ECONOMIC RECOVERY
Pushed To The Background
Even as the country is basking in the glory of newfound political freedom, there are reasons to worry about the economy. At a time when the political leaders should be speaking and doing something about the ailing economy, they are concentrating only on political issues. Nobody doubts that political issues are most important at this juncture. But we can overlook the equally burning economic issues, only at our own peril. The lukewarm reaction of politicians, MPs and even civil society towards the White Paper presented by the Finance Minister and dearth of debates regarding the economic road Nepal should pursue in the coming days are ominous signals. Particularly, at a time when the extreme leftist parties are clamoring for radical changes in socio-economic fundamentals, the deafening silence from the vast majority of liberal-minded people and civil society is a worrying indication
By SANJAYA DHAKAL
Quite clearly, the extreme communists led by the Maoists have been dominating the political debates in the country. And they have even dominated the economic sphere. Last few weeks have seen how various sister organizations of the Maoists have swooped on in industries, factories and even schools.
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The frenzied campaign of extortions, demands for nationalization of schools and turning of the country into socialist-communist republic have occupied the center-stage of debates of late. Gone are the debates over the economic reconstruction, public-private partnership, liberalization and globalization. This has made the threat of rise of ‘illiberal democracy’ or even outright ‘communism’ that is much more ominous.
After they declared ceasefire, the Maoists have stepped up their campaign of extortions reportedly to finance their militia.
Around ten industries in Birgunj-Pathlaiya corridor were forced to shut down following demands of big ‘donation’ by the Maoists. Newspapers reported that the Maoists asked for Rs 100 million donation from Dabur Nepal company alone. Although this particular problem has been resolved through talks between the business community and the trade union wing of the Maoists (All Nepal Trade Union Federation), the whole episode has cast a gloomy spell over the entire business and investment environment. “The extortion drive by the Maoists has negatively affected the business and investment environment,” conceded Finance Minister Dr. Ram Sharan Mahat.
The Maoists are also reported to be engaged in extortion in cities across the country. The Himalayan Times daily reported on May 23 that the Maoists have asked over a dozen private banks to “cough up Rs 2.5 million each as donation.” And in the rush to strengthen their organization, the Maoists are taking up the causes of workers in industries and driving a wedge between them and employers hurting the industrial peace. In Birgunj, over 10 industries closed down accusing the ANTUF of spreading terror as the latter started barging into factories with arms; spraying black paints over the faces of managers and organizing the workers’ meetings on factory premises.
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“The business community never had to face pressure like this anytime before,” said Bijaya Sarawagi, president of Birgunj Chamber of Commerce and Industry (BCCI).
The wave of extortion threats has even compelled the government to urge the Maoists to bring the issue of financing their militia in the forthcoming talks. Senior ministers are saying that the government could look into how it can help finance the militias. “We can talk on this issue. So, they must stop the extortion drive,” said deputy prime minister and Foreign Minister K.P. Oli. Politicians like UML general secretary Madhav Kumar Nepal have already called on the Maoists to stop their extortion activities and, instead, put forth their problem of financing to the government, if they are genuine about maintaining peace.
The rampant excesses by the Maoist organizations have led many people to harbor suspicions regarding their real intent. “We were quite optimistic after the restoration of the parliament and announcing of ceasefire. But the recent events have caused us to doubt the seriousness of the Maoist commitment of joining the competitive multiparty politics,” said an industrialist who did not want to be named.
Red Storm Rising
It is not only the ANTUF that is causing the business community to worry. The student wing of the Maoists – All Nepal National Free Students Union (ANNFSU-Revolutionary) – has recently submitted nine-point demands to the Prime Minister Girija Prasad Koirala demanding the nationalization of all private schools. It has demanded that if the schools cannot be nationalized in the short-term, their fees must be sharply reduced immediately. They have threatened to unleash their protest campaigns if the demands are not met.
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Last week, speaking at a program, Suresh Ale Magar, the central member of the Maoists who was released by the government as a gesture of goodwill, said that the parties and civil society should stop urging Maoists to come to the political mainstream. He added that the parties should, instead, come to the mainstream of people and the Maoists.
In his reaction to the parliamentary charter declaration, Maoist chairman Prachanda criticized it for failing to introduce ‘revolutionary land reforms’ among others. At a time when the Maoists are calling for collectivization of agriculture and building of communes, it is anybody’s guess what ‘revolutionary land reforms’ would mean.
In fact, it is not only the Maoists that are shaping the debates over economy. The Seven Party Alliance (SPA), which is dominated by communist outfits, is also gripped by the communist line. Among the SPA constituents, Nepali Congress and NC (Democratic) are the only liberal parties. While the UML, Nepal Peasants and Workers Party (NWPP), People’s Front (PF) and United Leftist Front (ULF) are communist parties, the Nepal Sadbhavana Party (Anandidevi) is a regional one. Consequently, the political as well as economic issues are being hijacked by the communists.
At a time, when the country is heading towards the election of the constituent assembly to write a new constitution for the country, the domination of debates by communists could spell trouble for democratic centrists, liberalists and capitalists. “It is a worrying sign for the private sector,” added the industrialist.
“The Maoists are seeking a secular, socialistic republic with radical land distribution and removal of the monarchy. However, few realize the dire consequences of electing a constituent assembly. Basically, the Maoist-dictated and drafted constitution will trample on individual liberty and freedom, lead to mass migration of Nepalis, extinguish the nationalistic spirit of Nepal, and negatively impact the fledgling capitalistic economy,” writes Laba Karki, a practicing attorney based in Virginia, USA (Nepalnews.com).
Economics In The Back-seat
As the country is engrossed in political debates, the economic issues are not getting the attention they deserve. So much so that Finance Minister Dr. Ram Sharan Mahat had to urge the people and the MPs in the parliament to ‘zealously’ pursue the economic agenda. “It is my firm determination and belief that the dream of people to build prosperous Nepal can be realized. I expect similar level of zeal as shown by the people during the popular movement in course of economic reconstruction as well,” he stated.
The issue of economic recovery seems to have been pushed to the background for the time being as every section of society is focused on peace process and constituent assembly. “While the wheels of the political solutions are now in motion, the economic problem needs immediate attention. It will be disastrous to wait until the finale of political drama to address the economic problem. The burden of economic movement lies on the economists, socialists, informed citizens, and policy makers, from the leaders of both, the political parties and the Maoists,” wrote Shiva Gautam, Assistant Professor at the Harvard University in an article published recently.
Economists agree that the government must take up the economic agenda with equal zeal. “I think the political agendas are now, more or less, settled. It is now time to take up the economic agenda. I believe that the economic development should go hand-in-hand with the political development,” said Dr. Binod Karmacharya, an economist.
Adds Dr. Shankar Sharma, the former vice chairman of the National Planning Commission (NPC), “The time is now ripe for, not only repairing the damaged infrastructures but also, building new ones, particularly in rural areas.” He added, “This is the time for nation-building.”
Economic Recovery
The national economy currently lies battered. The growth has come down to less than 2 percent. Compared to the population growth rate of 2.3 percent, this pace of GDP growth could actually mean that the country is marching on a reverse direction.
“The growth rate can be increased if the peace is maintained. We can then cut down defense expenditure and divert the savings and resources to development sector. We can even take development to places where we could not go earlier thanks to the conflict. These activities are certain to fuel growth,” said Dr. Karmacharya.
In the White Paper he presented last week, Dr. Mahat has painted the bleak picture of prevailing economy. It mentions that while the country had averaged the GDP growth rate of 5.1 percent in the decade prior to 2001, it has come down to 2.7 percent in the last three years.
Major industries of the country including tourism, garment, pashmina and carpet have all suffered terribly. Tourism has come down by nearly 50 percent. The exports of garment products have decreased by over 40 percent in the last two years. Tens of thousands of jobs in garment sector have been lost as factories are downing their shutters at an alarming rate.
Trade deficit has been growing at the rate of 17.7 percent in the last four years. The only saving grace has been the consistently increasing inflow of remittance.
The revenue collection has dipped. The previous government had set the target of collecting Rs 81.81 billion. This target is not going to be met at all. Till mid-April, the government had collected only Rs 46.37 billion. The government’s adjusted estimates now puts the target of revenue at Rs 73.57 billion.
On Sunday (May 21), the Nepal Rastra Bank also released a report assessing the economy of the first eight months of the current fiscal year. The report states that the trade deficit, during the period, increased by over 37 percent compared to 7.4 percent during the same period previous year.
But again due to favorable growth of remittances, the Balance of Payments (BoP) surplus registered Rs 13.8 billion in the period compared to only Rs 5.7 billion in the corresponding period last year. Likewise, the current account posted a surplus of Rs 4.8 billion. The total foreign exchange reserve has also increased by 11.2 percent to reach Rs 144.4 billion till mid-March 2006, states the NRB report. This level of reserve is sufficient to finance merchandise imports of 9.8 months and merchandise and service imports of 8.3 months. The inflation, however, has increased by 7.7 percent in the review period as against 5.7 percent previous year. The unbridled growth of inflation coupled with low GDP growth can eat up the savings and earnings of common people triggering catastrophic consequences.
Given the bleak economic scenario, it is the duty of all concerned to pay attention towards developing the country’s economy. While the people of neighboring countries India and China are reaping the benefits of unprecedented growths, the Nepalese, too, deserve no less. The people had not come out in the streets simply to change the constitution, they also had come there with the expectations that their lifestyle would be improved. And this desire of the people must not be relegated to the back-seat.
DONORS’ ASSURANCES
Promises Of Support
During the major meeting with the government, donors pledge generous support
By A CORRESPONDENT
Just like they supported the democratic struggle, the donors have pledged to support their economic struggle as well.
After the February 1 royal step, the donors had stalled their aid to Nepal . Last week, during their meeting with the Finance Minister, the donors assured that they would resume the stalled aid. They also promised to provide further assistance to help in the process of reconstruction.
The meeting was held in the Ministry of Finance on May 17. During the meeting, Danish ambassador Finn Thilsted proposed the assistance of Rs 500 million for democratic process, constituent assembly and management of arms and cadres of Maoists. He added that Danish government would resume assistance in the rural energy program amounting to Rs 1.5 billion.
Other donors expressed concerns that the Maoist activities and lack of security could pose obstacles in the development works. They said that if the government can widen the development space and ensure delivery, people’s confidence in peace process will increase.
