a combination of concessional loans and grants. Rather than the project itself, the conditions for financing and project design turned out to be the most controversial. A consortium of international and domestic non-governmental organisations spearheaded the opposition camp, at times blowing allegations out of proportion with a deliberate intention to derail the project.

On August 3, 1995, the then WB president James Wolfensohn called the then prime minister Man Mohan Adhikari to inform him of the WB’s decision to not move ahead with the project. Although the WB formally pointed out three main reasons for pulling out—lack of ability to manage the complicated project, politically difficult situation to rationalise electricity tariff and prioritise public expenditure, and cost escalation due to delays—in reality it bowed to intense international and domestic pressure to abort the project. The INGO and NGO activism had tacit support of the UML which was determined to overturn a large-scale project initiated by the Nepali Congress-led government. In fact, the then UML general secretary Madhav Kumar Nepal had written to the WB threatening to review the project if his party came to power.

The hurdles

The major objection of the INGO and NGO community was over cost, corruption, environmental damage and threat to livelihoods of indigenous people. An important point to note here is that even legitimate concerns were blown out of proportion. First, Nepal needed a large-scale hydropower project to fulfil demand increasing at the rate of 40 MW annually and increase access to electricity. Achieving these aims and providing adequate energy to industries, which were just beginning to take shape following first generation reforms in 1992, were not possible with small and medium scale hydro projects as the activists had suggested. Back then, Arun 3 was identified as the most viable in terms of cost and time. In fact, to address the cost issue, it was redesigned as a two-stage project of 201 MW each.

Second, there were no absolutely binding clauses that would have barred the country from initiating other hydroelectric projects of over 10 MW. The government had convinced the donors that the expected return from Arun 3 was more than enough to service debt, and thus it could use the savings for other projects, for instance, the 144 MW Kali Gandaki project.

Third, allegations regarding corruption were nonsense because big projects need to be contracted to international contractors as domestic firms don’t have the capacity to execute them. Subsequently, they sub-contract parts of the construction work to local contractors. Fourth, the 122 km access road would not only help Arun 3, but also be beneficial for the Lower and Upper Arun hydropower projects. Fifth, there are always trade-offs in mega development projects, and Arun 3 was no exception. A well laid out safeguards plan was agreed upon to address environmental and livelihood threats to the extent possible. The activists, with the support of the UML, won the battle, forcing the WB to pull out of Arun 3. In fact, the WB stayed away from energy sector investment.

Fast forward to 2018, the same party whose disastrously opportunist stance led to the demise of Arun 3, and that subsequently exacerbated an important binding constraint to growth (adequate supply of electricity), enthusiastically promoted and facilitated clearances and approval of the project. Most of the background work was done by IBN, which deserves special appreciation for the tireless work since its establishment in 2011. 

The controversies and delays surrounding Arun 3 remain an unfortunate example of why politics should not supersede development of transformative projects. The growth and employment trajectories would have been entirely different if the construction of Arun 3 had started in 1995. Let us hope that the NCP-led government, which has a sizeable majority at all three-tiers of government, will not again fall prey to outlandish growth-regressive activism.

Interview: आर्थिक विकास र समृद्धि कर्मकाण्डी आश्वासन मात्र हो

This interview was published in Arthik Abhiyan, 20 May 2018

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आर्थिक विकास र समृद्धि कर्मकाण्डी आश्वासन मात्र हो

पछिल्लो राजनीतिक परिवर्तनयता अहिले नेपालमा आर्थिक विकास र समृद्धि एउटा साझा र बिकाउ नाराजस्तै बनिरहेको छ । चुनावअघि पनि प्रायः सबै राजनीतिक दलका चुनावी घोषणपत्रहरू पनि यस विषयकै सेरोफेरोमा केन्द्रित थिए । आर्थिक विकास र समृद्धिका लागि आवश्यक नीतिगत आधार तथा तदनुरूपको राजनीतिक इच्छा शक्ति र अन्य अवस्था छ/छैन, त्यसतर्फ भने खासै ध्यान दिइएको पाइँदैन । कतिपय यसलाई राजनीतिक स्टण्ट मान्ने गर्छन् भने कतिपय अब साँच्चीकै राजनीतिक कोर्ष सकिएकोले अबको बाटो आर्थिक विकास र समृद्धि नै हो भन्ने गरेका छन् । के हामी त्यो अवस्थामा छौं त ? यसै सेरोफेरोमा एकजना युवा अर्थशास्त्री, नेपाल इकोनोमिक फोरमका सिनियर फेलो चन्दन सापकोटासँग राजनीतिक परिवर्तनपछिको आर्थिक वृद्धि, विकास र समृद्धिका चुनौती तथा विकासको दिगोपनलगायतका विषयमा केन्द्रित रहेर आर्थिक अभियानका टीपी भुसालले गरेको कुराकानीको सार :

आर्थिक विकास र समृद्धिको नारासहित सरकार सङ्घीय बजेट निर्माणको चरणमा छ । राजनीतिक रूपले भनिए जस्तो वा चुनावी घोषणापत्रमा उल्लेख भए जसरी हामी आर्थिक समृद्धिको बाटोमा जान सक्ने अवस्था कस्तो देख्नुहुन्छ ?

हो, अहिले सबैले आर्थिक विकास र समृद्धिको कुरा त गरेका छन् । तर, मुख्य कुरा के हामी यसका लागि तयार छौं त भन्ने प्रश्न नै हो । विकासको आवश्यक पूर्वाधार छ । हामी आर्थिक रूपमा तथा अरू क्षमताका हिसाबले तयार छौ/छैनौं भनेर हेर्न जरुरी छ । चुनावी घोषणापत्रमा सबै राजनीतिक दलले हामी योे गर्छौं त्यो गर्छाैं त भने तर त्यही घोषणापत्रमा यी कामका लागि हामीले यहाँबाट स्रोत जुटाएर यसरी गर्छौं कसैले भनेनन् । मेगा हाइड्रोपावरको कुरा गरिएको छ । एक्सप्रेस हाइवेको कुरा गरिएको छ । मेट्रो तथा मोनो रेलको कुरा गरिएको छ । यी परियोजना देशका लागि रणनीतिक महत्त्व राख्ने खालका हुन्, यसका लागि वित्तीय व्यवस्थापन यसरी गरिन्छ भन्ने त कहीँकतैबाट आएन । हरेक परियोजनाका लागि रकमको जोहो कसरी गर्ने र ती परियोजना कति समयसम्म सक्ने सबै कार्ययोजना हुनु पर्दैन र ? यसका लागि कुनै ठोस कार्ययोजना देखिँदैन । त्यसैले मेरो विचारमा अहिले जुन कुरा भनिएको छ, त्यो पहिलेदेखि नै भनिँदै आएको कर्मकाण्डी आश्वासन मात्र हो ।

मुलुकमा राजनीतिक मुद्दा सकियो, जुन पार्टीले गरेपनि अबको काम भनेको आर्थिक विकास र समृद्धि नै हो भन्ने धारणा छ । अझै पनि राजनीतिक पार्टीहरूलाई अविश्वास गरिरहने त ?

यो भनेर पूर्ण निराशावादी बन्नु त भएन । तर, आशावादी पनि कत्ति बन्ने भन्ने हो । अलिकति सतर्क भने अवश्य बन्न जरुरी छ । पछिल्ला दुई दशकमा राजनीतिक अस्थिरताले हामीलाई गाँजेकै हो । यति ठूलो राजनीतिक परिवर्तन र स्थिरतापछि राजनीतिक महŒवाकाङ्क्षा त जन्मिन्छ नै । गर्ने चाहना भयो भने अब राम्रो अवसरचाहिँ छ । तर, त्यसका लागि नीतिगत स्पष्टता जरुरी छ । उद्योगी तथा व्यवसायीले पनि त्यो होस् भन्ने चाहेका छन् । यदि नीतिगत स्पष्टता भएन भने लगानीकर्ताले लगानी बढाउँदैनन् । अब केही दिनमा नै बजेट आउँदै छ । यसले कस्तो कार्यक्रम लिएर आउँछ, त्यो हेरेपछि पनि केही कुरा स्पष्ट हुँदै जान्छन् ।

पछिल्लो २ वर्षको आर्थिक वृद्धिदरलाई हेरेर पनि आर्थिक वृद्धि र समृद्धिको अपेक्षा बढी प्रचार गरिएको छ । यसमा दिगोपनको आधार के देख्नुहुन्छ ?

अहिले यही अवस्थालाई हेर्ने हो भने दिगोपनको आधार देखिँदैन । पछिल्लो २ वर्षमा हामीकहाँ भएको आर्थिक वृद्धि मूलतः भूकम्पपछिको पुनर्निर्माण र तीन तहका निर्वाचनको कारणले भएको हो । शून्यबाट ४ मा वृद्धि हासिल गर्न जति सजिलो हुन्छ, ४ बाट ६ मा वृद्धि हुन त्यति सजिलो हुँदैन । पुनर्निर्माणको किस्तामा गएको रकमले सरकारी पैसा खर्च भयो, अर्कोतर्फ निर्वाचनमा सरकारी तहबाट खर्च त हुने नै भयो, त्यसमाथि राजनीतिक दलले आफ्नो ढङ्गले गर्ने खर्च पनि ठूलो थियो । यसले धानेको हो नि । अब त भूकम्पपछिको पुनर्निर्माणमा लिने किस्ता पनि कम छ । अबको केही वर्ष निर्वाचन हुँदैन । अब आर्थिक वृद्धिको स्रोत के हुने त ? अब यो चुनौतीका बीच सरकारले निजीक्षेत्रलाई समेत साथमा लिएर केही विशेष क्षेत्रमा लगानी बढाउन जरुरी छ । जस्तो : आधुनिक कृषि (हाइभ्यालु कृषि), सडक र हवाई सञ्जाल, पर्यटन, ऊर्जा, हल्का खालको वस्तु उत्पादन तथा शहरी विकास र शिक्षाजस्ता क्षेत्रमा लगानी बढाउन जरुरी छ । यी खास क्षेत्रमा लगानी गर्न सके त्यसले दीर्घकालीन फाइदा दिन सकिन्छ ।

अर्थमन्त्रीले केही दिनअघि मात्रै विनियोजन विधेयकको सिद्धान्त र प्राथमिकताबारे प्रस्तुत गर्दै सरकारले आउने आर्थिक वर्षका लागि १५ खर्ब रुपैयाँको बजेट ल्याउने सङ्केत दिएका छन् । स्रोत व्यवस्थापन कति जटिल देख्नुहुन्छ ?

स्रोत व्यवस्थापन नै अहिलेको चुनौती हो । सरकारले राजस्व बढाउनु पर्‍यो, यो अर्को चुनौतीपूर्ण काम हो । यसका लागि दुईओटा बाटा छन्, एउटा राजस्वको दर वृद्धि गर्ने, अर्को दायरा वृद्धि गर्नु पर्‍यो । राजस्व चुहावट नियन्त्रण गर्न जरुरी छ । यो काम पनि आफैमा चुनौतीपूर्ण देखिन्छ । अहिलेका अर्थमन्त्रीले गर्न खोज्नु भएजस्तो देखिन्छ र तर त्यसको परिणाम अझैसम्म त्यति सन्तोषजनक त आइरहेको छैन । अहिले हेर्ने हो भने राजस्वको बढ्ने दर २० प्रतिशतभन्दा माथि देखिँदैन । तर, खर्च गर्ने दर बढी छ । अहिले त झन्सङ्घीय बजेट निर्माण गर्दा बजेट तलसम्म बढाउनु पर्ने हुन्छ । अर्को कुरा बजेटको ढाँचा नै अहिले फरक ढङ्गले निर्माण गर्नुपर्ने हो । किनभने प्रदेश सरकारले पनि आफ्नो बजेट बनाएको छ । यो बजेट गत आवको भन्दा कम हुनु पथ्र्यो । १५ खर्बको बजेट ठूलो हो । हामीले यो बजेट व्यवस्थापन गर्न सक्दैनौं । यसैले घाटा बजेट बढ्छ ।

ठूलो आकारको बजेटले अर्थतन्त्रमा कस्तो असर पार्ला त ?

बजेट घाटा बढ्नेबित्तिकै मुद्राको अवमूल्यन हुन जान्छ । किनभने हामीले बाहिरको वस्तु धेरै आयात गर्छौं । यसको असर मुद्रास्फीतिमा पर्छ । बजारमा तरलता कम हुँदा सरकारले ऋण उठाउने हो । सरकारले नै बजारको रकम उठाएपछि निजीक्षेत्र बैङ्क वित्तीय संस्थाहरूले कहाँबाट रकम लिने ? रकम अभाव भएपछि बैङ्कहरू बढी ब्याजदरमा रकम जुटाउनतिर लाग्छन् । यसले बैङ्क ब्याजदर पनि अस्थिर हुने भयो । यसले समग्र अर्थतन्त्रको चक्रमा नै असर पार्ने देखिन्छ । यद्यपि, उत्पादकत्व बढाउने क्षेत्रमा खर्च भए त केही वर्षमा त्यसले प्रतिफल दिन थाल्छ, तर त्यो सम्भावना पनि कमै देखिन्छ ।

अर्थमन्त्रीले संसद्मा पेश गरेका यी सिद्धान्त र प्राथमिकताले हालै जारी भएको श्वेतपत्रमा देखाइएका चुनौतीलाई कत्तिको सम्बोधन गर्न सक्छ ?

अर्थमन्त्रीले ल्याएको श्वेतपत्र राजनीतिक दस्तावेज मात्र हो । यसमा कुनै सन्देह नै छैन । यद्यपि, श्वेतपत्रमा एउटा कुरा देशको अर्थतन्त्रको अवस्था यस्तो छ है भनेर अर्थतन्त्रका आधारभूत कुराहरू उल्लेख गरिएको छ, जुन यसरी यो रूपमा यसअघिका अर्थमन्त्रीहरूले भनेका थिएनन् । तर, अर्थमन्त्रीले श्वेतपत्रमा राजनीतिक रङ थपिदिनु भयो । उहाँले निजीकरणविरुद्ध आफूलाई प्रस्तुत गर्नुभयो । जब कि एमाले र माओवादी पटकपटक सरकारमा रहँदा पनि आफूलाई निजीकरणविरुद्ध प्रस्तुत गरेनन् । बरू काङ्ग्रेस पार्टीकै उद्योगमन्त्री नवीन्द्रराज जोशीले सरकारी उद्योग सञ्चालनको प्रयास गरे । औषधि उत्पादन पनि भयो । त्यसकारण अर्थमन्त्रीले ल्याएको श्वेतपत्रमा राजनीतिक रङसहितको द्वैध चरित्र देखियो । अनि केही दिनअघि संसद्मा पेश गरेका यी सिद्धान्त र प्राथमिकता त काम गर्ने दस्तावेज हो । श्वेतपत्र र संसद्मा पेश गरेका सिद्धान्त र प्राथमिकताबीच मेल खाँदैन । तुलनात्मक रूपमा हेर्ने हो भने श्वेतपत्र राजनीतिक रूपमा बढी प्रेरित छ भने यो वस्तुगत छ, अलि सन्तुलित पनि छ । केलाएर हेर्ने हो भने हिजो काङ्ग्रेसले गरेको र उहाँले प्रस्तुत गरेको कुरामा सिद्धान्ततः खासै फरक पनि छैन ।

अहिले तीन तहका संरचनामा खर्च गर्नुपर्ने अवस्था छ । पछिल्लो राजनीतिक परिवर्तनले आम नागरिकमा महŒवाकाङ्क्षा पनि बढाएको छ । यो महत्त्वाकाङ्क्षालाई यथार्थमा परिणत गर्न सरकारसँग कस्ता चुनौतीहरू छन् ?

यी सबै समस्या काम नगर्दा आएका हुन् । काम नभएपछि चुनौती त बढ्छ नै । हामीलाई २/४ वर्षअघि नै थाहा थियो नि, अब मुलुक सङ्घीयता मोडलमा जाँदै छ भन्ने कुरा । न नेताले काम गरे न त कर्मचारीतन्त्रले नै गर्‍यो । सङ्घीयतासम्बन्धी कानून, आवश्यक पूर्वाधार पहिले नै बनाउनु पर्दैन ? प्रदेशको राजधानी ४ वर्षअघि नै तोक्न सकेको भए यो बीचमा त्यहाँ पूर्वाधार बनिसक्थ्यो । अहिले गएर काम गर्न सजिलो हुन्थ्यो । अहिले स्थानीय तहको निर्वाचन सम्पन्न भएको १ वर्ष बितिसक्यो । स्थानीय तहका जनप्रतिनिधि ‘काम गर्न पाएनौंm काम गर्न देऊ’ भनेर छटपटाइरहेका छन् । तर, अहिलेसम्म उनीहरूले के गर्ने भन्ने कानून नै बनेको छैन । यो गल्ती कसको ? राजनीतिक नेतृत्व र कर्मचारीतन्त्रको खेलाँचीका कारण यी समस्या आएका हुन् । जब राजनीतिक नेतृत्वमा दूरदर्शिताको अभाव हुन्छ, यो समस्या आउँछ । अहिले भएको पनि त्यही हो । अर्को कुरा सङ्घीयता कार्यान्वयन भनेको बजेटको कार्यान्वयनलाई भनेर बुझेको अवस्था छ ।

त्यो भन्दा अघि त योजना चाहियो नि । योजना निर्माण गर्ने निकाय केही दिन अघिसम्म नेतृत्वविहीन थियो । अहिले परिपूर्ति भएकाहरूको पृष्ठभूमि पनि त्यति सन्तोषजनक देखिँदैन । प्रादेशिक योजना अयोगको कुरा त कता छ कता । पहिले योजना बनाएर त्यो अनुरूपको बजेटको सिलिङ बनाएर काम गर्नुपर्ने हो, तर खोई त ? जनतालाई राजनीतिक रूपमा भाषणमा गाउँगाउँमा सिंहरदबार पु¥याउँछौं भन्यौं, तर काम गरेनौं । उनीहरूको महत्त्वाकाङ्क्षा बढ्नु स्वाभाविक नै हो । यो अवस्था हेर्दा अबको १/२ वर्ष डामाडोल नै रहन्छ ।

नेपालको बाह्य मात्र होइन, आन्तरिक अर्थतन्त्र पनि रेमिट्यान्स (विप्रेषण)ले धान्दै आएको छ ? पछिल्लो समयमा यसको आप्रवाहको वृद्धिदर पनि घटेको देखिन्छ । यसले कस्तो अप्ठ्यारो पार्ला ?

हाम्रो अर्थतन्त्र नै विप्रेषणमा निर्भर छ । हामीकहाँ आउने विप्रेषणमध्ये ८० प्रतिशत त उपभोगमै सकिन्छ । अहिले विप्रेषण घटिरहेको अवस्थामा घरायसी खर्चको माग पनि घटाउँछ । यसको प्रत्यक्ष असर कुल गार्हस्थ्य उत्पादनमा पार्छ । किनकि व्यक्तिगत उपभोग घट्ने भयो । अर्को सरकारको समग्र अर्थतन्त्रमा असर गर्छ । अहिले राजस्वमा जुन खालको तनाव देखिन्छ, यसकै असर हो । यसै गरी विप्रेषण कम आउँदा बैङ्कहरूमा तरलताको समस्या पनि बढ्ने भयो । चालू खातामा घाटा हुने भयो । वैदेशिक मुद्रा सञ्चिति पनि कम हुने भयो । यसले त अर्थतन्त्रको सबै ठाउँमा असर गर्छ । अर्को भनेको संस्थागत विषयमा असर गर्छ । पहिले कर्मचारीतन्त्रले भइहाल्छ, आइरहेकै छ भन्ने ठाने, अहिले तनाव भएको छ यिनीहरूलाई कसरी व्यवस्थापन गर्ने भनेर । रेमिट्यान्सको वृद्धिदर अझैै पनि घट्दै जान्छ । यसले हामीलाई जताततै असर मात्र गर्ने हो । त्यसकारण निजी क्षेत्रको पुनःसंरचना चाँडो गर्न जरुरी छ ।

समृद्धिका लागि सुशासन एउटा मीठो नारा नै भएको छ । यही राजनीतिक नेतृत्व र यही कर्मचारीतन्त्र अन्तर्गत यो कत्तिको सम्भव छ ?

हिजोकै राजनीतिक नेतृत्व र हिजोकै कर्मचारीतन्त्र हो, जसले हिजो सानो आकारको बजेटमा त्यसको ७० प्रतिशतसम्म पनि खर्च गर्ने क्षमता राख्दैनथ्यो । आज सय प्रतिशत माथि बजेट पु¥याँउदा उसले खर्च गर्छ भनेर कसरी पत्याउने ? यो सबै कामका लागि क्षमता अभिवृद्धिदेखि उसको कार्य पद्धति हेर्न जरुरी छ । सुशासन अर्थतन्त्रको ब्ल्याक बक्स हो । यसको शुरुआत कहाँबाट गर्ने भन्ने कुरा महŒवपूर्ण प्रश्न हो । शाखा अधिकृतबाट गर्ने कि सचिव स्तरबाट । सुशासन संस्कृति हो, प्रहरी सेना लगाएर योल्याउन सकिँदैन । यो राजनीतिक तहबाटै आउन जरुरी छ । यसको लागि राजनीतिक अडान आवश्यक छ ।

स्वदेशी उद्योगको प्रवर्द्धन तथा आयात प्रतिस्थापनका नयाँ योजना अगाडि सारिएका छन् । यसो गर्न कत्ति सहज छ ?

निर्यात प्रवर्द्धन गर्न पहिले त हामीसँग निर्यात गर्ने सामान हुनुपर्‍यो । छिमेकी मुलुकले यो गर्‍यो त्यो गर्‍यो भनेर बसेर मात्र पनि भएन । आफ्नो क्षमता पनि बढाउनु पर्‍यो । अर्को कुरा हामीले भारत पठाउने वस्तु कस्तो छ ? कुन गुणस्तरको छ ? कृषिजन्य वस्तु त्यो पनि अप्रशोधित । अनि अलि कति टेक्सटायल । यसको निर्यात प्रवर्द्धनको कुराभन्दा पहिले उत्पादन बढाउनु पर्‍यो । उत्पादन बढाउन पूर्वाधार निर्माणमा जोड दिनु पर्‍यो । पूँजीमा उद्योगीहरूको पहुँच पुग्न जरुरी छ भने अर्को व्यापार सहजीकरण । यी कुराहरू नगरी निर्यात प्रर्वद्धन गर्छु भन्नु त्यति सहज छैन ।

नेपालको आर्थिक वृद्धिदर मुख्यतया कृषिक्षेत्रको वृद्धिदरमा निर्भर छ । यस परिप्रेक्ष्यमा सरकारले लगानी बढाउनुपर्ने माग चर्को रूपमा आउँछ । तर, कृषिको वृद्धिदर भने बजेट विनियोजनमा निर्भर देखिँदैन, के गर्नुपर्ला ?

कृषिमा खुद्रा बजेट छर्ने गरिन्छ । कृषिलाई आधुनिकीकरण गर्ने हो भने ठूल्ठूला आयोजनामा लगानी गरौं । ठूल्ठूला बहु आयामिक परियोजनामा खर्च गरौं, जसले अर्थतन्त्रलाई दीर्घकालमा केही सहयोग गर्न सकोस् । त्यस्ता परियोजनाले रोजगारीसमेत सृजना गर्छ ।

एउटा अर्थशास्त्रीको नाताले आर्थिक पुनःसंरचनाका लागि गर्नुपर्ने अल्पकालीन, मध्यकालीन तथा दीर्घकालीन योजनाहरू कस्तो हुनुपर्ने देख्नुहुन्छ ?

पहिलो कुरा हामीले वैदेशिक लगानीमा सम्झौता गरेका वा आफ्नै पूँजीले बनाइएका जति आयोजना छन्, ती आयोजना सम्पन्न गर्नपहिलो प्राथमिकता दिऔं । यो गर्नासाथ आर्थिक वृद्धि त्यसै हुन्छ । जस्तो कि अहिले नै एशियाली विकास बैङ्कको ऋण र सहयोग गरी करीब १ अर्ब डलर छ । विश्व बैङ्क, भारतीय दूतावास र चीनको पनि १ अर्ब डलरको हाराहारीमा बजेट छ । यो सबै जोड्दा ५ अर्ब डलर जति हुन्छ । हाम्रो देशको अर्थतन्त्र ३० अर्बको छ । त्यसमा ५ अर्ब बराबरको काम सम्पन्न गर्नुस् त, अर्थतन्त्र कहाँबाट कहाँ पुग्छ । नेपालले काँचुली फेर्छ । त्यसपछि देशको आवश्यकताको मध्यकालीन रणनीति बनाऔं । जब हामी मध्य आय भएको मुलुकमा पुग्छौं, त्यसलाई दिगो कसरी बनाउने भन्नेतर्फ सोचौं । अहिले हामीले सन् २०३० सम्ममा मध्य आय भएको मुलुक बन्छौं भनेका छौं । त्यो मध्यकालीन कुरा भयो । अब २०३० पछिको नेपाल सोचौं ।

Merger of two communist parties in Nepal and more

CPN-UML and CPN (Maoist Centre) merge to become Nepal Communist Party (NCP)

From The Kathmandu Post: Two major national left political forces--CPN-UML and CPN (Maoist Centre)--merged to become the Nepal Communist Party on Thursday, 69 years after the communist movement gained momentum in the country with the establishment of a party by the same name. 

The NCP announced a nine-member Central Secretariat. Apart from Co-chairs Oli and Dahal, the team has former PMs Madhav Nepal and Jhala Nath Khanal as senior leaders. Bishnu Poudel, one of the architects of the unification process, has been named general secretary while Narayan Kaji Shrestha has got the responsibility of spokesperson. The secretariat has senior leader Bam Dev Gautam, Defence Minister Ishwor Pokhrel and Home Minister Ram Bahadur Thapa as members. The NCP will have a 45-member Standing Committee and 441 Central Committee members. The Standing Committee comprises 26 UML and 19 Maoist Centre leaders while the Central Committee has 241 UML and 200 Maoist leaders.

According to the declaration, the parties have agreed to highlight the positive aspects of the Janata ko Bahudaliya Janabad (People’s Multi-party Democracy), currently practised by the UML, and the Janabad of the 21st century, the guiding principle of the Maoist party, to create a new ideological framework governed by people’s democracy and socialism.

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Govt to scrap fees unfairly levied on Malaysia-bound Nepali workers

From The Kathmandu Post: Minister for Labour, Employment and Social Security Gokarna Bista on Thursday decided to scrap all the fees imposed on Nepali migrant workers as a result of the Malaysian government’s unilateral move to add extra financial burden on them. Nepali workers are compelled to pay for MiGRAMS, bio-metric medical test, services of the One Stop Centre (OSC) operated by Malaysia VLN Nepal Pvt Ltd, Immigration Security Clearance (ISC), and visa fees, totalling up to Rs18,480 per individual excepting other expenses borne by Nepali workers before landing jobs in Malaysia.

Nepali workers have been paying Rs 3,300 for online registration (MiGRAMS) while other bio-metric identification tests cost them Rs4,500. Other charges include Rs3,164, which is paid at the OSC for collecting workers’ passport and Rs3,616 to the VLN for online data entry. Besides, one has to pay Rs3,200 for ISC being provided by the GSG Services Nepal and Rs700 in visa fee to the Malaysian embassy.

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Current account deficit widens to Rs 171.64 billion; BOP swings into Rs 14.6-billion deficit

From MyRepublica: Both current account and balance of payment (BoP) of the country slipped into deficit in the third quarter of the current fiscal year 2017/18, posing risk to external sector stability. According to the ‘Current Macroeconomic and Financial Situation of Nepal (based on Nine Months’ Data of FY2017/18’ released by the Nepal Rastra Bank (NRB)) on Thursday, current account deficit widened to Rs 171.64 billion in the review period from a deficit of Rs 10.34 billion in the same period of FY2016/17. Similarly, the overall BoP turned into a deficit of Rs 14.60 billion in contrast to a surplus of Rs 50.60 billion in the same period of the previous fiscal year.

According to the NRB data, merchandise imports in the review period rose 20.6 percent to Rs 876.29 billion compared to a growth of 39.7 percent in the same period of the previous year. Exports, on the other hand, increased by 8.2 percent to Rs 59.74 billion compared to a surge of 12.1 percent in the same period of FY2016/17. The declining growth rate of remittances is also pushing the current account deeper into deficit. Gross foreign exchange reserves decreased by 1.4 percent to Rs 1064.37 billion as at mid-April 2018 from Rs 1079.43 billion as at mid-July 2017. The workers’ remittances, a major source of foreign currency earning for Nepal, increased 5.6 percent to Rs 540.38 billion in the review period compared to a rise of 6.3 percent in the same period of the previous year.

Structural transformation, prosperity and trade deficit with India

Here are two interesting stuff that I was engaged in recently:

1. Lecture on structural transformation and prosperity in Nepal. Event organized by Nepal Economic Forum. It also touches upon emerging cross-sectoral constraints, risks and opportunities. Presentation slides here.

2. Increasing trade deficit with India and ways to reduce it. Discussion on BBC Nepali service.

CBS projects Nepal's GDP to grow at 5.9% in FY2018

On 25 April, Central Bureau of Statistics (CBS) estimated that Nepal’s economy would likely grow by 5.9% in FY2018, down from 7.4% in FY2017 (and 0.2% in FY2016). This is slightly lower than 6% revised growth target during mid-year review of FY2018 and 7.2% target set during the budget speech for FY2018. Last year’s 7.4% growth (at basic prices, FY2001=100) was the highest since FY1994, when GDP grew by 7.9%. That was largely a base effect. 

In FY2018, agricultural, industrial and services sectors are projected to grow by 2.8%, 8.8% and 6.9%, respectively. Agricultural sector contributed 0.9 percentage points, industrial sector 1.3 percentage points and services sector 3.5 percentage points to the overall projected GDP growth of 5.9%. These projections are based on eight to nine months data. 

Specifically, construction sector is projected to grow at the fastest rate (10.6%, down from 12.4% in FY2017) followed by mining and quarrying (10.5%, down from 13.7% in FY2017). Two consecutive years of double-digit growth of these sub-sectors indicates acceleration of post-earthquake reconstruction of public and private infrastructure. Overall, robust industrial activities is underpinned by post-earthquake reconstruction and improved supply of electricity (manufacturing growth is equally strong at 8%). Rising inward tourism and associated activities also contributed to hotels and restaurants growth of 9.8%, up from 7.3% in FY2017.

Agricultural output is projected to grow at the slowest rate at 2.8%, down from 5.2% in FY2017, largely due to the decline in paddy output (negative 1.5%), which has a weigh of 20.8% in overall AGDP basket due to the uneven monsoon rains and flooding in Terai region. Agricultural commercialization, availability of chemical fertilizers and irrigation facilities were not sufficient to offset the denting effect of unfavorable weather pattern. 

Industrial output is projected to grow at 8.8%, down from 12.4% in FY2017. Construction, and mining and quarrying activities are projected to contribute 0.7 and 0.05 percentage points, respectively, to overall GDP growth. Mining and quarrying of stones, sand, soil and concrete have intensified in response to large and growing demand for reconstruction activities. Similarly, construction activities intensified thanks to progress in large infrastructure projects such as Melamchi water supply and Upper Tamakoshi hydroelectricity (both are expected to be completed this year). Manufacturing sector is projected to grow at 8% and contribute 0.5 percentage points to overall GDP growth. Stable supply of electricity and improved industrial relations have contributed to strong manufacturing output growth. Its share of GDP has increased marginally to 6.4% from 6.2% in FY2017. Electricity, gas and water sub-sector is projected to grow at 5.8%, down from 20.5% in FY2017, due to an expected 82 MW of additional energy generation by the end of FY2018 (it was 118 MW in FY2017). 

Services output is projected to grow at 6.6%, down from 7.4% in FY2017. Within service sector, hotels and restaurant, and public administration & defense grew by 9.8% and 9.6%, respectively (higher than 7.3% and 9.1%, respectively, in FY2017). Record tourist arrivals and stable supply of electricity underpinned the robust hotels and restaurants growth. Tourist arrivals increased by 24.9%, reaching a record 940,218 in 2017, up from 753,002 in 2016. 

Expenses related to three tiers of elections and additional wages and allowances for public officials deputed to local bodies and for reconstruction works are expected to support public administration and defense sub-sector’s growth. Meanwhile, wholesale and retail trade (which accounts for about 13.6% of GDP) is projected growth at 9.1%, up from 9.6% in FY2017 on account of higher import of goods and increase in production of industrial and agricultural related goods.  Financial intermediation is projected to grow by 6.4%, largely contributed by income of NRB, BFIs, insurance board and companies, securities board, EPF and CIF among others. Health and social work subsector is projected to grow grow by 6.3%  due to the increase in number of patients at hospitals and healthcare activities in and of public and private sectors. Similarly, community, social & personal services sub-sector is projected to grow by 5.5% on account of public spending at central and local levels, and entertainment services provided by public and private FM radio stations. Transport, storage and communications; real estate, renting & business activities, and education sub-sectors are projected to grow at a lower rate than in FY2017.  

On the expenditure side, GDP (at market prices) grew by 6.3%, down from 7.9% in FY2017. Consumption decelerated but public fixed investment (public GFCF) grew robustly (14.9% growth compared to 4.1% growth in FY2017) but private GFCF growth declined to 15.9% (down from 56.6% in FY2017). While import of goods and services is projected to grow at 14.8%, export of goods and services is projected to grow at just 4.4%. The largest increase in contribution to GDP growth is coming from public investment. 

Few preliminary observations:

First, the growth boost is coming from reconstruction works albeit at a modest pace. Two consecutive years of double-digit growth of mining & quarrying, and construction points to this fact. Also, it is largely driven by public investment (potentially includes accounting of transfers to local bodies that is not spent yet). In fact, public GFCF is expected to grow by 14.9%, sharply up from 4.1% in FY2017 . This is also reflected by the 9.6% growth of public administration and defense. So, the negative impact of unfavorable weather is more than offset by increase in public spending (need to see how much of the projected spending is actually realized as capital spending till mid-April was just 35% of  budget capex) on elections, reconstruction, and mining & quarrying activities. Last year, growth was driven by private GFCF. 

Second, retail and wholesale trade’s growth projection is a bit optimistic given that remittances, which finances imports, has been decelerating and most of the increase in imports is account for by capital goods as opposed to daily consumable retail and wholesale goods. However, the expectation is that the dent in demand caused by deceleration of remittances, which mainly finances imported consumable goods, will be more than offset by direct and indirect elections related expenses, which also increase demand for daily consumable goods and services. There is massive temporary employment (police personnel, poll observers, awareness campaigns, etc), and expenses on travel, food and retail goods during elections. A marginal optimistic growth projection for retail and wholesale trade activities makes a huge different to overall growth rate because its share in GDP is the largest and also contributes the most to GDP growth rate. 

Third, except for hotels & restaurants, public administration & defense sub-sectors all other services activities decelerated compared to FY2017. So, the boost is actually coming from public spending on reconstruction and elections, and partly from increased tourism activities. Some folks might quickly interpret it as a resurging Nepalese economy. This may be a bit misplaced because FY2017’s growth of 7.4% at basic prices (7.9% at market prices) was largely due to base effect (recovering from lingering effects of earthquakes in FY2015 and crippling trade blockade in FY2016 as well as favorable monsoon), improved energy supply, and some pick-up in reconstruction. This year’s growth should also be seen from that perspective but the driver is public spending on reconstruction and elections. This in no way means that the economy will continue to grow at this rate in FY2019 unless there is at least a comparable acceleration in public capital spending and private economic activities (apart from other usual factors such as favorable monsoon, which is likely given forecast so far). 

Fourth, some of the reasons for higher growth this year are pretty much the same (Melamchi and Upper Tamakoshi, reconstruction, etc) as in last year. This indicates that if public capital spending accelerates, then it gives a good boost to overall GDP growth.

Fifth, per capital GDP has increased to US$1003.6, thanks to a double-digit growth of nominal GDP (13.8%, down from 17.3% in FY2017 – highest since FY2010) and a slight appreciation of Nepalese rupee vs US$ (CBS assumes constant population growth rate of 1.4%). Note that CBS used monthly average middle of buying and selling rates during the first eight months (NRs102.96). Usually, monthly average of buying rate is used. It was NRs102.75 in the first eight months of FY2018. Per capita GDP and size of GDP might change a bit once the full fiscal year monthly average exchange rate is available sometime around mid-August. But, note that real GDP per capita growth is 4.9% and nominal GDP per capita growth is15.8%. For now, the size of the economy is projected to increase to US$29.3 billion from US$25 billion in FY2017. 

Sixth, per capita gross national disposable income (which factors in remittances as well) is projected to be US$1296.6, up from US$1159.2. 

Seventh, the claim that the previous government handed over a badly managed economy doesn’t stand now at least with respect to real sector (note that this is different from the claim of a badly managed fiscal situation when there was change of guard at MoF). Fiscal, monetary (particular financial) and external sectors will see deterioration anyway in FY2018. 

Eight, as mentioned in previous blog posts the economy can sustain growth of over 7% with an appropriate mix of macroeconomic strategies, financial arrangements, smart project execution, and supportive institutions and policies. Government has an important role to play in providing critical infrastructure, addressing market failures, designing a growth-enhancing tax regime, and implementing business-friendly policies to usher in a meaningful structural transformation. It also needs to enhance both the quantum and quality of public capital spending to over 8 percent of GDP annually. Given the sound fiscal space, though Nepal doesn’t have a shortage of funds until medium-term, a dearth of capacity to fully execute the budget and finish projects on time may prove problematic.

Finally, FY2018 and FY2017 figures are provisional and revised, respectively. 

Can highly productive services activities make up for the decline in manufacturing sector?

Many developing and emerging economies are seeing a shift of workers from agriculture to services, bypassing the manufacturing sector, which has traditionally been a stable jobs creator with significant boost to overall economic activities. The latest WEO April 2018 devotes a chapter on this structural shift and investigates if it is bad at all. In short, the decline of manufacturing jobs may not hurt growth or raise inequality “provided that the right policies are in place”. 

The catch is that some services sector activities are very similar to manufacturing activities in terms of levels, growth rates, and convergence of output per worker (labor productivity). Therefore, the ongoing structural transformation, although unconventional, could be beneficial if these services sector activities are promoted. 

Here are key highlights from the study:

• Transport, telecommunications, and financial and business services have higher levels and growth rates of output per worker than manufacturing. Furthermore, productivity convergence (and per capita as well) is similar to manufacturing activities, i.e. it grows faster where it is relatively low, allowing countries with low initial productivity levels to catch up toward those with higher levels.
• Highly productive service sectors such as communications, finance, and business activities have been attracting workers faster than other sectors. The shift of employment from agriculture to services since the 2000s has benefited aggregate labor productivity in emerging market and developing countries across all regions—and especially in sub-Saharan Africa.
• On policy front, barriers to international trade in services (much higher than in the case of goods trade) need to be reduced so that “highly-productive service sectors is not constrained by the growth of domestic demand”. Skills enhancement is more needed in the case of tradable service subsectors (financial and business services). In addition to improving business and investment climate, strengthening human capital and physical infrastructure could unlock productivity growth across all economic activities. 
• Changes in overall inequality are mostly explained by rising inequality within sectors, rather than changes in sector size due to reallocation of workers. This is based on a sample of 20 advanced economies. The level of labor income inequality within industry (70 percent of which is accounted by manufacturing) is somewhat lower than within services. The biggest factor driving changes in aggregate inequality in advanced economies since the 1980s has been the increase in earning differences in all sectors—rather than the decline of industry jobs.