Ensure healthy competition

The manner in which the SLC Board of His Majesty’s Government declared the results of the School Leaving Certificate (SLC) Examination the other day was not in keeping with the country’s education standard. Whatever the Board might say, the fact remains that the Board published the SLC results without giving reasons for not publishing the names of the top ten students or why it was publishing the names of only the top two students (three this time with two candidates scoring second positions).

Compared to last year’s SLC results, the pass percentage has declined by over two percent. However, the number of students appearing in the SLC examination conducted in April went up by more than sixty four thousand. Similarly, the number of students who passed the SLC examination also increased by over thirty thousand. This no doubt shows that the Board has been doing a commendable job to accommodate as many students as it can in every SLC examination. However, the number of students passing in first division is not encouraging enough in view of the large number of students taking the exam. The reasons for this are obviously the poor quality of teaching in government run schools, frequent changes of the academic session and less school working days. Of the total 205,541 regular students, only 93,978 (roughly 45 percent) managed to get through this year’s SLC examination. In other words, 111,563 students have failed to get through the iron
gate. This is also an indication that the number of students who are appearing in next year’s
SLC examination will increase. However, if the Board does not introduce measures to improve the quality of education and the number of school working days, the pass percentage will continue to decline. The Ministry of Education has to take things seriously to improve the quality of teaching especially in government run schools as they continue to produce poor SLC results each year.

The frequent change of academic session has led to instability in the academic calendar of schools, affected the education standard and also delayed the announcement of SLC results. The Education Ministry must look into this seriously. With regard to the SLC Board’s decision not to publish the top ten positions in the SLC examination, it must be said that the Board has discouraged healthy competition among students and also schools. If the Board took the decision because of alleged illegal practices, then it is a wrong decision because the allegations should have been first looked into before arriving at such a decision which actually only avoids the issue.

Exchange rate regime and capital flows

By Sushil R Mathema

The past few years have been observed as the exceptional experience for the new emerging South East Asian economies as it suddenly went through the course of currency as well as financial turmoil in late 1990s after having achieved encouraging growth in the region for almost a decade. Many scholars put forth a wide range of highly divergent ideas as to which prominent factor did most trigger the crisis in the region. The de-facto official peg to hard currency with a fixed exchange rates for a considerable period, non-transparency in the global transactions and mismatch between the sources and uses of funds by the financial institutions, weak monitoring and supervising capability of the responsible institutions and, moreover, the highly speculative behaviour observed in the capital market are nonetheless some of the pertinent reasons that led not only to the incidence of the financial crisis but also pulled the existence of such situation for a longer duration.

It is true that the inflow of foreign capital to South East Asian countries was presumably due to better performance of economies coupled with the recession in world economy including the European economy in the 90s. An increase in inflow of foreign exchange and the resultant surge in the volume of foreign currency reserves exert pressure on the market to appreciate the domestic currency. But granting stable exchange rates even under such circumstances would expose themselves to the risk of currency devaluation. This has, as is common to all, been well explained by the 1997 crisis in Thailand. At the outset, however, it was understood that the sharp withdrawal of foreign capital was not due to the exchange rate system adopted by these countries but rather the panacea of the private investors who withdrew the capital very sharply due to speculative motives (Jeffery Sachhs). It thus simply shifted down the production possibility frontier and affected aggregate demand.

Yes! Although inappropriate exchange rate policy did not virtually trigger the crisis it contributed to the crisis in two ways: (i) It led to build up more short -term capital. (ii) It stimulated the rapid growth of exports due to depreciation of real exchange rate when the greenback dollar was weak but the course was suddenly reversed when the US dollar became strong vis-a-vis Japanese yen leading to the large current account deficit.

If we observe the exchange rate policies of the South East Asian countries before and after the crisis, we find interesting evidences of the need to correct the exchange rate policy stances to avoid such crisis in future. There had been a general trend in these countries to gradually move toward more of adopting flexible exchange rate regime, although the timing and reasons for the movement varied amongst the countries. For instance, the countries like Singapore, Malaysia, Sri Lanka, Indonesia, Taiwan and South Korea had pursued managed floating system while Nepal, Thailand and Myanmar preferred pegged exchange rate regime to basket of currencies. The countries such as the Philippines and Mongolia followed independent floating exchange rate regime. After the crisis, Nepal continued to remain on peg exchange rate regime while Malaysia moved to a capital control and single peg exchange rate regime. Singapore and Sri Lanka continued to pursue managed floating regime and the remaining countries underwent to adopt independent exchange rate regime. The pursuance of different kinds of foreign exchange regime entails us that the choice of exchange rate regime was dependent on the degree of volatility of the respective currencies. Those countries, which underwent substantial depreciation against their trading partners, both in real and nominal terms, accompanied by high exchange rate volatility, seem to adopt independent foreign exchange rate regime to correct the forex market.

Regarding Nepal, it is a unique case, however. The objective of exchange rate policy in Nepal is generally a judicious blend of mixture between external competitiveness and domestic price stability. The uniqueness in the exchange rate market of Nepal is that Nepal has floating exchange rate arrangement with other currencies while having fixed exchange rate with the Indian currency. The South East Asian crisis has had minimal impact on Nepalese economy, as a major source of capital inflow is official capital in the form of grants and loans. The data for FY 1998/99 shows that the official capital recorded as high as Rs 9.1 billion while the miscellaneous capital inflow recorded a negative of Rs 5.3 billion. It is to be noted that the latter capital includes private capital such as capital inflow of directly funded foreign assistance projects, which are not reflected on government budget, unrecorded investments made by the Indians, unrecorded remittances of the Nepalese workers abroad, the inflow of short-term capital in the form of suppliers’ credit or usance credit etc. In other words, almost two-thirds of the capital inflow constitutes official capital which is of long-term nature and therefore the country did not have to absorb the spillover effect of the crisis directly. In fact, net private flow has plummeted from US $ 39.3 million in 1987 to US $ 12.4 million in 1997 (Indicators of Developing Asian and Pacific countries: ADB/M).

The country did suffer a setback of depreciation of its currency by more than 19 percent during a period of one and half year as a consequence of the depreciation in the Indian rupee vis-a-vis US dollar. This is because Nepalese rupee is pegged with the Indian currency. Some schools of thought believe that the pegging with the Indian currency has undermined the stance of monetary policy and created misalignment in the real exchange rate situation. But in the present context, it is quite necessary for a small economy like Nepal to make the choice of exchange rate regime being dependent on the direction and volume of trade with the Indian economy. The strong economic and financial ties with the Indian economy has, necessitated the need for maintaining the peg with the Indian currency.

Moreover, the free mobility of labour, capital, commodities across the southern border with India, strong social and cultural ties and strong market linkages between the two countries have also served as a strong base for adopting fixed exchange rate regime with the Indian currency. The truth is, if Nepal had not adopted fixed exchange rate regime with the Indian rupee, it would have faced, among others, the rise in currency speculation leading to the possibility of currency substitution in both transaction and asset, and the volatility that would be created in Nepalese rupee and Indian rupee exchange rate would sprout price instability in the domestic economy.

As for now, Nepal is heading for liberalization of the capital account and therefore full convertibility in the capital account is under the card, its introduction would definitely bring volatility in capital flows. There will be no doubt, a greater demand in the flexibility of exchange rate as the greater inflow of capital and fixed exchange rate regime with the Indian currency will be generating wide broken cross-rates between the three currencies--the Nepalese rupee, the Indian rupee and the US dollar. Under such situation, it is not always possible to adjust its exchange rate with the US dollar to nullify the broken cross rates. To correct the volatility in such situation of forex market, Nepal will have to adopt managed floating exchange rate regime with the floating arrangement with the Indian rupee. Whether to appreciate or depreciate the national currency vis-a-vis the US dollar and the Indian rupee depends upon the real exchange rate movement of Nepalese currency against these two major currencies. Besides, the choice is also dependent on the nature of direction and magnitude of trade of goods and services with India and the third countries. A balanced approach has to be undertaken not to make imports of essential commodities particularly petroleum products and chemical fertilizers from abroad much expensive. At the same time, we should also maintain the country’s exports competitiveness. As we are very much aware that Nepal needs to diversify its exports both in terms of country and commodity aspects, there is very little room to cash in benefits generated from the depreciation of its currency vis-a-vis major hard currencies.

To sum up, the present fixed exchange rate regime with India has allowed Nepal to meet its objective of price stability. With the advanced stage of liberalization, that is, after adoption of full capital account convertibility by both the countries, the volatility of capital flows needs to be scrutinized through adopting managed floating exchange rate regime with both the currencies--US dollar and the Indian rupee.

Infant at ten !

By Chiranjibi Kafle

The other day yours truly got a marvellous opportunity to browse through a piece of commentary by a shrewd writer. He was indeed shrewd. This is because the gentleman—for, at least the name that appeared sounded fully male in tone—not only seemed to be keen on treating the country’s democracy with due respect but that he was also equally eager to patronize the ten-year-old democracy as "still infant".

So much so good. But what yours truly could not properly make it out was the ‘hidden mystery’ associated with his choice of that particular age-group. I had read, as the student of Education long time back, that human beings could be broadly grouped into several categories, based on their age. Infanthood, of course, belonged to a primary group, befitting to be cared for—if a school terminology is to be used—with sweet nursery rhymes. That means, with sweet, sweet things, both in literal and figurative sense.

But I thought here was an altogether new ploy. An issue as old as ten years in age was being pampered as still an "infant". That was really intolerable. Maybe, I again thought, the gentleman in question must be too fond of children, always obsequious to bestow showers of tender love on them. Nothing wrong. A highly humane feeling, indeed! But still, the inner fool within me could not give in. Com’on, how can a ten-year-old be regarded as an infant? If I’m right, "analysts" and "experts" would brand this age-group as adore...sorry adolescents. Meaning, they have not only crossed infanthood but also childhood in its normal, technical sense.

So those who prefer to pamper their adolescent offsprings, over-nurturing them with undue dose of sweetmeats and what not, must be aware of several things. First, the children whom they produced are no longer ‘infants’ over a period of time. Second, too much or too less care from parents or others, both could be equally irritating to them as soon as they reach a certain age. Third, adolescence in particular—as our democracy is in today— is such a phase that they hardly entertain parent’s or anybody else’s interference, mainly on their behavioural pattern. It is an age when they may even be internally aware of their own ‘parenthood potential’ and so may be already planning and practicing a host of escapades—biological or otherwise. In the absence of right education and approach, such children may just go astray—like this gentleman’s "infant" democracy is on way. While handled properly, with the role neither of ‘trophy parents’ nor interference, they could become real gems for the society and for themselves. So pamper no more this democracy as infant. It is already older.

The Kargil Whodunit

By Kuldip Nayar

The latest case that the Musharraf government has filed against former Pakistan Prime Minister Nawaz Sharif is on the "leakage of state secrets." This is yet another confirmation of Sharif’s candid statement that "he was kept in the dark on the Kargil operation." He told reporters at Attock, where he is confined, that "the operation was planned without his knowledge and he was informed only after it began in May." In the face of this, the observation by Subrahmanyam Committee report that "he (Nawaz Sharif) was fully in the picture," turns out to be misleading.

The report went on to say: "It is reasonable to assume that Nawaz Sharif was at least aware of the broad thrust of the Kargil plan when he so warmly welcomed the Indian Prime Minister in Lahore." On what basis did the committee come to this conclusion? There is no supporting evidence in the report. Nawaz Sharif’s statement sounds more credible because the charge slapped on him after the statement is that of treason, punishable with death.

In fact, the committee’s observation tallied with the remark by General Parvez Musharraf, Pakistan’s Chief Executive, that "everybody was on board." Unwittingly, if not wittingly, the committee damaged the image of Nawaz Sharif. The Indian opinion, which was in his favour, became generally unfavourable after the report. All those who admired him for having initiated the Lahore process to bury the hatchet retracted their praise.

So much so that Prime Minister Atal Behari Vajpayee, who once said that "poor Nawaz Sharif" had been punished "on our account," felt let down. After the committee’s observation, he would say he did not know. He avoided making any public statement although he kept wondering why Nawaz Sharif arranged the meeting when he had other plans. The entire edifice of the Lahore process came tumbling down.

Not only that, the Pakistan military version came to hold the ground. The impression spread was that Nawaz Sharif was "aware of the broad thrust of the Kargil plan" and that of stationing of the Pakistan troops and mujahideen at the Kargil heights before the Lahore meeting took place. The feeling of perfidy got strengthened in India. Nawaz Sharif lost whatever sympathy he had.

His observation that it was the army’s doing has changed the picture. Once again, the sympathy has swung in his favour. Indeed, his words do not leave any room for doubt: "This (Kargil) operation was conceived in January last year and I was informed about it only in May 1999 after it had started. I went to Washington in July last year after consultations with the army chief General Pervez Musharraf and he had full knowledge of what was happening at that time.

Even many of the corps commanders and the chiefs of both the Naval and Air staff were also kept in the dark about the operation." But this is not the first time that a Pakistani ruler has been led up to garden path. General Ayub Khan, Martial Law Administrator, was not told everything about the infiltration into Kashmir in 1964.

At that time the guilty party was not the military but a civilian, Foreign Minister Zulfikar Ali Bhutto. In an interview before the Shimla Conference, he was frank enough to tell me that he wanted to fight India because he believed that after some time it would be hard to beat because of the strength it was acquiring by building the infrastructure and defence production establishments.

In his book, Ayub Khan, Altaf Gauhar, an insider as Information Secretary, has traced how Operation Gibraltar, the guerrilla warfare in Kashmir, was initiated by Bhutto, with the help of General Musa, then commander-in-chief, without Ayub’s permission. Gauhar reproduces Ayub’s remark when Operation Gibraltar was spelled out before him: "Who authorised Foreign Office and the ISI to draw up such a plan? It is not their job. All I asked was to keep the situation in Kashmir under review. They can’t force a campaign of military action on the government."

Ayub was stumped by foreign office and Nawaz Sharif by the army. But the lesson to be learnt from both operations is the same: it does not matter who the ruler at Islamabad is; it is the establishment which really controls the country. It is the one which decides what is the "national interest." The "nationalist interest," during Ayub Khan’s time, resulted in a war between Pakistan and India and ended in an agreement at Tashkent. Nawaz Sharif was able to avert a full-fledged war, but ended at Washington to associate President Clinton with the withdrawal from Kargil.

"Who sabotaged the Lahore Declaration? Who derailed the process of dialogue on the Kashmir issue and from which incident did the global isolation of Pakistan begin?" These are the questions Nawaz Sharif has posed. And they need to be answered, not only by Pakistan but also India.

Remarks by the Subrahmanyam committee on Nawaz Sharif’s complicity reopened the whole thing. There has to be further probe. The committee did a commendable job to point out the deficiencies in the country’s internal and external security apparatus. The IB and the RAW were caught napping. But the committee glossed over what might be considered the political side of the Kargil operation.

Whether Islamabad will appoint a commission, as Nawaz Sharif has demanded, or not, is up to the military junta in Pakistan. But it is important for India to know who sabotaged the Lahore process and how. The Subrahmanyam committee found the Pakistan army and Nawaz Sharif in league. Was it so?

The officially-sponsored interlocutors--former Pakistan foreign secretary Niaz Naik and Editor R K Mishra--held four, five rounds of talks. They reportedly arrived at a formula which looked like solving the Kashmir problem. "We were very near it," was Vajpayee’s remark when I asked him during an interview to comment on the aborted talks between Naik and Mishra.

The committee should have found out how far the two countries had travelled on the path towards a settlement. It is an open secret that there was an agreement at Lahore on the time limit within which the formula was to be implemented. Another understanding was to eschew violence, direct or indirect, in all eventualities.

What was the formula? The Subrahmanyam committee merely said that Mishra did not appear before it. That does not absolve it of its responsibility. It was given full powers to find out what happened. It should have summoned him and interviewed even Vajpayee, foreign minister Jaswant Singh, home minister L K Advani and defence minister George Fernandes to get at the contents of formula.

New Delhi has welcomed Nawaz Sharif’s admission on the participation of the Pakistan troops at Kargil. Fernandes, in fact, said within 24 hours of the Kargil clash that Nawaz Sharif had no prior knowledge of it. He was denounced then.

India has remained silent on Sharif’s plea that he was innocent. It should have the courage to say that it had gone wrong in its assumption that he had prior knowledge of the Kargil operation. Without joining issue with the Subrahmanyam committee, the government could have said that it did not concur with the observation that Sharif was aware of "the broad thrust of the Kargil operation." It would have retrieved his reputation--and the sanctity of the Lahore process.

From the disclosures that Sharif has made, it is clear that he, like Zulfikar Ali Bhutto, tried to normalise relations with India. Bhutto could not sell the Shimla Agreement to his country and Sharif the Lahore declaration. The difference between the two is that Bhutto went back on the agreement because of opposition while Sharif owned the Lahore declaration and went down with it.