ECONOMY
Hamstrung & Crippled
As the country is neck-deep in political crises, the economy has become nobody's baby. In fact, the issues of economic concerns have not drawn the attention of either the political parties or the civil society. This is happening despite the fact that without stabilizing economy, there will be no political stability. The acute fuel shortage that has constantly hit the people since last many months; the inability of the government to maintain law and order; the Melamchi debacle are some of the examples that point at paralyzed economy. Trade union disputes, frequent lock-ups; abductions of businessmen; almost constant bandhs and total unrest in Terai region have hit the national economy where it hurts the most.
By SANJAYA DHAKAL
On Monday (May 28), a group of robbers attacked a businessman Kanhaiya Agrawal in Kalikasthan in broad daylight and looted Rs 1 million cash from him. The robbers have seriously wounded the businessman.
In recent months, there were a plethora of reports of series of abductions of Marwari businessmen in Kathmandu valley. According to one businessman, Bihari-style kidnapping for ransom has haunted the community.
Over 35,000 schools across the country – including 8500 private ones – remained shut down for ten days at the call of Educational Republican Forum. There are calls from pro-Maoist student wing to nationalize the private schools in which entrepreneurs have made billions of rupees of investment.
The biggest infrastructure project on the floor – the Melamchi Water Supply Project (MWSP) – is almost gone. Due to stance by Maoist minister, the principal donor Asian Development Bank (ADB) has said it will pull out its funding after June.
Bandh, partial blockades, strikes are commonplace along the length and breadth of East West Highway – the lifeline of Nepal's economy. There is hardly a day when the entire highway remains open. In contrast with the past trend when one single political entity would call strike, in recent days a new trend has emerged whereupon hitherto unknown organizations call localized strike crippling the transport movement.
Shortage of petro products has become a constant phenomenon. The bankrupt Nepal Oil Corporation is unable to incur further losses whereas the government is unable to hike fuel price fearing backlash.
Frustrated by the incessant unrest and decreasing demand, the garment entrepreneurs have started to shift their operations to India and elsewhere. Kiran Sakha, president of Garment Association of Nepal, has said that due to cutthroat international competition, labor problems and unrest, they are manufacturing garments elsewhere in order to fulfill some export orders that they are still getting.
Violence Holding Sway
Speaking at a program in the capital last week, Finance Minister Dr. Ram Sharan Mahat expressed deep sadness over the continuing culture of violence.
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Vandalism : Unending culture of violence |
Conceding that even the mainstream democratic parties have contributed to further the culture of violence by engaging in vandalism during their agitation, Dr. Mahat, however, justified it pointing at the need to uproot autocracy. Sadly, others are indulged in vandalism without justification, he indicated.
Dr Mahat said that since peace is necessary to sustain democracy, the prevailing culture of violence must come to an end. "During the period of transition, everybody must exercise restraint. We must not try to impose agenda through street politics. Otherwise, there are all kinds of elements including divisive, religious, regional, rightist and anarchist forces who will create an unbearable situation in the country," Dr. Mahat said.
He said that there should be singular focus on economy if the nation is to realize the dream of building new Nepal. "Besides, only economic prosperity can consolidate the hard-earned democracy," he said.
"Economic issues must be brought to the central stage. There is no alternative to hard work and discipline," he said.
Disturbed by the incessant unrest, Dr. Mahat said the future of Nepal lies only in peace, democracy and economic prosperity.
"But I still see the silver-lining in the dark clouds. There is a huge enthusiasm among the people of villages. After long conflict they are now brimming with zeal and confidence to build the nation. We must be able to tap that zeal properly," he said.
A senior economist Prof Dr. Bishwambher Pyakuryal said that the current degeneration in the country were a bad omen. He said history has shown that 50 percent of countries, which have ended conflict, have gone back to conflict during the first five years of post conflict period. "There is no guarantee that same thing will not happen in Nepal given the level of degeneration we are witnessing. Therefore, we need to be careful," he said.
Melamchi Musings
The unfolding debacle of Melamchi Water Supply Project (MWSP) threatens to mar the image of Nepal among the international investors.
As the tussle continues between the senior Maoist leader and Minister for Works and Physical Planning Hisila Yami and the Asian Development Bank (ADB), the latter has clearly stated its intention to pull out from the project unless the previous agreement to hand over management contract of valley's water distribution system to a foreign company is honored.
Buoyed by their revolutionary zeal, the Maoists have adopted a tough posture saying they will not allow a 'discredited British company Severn Trent' to manage valley's water. In so doing, they have also earned support from bands of NGOs that have been working against the project for a long time and some of whom have been pointing at 'rainwater harvesting' as better alternative to overcome valley's water scarcity.
Last week, Maoist chairman Prachanda, addressing a program in the capital, said his party has taken the stand in order to smash the tradition of abiding by all conditions posed by donors. Maoist leaders including Prachanda had also met with ADB country director Paul Heytens on Wednesday (May 23) to request the latter to reconsider its decision to pull out of the project.
Notwithstanding their revolutionary zeal, the Melamchi dispute is already sending very negative signals to the international community. Reports say that Japan has already warned to withdraw all its support to 127 MW strong Upper Seti project if the Melamchi Water Supply Project is stalled. Japan Bank for International Cooperation (JBIC), which also has a commitment for assisting a portion of Melamchi project, had committed to provide US$ 250 million soft loan at 1% interest for the Upper Seti project.
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A queue for drinking water : City of shortage |
Minister Yami, on the other hand, has refused to climb down from her position. Despite repeating that she is in favor of Melamchi project and wants to cooperate with ADB, Yami said, "The world will go on (even without foreign assistance)."
Her remarks are eerily similar to the statements made by former vice chairmen duo of erstwhile royal cabinet. Faced with international censure, Dr. Tulsi Giri and Kirtinidhi Bista had made statements saying that it had provided opportunity for Nepal to stand on its own.
If Melamchi is cancelled, the Maoists will have live with a permanent blot on their image, particularly among the thirsty population of Kathmandu . "The decision will ultimately prove to be political as well as economic catastrophe for the Maoists. They should not be following the agenda of some NGOs who are selling impossible and ludicrous dreams of fulfilling water demand of a metropolis like Kathmandu through collecting rain water," said an economist.
Fueling The Problem
The scarcity of fuel and the imminent rise of inflation once the inevitable decision of price hike of fuel is taken also threaten to affect the economy.
The government is yet to get over the hangover of last August's violent reaction to the decision of hiking fuel price.
Therefore, despite feeling the bitter pinch, the government – and the eight parties, of course – have scoffed at taking the overdue decision.
The current fuel crisis is caused by the inability of Nepal Oil Corporation (NOC) to pay back its outstanding dues running over Rs 6 billion to the sole supplier Indian Oil Corporation (IOC).
Despite repeated requests by Nepal government including Prime Minister Girija Prasad Koirala, India's state-owned IOC has cut down the supply volume by over 40 percent leading to the shortage.
Rajendra Mahato, Minister for Industry, Commerce and Supplies has claimed that the government will soon pay Rs 1 billion to IOC, which will improve the situation for some time.
The NOC, on the other hand, held a press meet on Friday (May 25), to warn that the supply of fuel would worsen unless the government helped it to clear dues. The NOC has given two advice to the government – either provide it with Rs 500 million every month or hike the fuel price.
"The government, in principal, has agreed to release Rs 1.0 billion to clear dues and import bills for the months of April and May," Mahato has said.
The government, is in no mood to hike the fuel price. It has already referred this decision to eight party leaders who will, most definitely, decided not to hike the price at least till the CA elections.
"We feel that any increase of fuel price at this time would be exploited by nefarious elements to create turmoil and disrupt the Constituent Assembly elections," Minister Mahato said.
At a time when CA elections date is not certain, the continuous deferral of the decision to hike the fuel price is sure to further bleed the NOC and the government.
As immediate measure, the government is planning to involve private sector for the trading of petroleum products. "At the beginning, government plans to handover the trading of cooking gas to private parties," he said.
According to Biswonath Goel, executive director of NOC, the NOC's current total liabilities stand at Rs 10.20 billion including Rs 5.96 billion dues of IOC and Rs 4.26 loans of various domestic financial institutions.
He said that NOC suffers from Rs 256 loss per cylinder of cooking gas. Likewise, it suffers from Rs 6.55 loss per liter of petrol; Rs 4.31 loss per liter in diesel; Rs 2.35 loss per liter in kerosene, while it profits Rs 16.85 per liter in aviation fuel.
Minister for Industry, Commerce and Supplies Rajendra Mahato added that while only half a million families were using cooking gas, the whole country was suffering from its losses.
On the other hand, Finance Minister Dr. Ram Sharan Mahat has said there is a need to hike fuel price 'favorably.' "Losses cannot be incurred like this for a long time. The direct impact is in our Balance of Payment. Even consumers will be affected. There is no escaping this," he said.
Dr. Mahat said Nepal's dependence on India will increase as much as outstanding dues increase. " India will not resume normal supplies. Consumers will suffer from shortage," he said. He said that since price of fuel is rising in the international market, other countries, too, were facing similar problems.
Dr. Mahat, however, ruled out revoking tax on fuel. "In South Asia, Nepal imposes least tax on fuel. In India, 30 percent of total revenue comes from taxes on fuel. Cutting down taxes means cutting down development and administration expenditure," he said.
As such, the perennial problem of fuel shortage is likely to continue for a long time to come. The volume of dust that are being brushed inside the carpet is swelling by the day even as the national economy continues to bleed.
