Form cabinet with care

After the first ever election of the Nepali Congress parliamentary party leader through the democratic process of voting in the ruling party, public attention is now centred on the quality of the cabinet that the new Prime Minister Girija Prasad Koirala will come with after his appointment. Obviously, Koirala has already begun discussing the formation of the new Council of Ministers with his colleagues and advisors. Reportedly, he has also talked about the possibility of implementing the recommendations of a 1992 administrative reforms commission (ARC) that calls for a smaller cabinet size.

Clearly, the country will have an efficient cabinet if Koirala can really demonstrate the boldness that is required of him to implement the ARC’s recommendations which had come up when he himself was at the helm of affairs eight years ago. If the ARC recommendations are followed, the number of ministries will have to be reduced to eighteen. With this, the cabinet size—which covers 27 separate ministries at present-- will be drastically reduced.

Unfortunately, Koirala is bound to face a tough challenge maintaining the fragile political equation within his own party. As such, there are ample chances that he will be tempted to include as many heads as possible to keep his position safe. After all, the parliamentary party vote has indeed proved that the minority faction represented by Sher Bahadur Deuba is not at all that irrelevant as to be ignored.

While such is the case on the one hand, then on the other, even if Koirala reduces the size of the government, the true quality of the new cabinet cannot be established unless he inducts efficient and
clean figures in the new Council of Ministers. However, such an eventuality is less likely because Koirala is very much glued or beholden to a number of tainted figures who surround him. It is therefore unlikely that Koirala can hope to give a truly efficient cabinet just by reducing the cabinet size. The most prominent question relates to the intellectual, administrative and leadership qualities of the persons he chooses for handling different portfolios. Equally important is their political and moral integrity.

Thus it can be fairly argued that, unless Koirala demonstrates political prudence by avoiding the tainted faces in the cabinet, he can hardly hope to keep his promise of eradicating widespread corruption, improving the deteriorating law and order situation and establishing the ever elusive good governance. If he succeeds in giving us such a cabinet, we can expect the Koirala administration to perform and work towards bettering the conditions prevailing in the country. If not, he will have sacrificed his own long term interests as well as the country’s interests for the sake of short term political expediency. The faces he inducts into the cabinet will tell us what to expect.

Perspectives on downstream benefits

By Trilochan Upreti

The emphasis is currently on downstream benefits -- how and in what direction the available water resources of the country should be developed in a sustainable and just way. Quite recently, a decision involving all parties was made to prescribe preconditions to the US Energy Conglomerate Enron for the Karnali-Chisapani project.

Among others, India’s full fledged consent to share downstream benefits to accrue from works carried out during project implementation in Nepalese territory is significant. In other words, one of the major pre-conditions for issuing the survey license is that the Indian government has to agree to pay downstream benefits. This will be a major breakthrough with the Karnali project. Water resource experts argue that this benefit will scale down the project cost by 50 percent (around US$ 5 billion). The major component of such benefits will come through irrigation benefits which enable them to irrigate big chunks of land in India.

The subject of downstream benefits has been complicated and disputed since the inception of this project one decade back, not only in Nepal but also in India. It has been said that India did not agrees to even the outcome of research/investigation study with respect to such benefits accruing from the Karnali project. In the Nepalese scenario, it has remained a central issue. Almost all political parties want to go ahead with the project.

There are a lot of allegations, counter allegations, and disputes over the decision of jurisdiction, transfer of government responsibility to carry on direct negotiations with Enron. In the context of Nepalese water resources sharing with India, Nepal has always been cheated, exploited and barred from sharing reasonable benefits and major portions of such benefits go to the Indian side. Therefore, Article 126 of the Nepalese constitution has been established so as to maximize benefits through national consensus between national political parties at the time of ratification of such a treaty. The constitutional provision of this nature is of a great value in developing a national consensus before it goes for such a serious treaty. However, the consensus made by all political parties in the Karnali project for Enron does not establish a proper principal due to the role assigned to Enron alone. This could breed problems when it comes to accommodating the potential interest of India without its involvement in ascertaining downstream benefits that could accrue from the project.

Why should Enron be involved to negotiate, settle and conclude such issues and not His Majesty’s Government? Perhaps, it may be thought that a positive result will be possible through a treaty between a bull with a tiger. In fact it is the best option His Majesty’s Government has. However, there appears a significant reason to spell out such problems through trilateral negotiations due to the nature and extent of the project as such. The other significant reason is the efficiency and efficacy of a multinational company to deal with any type of problem arising in such transactions in regional and international arenas. As a sovereign nation, Nepal has to be involved in each crucial settlement of the socio-economic, political, diplomatic and legal spheres, to ensure the maximisation of benefits to its people. It can be argued that in pertinent issues of such projects, she has to prepare in each sector for the fruitful utilization of such few resources, for which huge investment in terms of time and money have been already made. Therefore, to enhance the capability to cope with the environment, help from the bureaucratic, technical, and diplomatic sector is urgently needed.

In fact, Enron receives no revenue from these downstream benefits. If India is willing to pay for the downstream benefits, HMG/N receives additional revenue. With this, HMG/N should negotiate these issues with India, not Enron in anyway. As a matter of fact, since Nepal’s predominant interest lies with hydropower benefits, downstream benefits are less important to Nepal than the benefits derived from the power portion of the Karnali, it is also being argued among experts. Enron thus, has included the potential market for downstream benefits in the post Karnali scenario. However, the criteria and methods for cost allocation and benefit allocation are to be analyzed separately with Nepal and India through negotiations on the issue. The allocation of benefits determines the respective rights to collect against the different outputs of a project like Karnali to both Nepal and India. The concept of benefit includes the monetary income resulting from tariff rates collection and also utilization of water resources, works, installations and facilities. Hence, an intention to practically follow the benefits to be derived by such allocations in the Karnali project should be explicitly disseminated. This can only be achieved through political negotiations.

In order to serve national interest, it will be best to take into account downstream benefits in water resource projects around the world, both in the background of private sector participation or even private public involvement. American-Canadian arrangement on Columbia basin, Chez-Slovakia-Hungary management of Govcikovo-Nagymoros Project, South Africa-Lesotho water transfer project, Uganda-Egypt water sharing project on lake Victoria (Aswan dam) project, treaty for Amazonian cooperation, Agreement on Zambezi river system and cooperation for sustainable development of the Mekong river 1995 are of utmost importance to us. However, the major thrust of equitable utilization, essence of friendly relations between neighbours and the maximization of shared benefits should be common objectives of concern for nations of SAARC.

It has been advocated that without changing the electricity Act and its regulation, maximization of benefit cannot be achieved. In addition to that, overall existing laws and policies need to be amended, changed or enacted. Nothing may be more counterproductive than a poorly administered and enforced system for water resources development. The magnitude of problems seem to be due to an improper and inadequate level of implementation. In fact, there is lack of proper understanding of the concept of downstream benefit together with a lack of strong commitment.

In the Nepalese context the difference between saying and doing is the main problem. Hence, confidence should be built between politicians, bureaucrats and the people. Otherwise, policy and programme envisaged in the Ninth Plan will remain only in dreams, not in practice. We cannot depend on others to utilize the only one significant resource by transferring our crucial national responsibility to settle upon milestone bilateral irritants and deadlocks by simply involving a MNC. Hence, farsighted political as well as strategic policy and programs need to be enunciated, developed and implemented.

Checking at point

By Himanshu Jaiswal

The bus stopped at Thankot. The check point for businessmen and smugglers. Two policemen boarded the bus and asked the passengers to show their luggage. An old lady who was sitting by my side was having difficulty opening her suitcase. The policeman requested her to hurry. I saw the old lady stumbling and her hand shivering. "Let me help you," I said.

I too tried to open her suitcase but could not. The old lady was confused and at the same time the presence of policemen scared her. "What do you have in your luggage and from where are you coming. What do have inside your baggage and from where are you approaching," asked the policemen harshly.

"I am coming from Janakpur, there is nothing in it, I don’t know why the suitcase is not opening," replied the lady.

The policewala suspected the lady and he stared at her for a moment. "You will have to get down here. You cannot go without getting your luggage examined."

I could see strain on the old lady's face. She was stammering and at the same time worried. Other passengers in the bus started to grumble and asked the driver to speed the bus. "We cannot delay due to one passenger," one of the passengers passed a heartless comment. "These ladies look innocent but they are not. She is trying to fool us by saying that the suitcase is not opening. She purposefully has brought wrong keys with her."

The policewala ordered the lady to get down from the bus with her luggage. To help the lady I too got down with her. The police unlocked the suitcase and found her clothes and some clothes fir her children.

One should perform one's duty. Thankot, a entry point to capital and check point for businessmen and smugglers. I have no complaint against police examination but I strongly object to police harassment of the public. It is possible that women smuggle. There are police record but we should always have curtsey. It is not wise to count everyone in one category. A similar incident can happen with anyone. The poor old lady had to go through mental stress not only because of police examination but more because of the uncooperative attitude of fellow passengers.

Instead of cooperating with her they blamed her for delaying the bus and carrying forbidden things. How long would it take to break the suitcase open? If the passengers had cooperated, things would not have been that unpleasant for the lady would not have gone through unwanted stress. I request passengers to have a heart and be cooperative with their fellow passengers. We may not recognize each other but are still depended on each other. We are like one big family, comfortable and safe if understood and cared, if not then heartless individual travellers.

Reforming budgetary rigidities

By Aditya Baral

It is widely accepted that the millennium is the age of ideas. Bill Clinton and Bill Gates have also acknowledged that it is the advent of the age of ideas. Be it the unstoppable wealth creation in stock markets or the unprecedented expansion of knowledge based industry, it is the idea that seems to be determining the agenda for growth everywhere. Why should, then, ideas not dominate the most important economic document of the year - the budget?

Ask any debtor what he will do with the money, the answer will be purchase assets (house, car, appliances, etc). Ask the government what it will do with the borrowings, the answer will be consumption. A deficiency stricken economy like ours is always soliciting funds from donors to infuse fresh blood to run through the stumbling economy. Major chunk of the borrowed money is either channeled to coax the donors in a shape of interest premium or paltry remnants plough the economic mainstream, leaving little room for mitigating the development thrusts. Thus, every annual budget might appear as actual engine of growth to makers but seems like poison to the takers (in long run). To date, we have already shouldered incredible amount of per capita liability disproportionate to our national income.

Profligacy and wastefulness are inherent characters of our budget making process in Nepal. Wisdom and discretion have never been the hallmark of government spending in our country. The funds ministries ask for annually, are not necessarily what they need. The funds the government grants to its departments are not what they eventually get. The prioritized allocations for spending are rarely accessed with the funds as it should be.

The upcoming budget must at least broadly outline the new thinking emerging in the government and among political parties. This should extend beyond enacting of the fiscal responsibility. It should cover entire gamut of economic reforms. The document should prove its worth as a broad roadmap of long term reforms and structural adjustments more than the annual accounting exercise.

In order to adopt a "need of the hour approach" for an added flavour in the forthcoming budget, fresh ideas that provide new solutions to the old problems seems necessary. Some of those ideas to grapple with the conventional rigidities are mentioned below.

Firstly, it is the input - not the output - that has come to matter for most in deciding which of the ministries gets how much money. The utilization part is rarely heeded but the greater emphasis is laid on fund requirement through bargaining process. Each ministry inflates its demand anticipating a slash. To wipe out this malady, Finance Ministry (FM) and National Planning Commission (NPC) should set parameters for spending, framework of activities, strategies for achievement and evaluation criteria to work in tandem with the expenditure needs of each ministries.

Secondly, it is amazing to know that the ministries although perpetually starve for the funds to run their programmes, they are somehow left with the savings at the last leg of the yearly journey. How do such savings happen? These savings occur just because of ministers’ inefficient orientations or inability. They try to white wash their inefficiency by engaging in squandering spree basically at the last leg of the fiscal year in a bid to eschew surrendering the saved budget. When most of the departments and institutions are languishing in abject resource crunch, this trend of ‘rush to July’ is barely a practice that makes fun of the growing aspiration of the naive citizens. To curb this practice of ‘rush expenditure’, biennial and triennial budgeting would be appropriate, under which funds for long-term projects are cleared and budgeted on multi-year basis, as practiced by US and Sweden. The annual budget will work in absolute tandem with the biennial and triennial budget within the broad framework outlined as per the objectivity.

The mechanism to check the chieftains’ efficiency has become mandatory to entrust and instill in them a sense of responsibility and accountability. Otherwise nation will breed countless of less accountable politicians having strong character of strangulating the exchequer.

Thirdly, the budget document postulates that once the budget is cleared, the ministry does not have any discretionary power to re-allocate the funds in other projects or programmes during the year. Mid-year corrections should not be empowered. This sort of ‘line budgeting system’ actually was devised to tie up erring bureaucrats to bar them from manipulating allocated funds. However, it seems that the noble endeavour of preventing bad management has made good management handicap. A good solution to the problem is granting the ministries and departments the discretion to channelise funds according to shifting priority, contemporary demands of national and international importance. This discretionary power should reside within the budgetary paradigm and should not breach expense limit.

Fourthly, treat all the non-planned programmes also as the priority ones. Planned expenditure connotes the expenses allocated for building new projects, while non planned ones are primarily meant for maintenance and running the new projects. Hence, without substantial allocation of non planned funds for the new projects, they may become unable to function optimally and may nosedive prematurely. NPC basically plans its budgetary programmes for five years. After the expiry of that period the planned programmes are treated as non-plan activity. Funds flow seems to dry up after of this period.

As a consequence, users are starved with the maintenance expenses and running projects go haywire in midway. This leads entire plan to end in fiasco. This is the conspicuous example inherent in our planning activities. Therefore, the optimal cocktail of plan and non-plan expenditure should be carried out with great caution in order to pave the way for projects or programmes for safe landing.

Therefore, the forthcoming budget presenter should try to prove himself exceptional and conceive reforms in his own budget rather than conceiving to achieve reforms through second generation programmes.