Good beginning

South Asian diplomats have gathered in Colombo for a two-day meeting starting Thursday to fix the holding of the next SAARC summit. This is the first SAARC meeting at the official level held after India refused to share the platform with Pakistan, citing military takeover as a reason. In fact, the 11th SAARC summit has been on hold ever since India called into question the legitimacy of the new military regime in Pakistan. The Agra talks, though it did not make any breakthrough on the disputed state of Kashmir, actually paved the way for the SAARC summit, besides bringing India and Pakistan across the dialogue table. Last month, Indian Prime Minister Atal Bihari Vajpayee had invited Pakistani military dictator General Pervez Musharraf to solve their mutual differences in the Taj City of Agra. This was done at the behest of US president George W Bush. The US took the initiative especially to defuse tensions between the two countries that had been nearing boiling point after both the countries conducted tit-for-tat nuclear tests. Fortunately, the Agra summit provided some hope for the revival of the SAARC conference.

Sensing the urgency, Sri Lanka initiated a diplomatic move to revive the SAARC summit last December. Earlier, the Citizen’s Commission for South Asia (CCSA) had also urged India and Pakistan to bury their differences and reschedule the 11th SAARC summit. When we consider the bilateral differences —bordering on enmity— between India and Pakistan, the concern for the future of SAARC is legitimate. This apart, it is the right of the member-country to raise concern against why the process of SAARC is stalled. However, India cited the military take over in Pakistan as an excuse. The fate of SAARC, meant for the socio-economic benefit of over one and half billion people, rests on the ties between India and Pakistan. India stalled not only the process of SAARC revival but also refused to share the platform with Pakistan for the development of the region.

The track two diplomacy initiated by the CCSA to reschedule the 11th SAARC summit and meet the deadline for the proposed free trade area within the SAARC too became futile due to bilateral differences between India and Pakistan. However, South Asian countries cannot afford to sit back and let the opportunities for economic cooperation among the SAARC member countries slip by. The SAFTA has been under threat. So, India and Pakistan must recognize that the bilateral differences have affected the smooth functioning of SAARC. The Colombo meet at the official level must also recognize that the 11th SAARC summit is more important than any Indo-Pakistan dispute.

Anti-root canal economics

By Dr Raghab D Pant

You go to see your dental surgeon for root canal treatment for a tooth that is giving you trouble since the last few months. But your dentist tells you that your tooth is in perfect condition. He is happy to see you healthy and advises for the continuation of the same life style. But your tooth, as weak as it is now, will bother you continuously, and within a few days, you are compelled to see another dental surgeon to minimize your pain.

This is exactly what has happened in Nepal in the last fiscal year: the analysis of the economy provided by the government in its official document, Economic Survey, and the experiences of the general public with macro economic trends are not compatible. The policy of the government is based on the analysis of mediocre economists rather than the experiences of the public. The authorities have proposed a wrong policy in parliament for approval which, if not fine tuned in time, will create serious problems in the country.

The statistical analysis per se of the last fiscal year provides a rosy picture of the economy as claimed by the government. The Gross National Product (GDP) at constant price increased by 6 percent with GDP of the agricultural sector alone rising by about 4.0 percent compared with an average annual growth of rate 1.9 percent in the fiscal years 1997/98- 1998-99. The inflation rate (2.1 percent) was also moderate compared with a rate of 11.4 percent in 1997/98. Given these figures, the National Planning Commission, noted recently for its inefficiency and the size of its staff, about 500 including consultants, estimated wrongly that there is a decline in the overall poverty rate- from 42 to 38 percent. It presumably led the government to declare in the Budget Speech that "program implementation will be strengthened in line with the work plan envisaged in the Agricultural Perspective Plan".

In reality, the money income of farmers- and agricultural sector provides livelihood for 85 percent of the population- increased only marginally. True, the real output has increased by 4.0 percent. But to calculate the money income of the farmers, we have to take into account the price of agricultural products which declined at a rate faster rate than the rise in output. As a result, the money income increased by 1.2 percent only, the lowest rate in the last fifteen years. The increase in income is less than the growth in population which is increasing at an annual rate of 2.3 percent. If income is increasing at a rate slower than the growth rate of population, the per capita income will naturally decline and poverty rate will increase. This is what happened in Nepal last year.

There is no basis for the National Planning Commission (NPC) to claim a decline in poverty rate. (If they are talking about the poverty rate of the members of the NPC, I have nothing to add). The inflation rate is low but it has also declined at the cost of the agricultural sector. In the last fiscal year, the agricultural products became cheaper by more than 10 percent while manufactured articles became costlier by 12 - 15 percent , and the price of fuel and electricity continued to increase at an alarming rate. These trends have increased the inequality of income in favour of urban sector, home to 15 percent of the population.

What changes do APP need to implement? It is simple. The price of agricultural products in Nepal is determined largely by the Indian price, a fact realized even by the policy makers given open border associated with fixed exchange rate between Nepalese and Indian currency. But Nepal is trying to maintain an independent price policy with respect to inputs needed in the agricultural sector under which we can include fertilizer, irrigation etc. India, however, is providing subsidy on these areas but Nepal, under pressure from the Asian Development Bank, has removed subsidies on all these inputs. This has naturally increased the cost of production of agricultural goods in Nepal relative to India. It is virtually impossible now for the Nepalese farmers to sell their products in the Indian market at profit. If the output price is determined exogenously, it is absurd to try maintaining an independent input price policy. Neither Nepal can follow a flexible exchange rate, given current political situation. We have only limited freedom to develop policy measures in this age of globalization.

What choices will the Nepalese farmers have in such a situation? The answer can be given in one word: none. They have either to produce and sell at a price which is lower than the cost of production, or they can stop their production. Farmers have already chosen the later option in the production of wheat in the current season; the production of wheat declined compared to last year. It is safe to conclude that if no new policy measures are introduced in the agriculture sector immediately to correct the existing distortions, the production of agriculture will definitely decline despite the expected good monsoon. If the government is committed to following same techniques to implement APP, I will recommend the new Minister of Agriculture to resign from his post to save his political career.

All for the chair

By Pragya Karki

I am talking about a septuagenarian man who fell in love with a Chair. Mind you, this is not an ordinary Chair but a special one. It is somewhat like an Alladdin’s Magical Lamp, which will provide its master the privileges such as power, money and fame. But it is entirely in the hand of the master as to how he or she utilizes the benefits showered on him. Each and every leader’s ( including the ones who promise to build a bridge even where there is no river) one and the only dream is to sit on this special Chair. Once they possess this Chair, I guess, they use Super Glue to be stuck to the Chair. Those thin, lean and skinny ones will start adding extra pounds, and those who hardly rode a cycle, will be the man at wheels of the gleaming metal body, that is after they tie their knot with this Chair. The above mentioned old man also did his best and left no stone unturned to stick to this Chair. And yes, to a greater extent, he succeeded. Although, there was a helluva pressure from external as well as internal "environment", he did not budge an inch. His principle was: The more obstinate you are, the more longer you will be on the Chair. Once you conquer the Chair you give a damn to the problems of this ailing country. That old man did have a vision, but nobody knew what that vision was. His rickety mind was a storehouse of conspiracies, knitted to enjoy absolute power. His four-chambered heart pumped blood in the name of his relatives.

The pair of two long ears were always wide open to hear sugar-coated words from his kith and kin, and to outsides it was sealed up, as if he was a complete deaf. He practised what the people hated most-nepotism, corruption, insecurity, to name a few. Above all, he added fuel to the already burning fire and spoke the language of war and weapons. In fact he had his own theories and principles ( read whims and fancies), regarding good governance. Quite unexpectedly, like a thunderbolt, one fine day, he broke his relationship with his lady love, I mean the Chair with a painful heart. As a result, the people of this tiny kingdom heaved a sigh of relief.

Today, a new man is on that same envious Chair. This new man’s re-arrival has definitely brought a ray of hope. Unlike the old man, this new stalwart speaks the language of peace and harmony. He believes that peace is a must for development and development is a must for peace. For him, the relationship of peace and development is something of a chicken and egg situation. They influence each other and are influenced by each other.

They expect peace, security, stability and prosperity from this new groom married to the same old bride. As for the old man, who cannot stop spewing acid from his mouth even if he is away from the coveted Chair reminds me of an old character, William of the poem entitled, "You are old, father William", written by Lewis Carroll. When a young man asks father William as to why he incessantly stands on his head in spite of his old age, William replies, "In my youth, I feared it might
injure the brain, but now that I am perfectly sure I have none, why, I do it again and again."

Problems and potentials with an urbanizing Nepal

By Erik Bryld

The cities in the developing countries are growing rapidly. In the least developed countries more than 40 percent of the population were living in urban areas by the turn of the century. These drastic developments have created a new category of poor – the urban poor. In Asia more than half of the urban households are living in a state of poverty, and on a global scale, an estimated 600 million poor people reside in urban areas. These tendencies are now also affecting Nepal, highlighting the necessity of increasing the focus on urban development.

Nepal has until recently been exempted from severe urban poverty. In 1971, a mere 4.1 percent of the population lived in urban areas, and there was therefore little incentive to take urbanization into consideration when development policies were formulated. This year, however, the level of urbanization has reached an estimated 15.9 percent or almost four million people. If this trend continues, half of the population of Nepal will be living in urban areas by the year 2035 . If it is then further assumed that half of the urban population will be living in poverty, as in the rest of Asia, the total amount of urban poor in Nepal will reach 15 million within three decades. These projections are made with the uncertainty of the future development of the country, but the tendency is clear: urbanization is increasing rapidly, and so is the number of urban poor.

Living conditions and livelihood strategies for urban poor are in many ways different from those of the rural poor. The urban poor have to cope with a life, that is more expensive due to lack of access to natural resources and higher service costs, forcing them to spend between 60 and 80 percent of their earnings on food. They live with the insecurity of tenure in unlawful shanty towns, where they risk evictions and are exposed to environmental hazards. These problems are more pronounced in the majority of developing countries in Asia. Urban poor, thus, face several difficulties, which limits their well being even more than that of the rural poor. Urbanization eventually brings with it not only growth but also severe socio-economic problems for the poor, which need to be dealt with locally and nationally. Policies need to be formulated to limit the negative impacts of the rapid population growth in urban areas.

The rapid urbanization in developing countries, including Nepal, has put increased pressure on the local governance structures. Municipalities face new difficulties as the number of urban poor increases. Besides finding secure and proper land for the new urban residents, the municipalities also have to deal with an increase in demand for services and basic provisions. Municipalities need to improve the food supply and level of services while at the same time constructively utilize the major work potential of all the new urban citizens as service providers and job generators.

Rapid urbanizing poverty is, however, not solely a municipal problem. It is closely connected to policies and actions in rural areas, where structural changes and rapid population growth increases urbanization. There is thus, a need to focus more on the rural-urban linkages to accommodate the problems of poverty and exploit the potentials of increased rural-urban interaction. Political decisions, which do not take into account both rural and the urban risks, increase poverty in both areas. What is important to understand is that cities are not isolated areas with fixed boundaries, the changes in the cities affects the development of the rural areas, and vice-versa. The single most important factor promoting growth of rural towns is a rise in income in rural areas, resulting in an increase on the level of consumption and demand for services from urban areas.

Realizing that urbanization is an unavoidable development, the task is to shape the development to the benefit of the nation and the poor. The classical development strategy has focused on strengthening large metropolitan centres in the hope that this development would trickle down and strengthen the rural areas and local towns. However, research has shown that economic growth of the centre hardly ever reaches beyond the larger cities. Development in the cities therefore often results in an uneven development in the country with a largely developed urban space around megacities and with little development in rural areas and towns. This also has a negative economic impact when financial recession sets in, as the country will only have one large growth machine on which the whole country depends. An alternative strategy is to focus not only on hierarchic city networks, but also on horizontal networks, which strengthen rural as well as urban areas simultaneously. As these are interdependent, a more equal development will also be able to generate growth in rural areas without neglecting urban areas. After all, rural towns develop primarily when the consumption in rural areas is high.

As has been illustrated above, it is not realistic nor desirable to prevent migration to urban areas from taking place since people are not passive victims within the constraints they face. People do their best to cope. On the contrary, this opportunity should be seized in order to develop the best outset for urbanization in Nepal which will be to the benefit of the majority. Urban poverty has generally been neglected by foreign donors. In Nepal, where currently only GTZ and UNDP are engaged in larger urban oriented programmes, this neglect is a natural consequence of the very late urbanization tendencies. Research from neighbouring Asian countries, however, clearly reveals that even though poverty in urban areas is difficult to assess, the number of urban poor accounts for up to half of the urban population, and that their livelihood is often more fragile and insecure than that of the rural poor. With a projected minimum of 15 million poor people living in urban areas of Nepal by 2035 BS, urbanization will pose new challenges to the government and donors in order to accommodate the needs of these new destitute.

The current rural-urban situation in the country is a rare opportunity for all stakeholders to be at the forefront of development and try and mitigate some of the worst effects of urbanization, which overcame Nepal’s neighbours in South and the Southeast Asia. Donors, government and civil society have the chance of shaping urbanization in Nepal in a way, which stimulates growth and creates improved conditions for the poor.

First and foremost, the importance of a decentralized governmental structure at both rural and urban levels has been recognized as paramount for a successful strengthening of municipalities and rural-urban linkages. In Nepal, the first step has already been taken by the Local Self Governance Act 2055, which devolves power to villages, municipalities and districts. A further devolution is needed, however, to strengthen these institutions to become viable generators of a regulated urbanization. This will also entail a strengthening of the local governments’ capacity to deal with these new challenges. But focus on municipalities alone will not solve the potential problems with an urbanizing Nepal.

The low rural consumption in Nepal is one of the main hindrances of growth in urban areas. Therefore, there still needs to be a strong focus on rural development not only to alleviate poverty in these areas, but also to accommodate development in both rural and urban areas. The citizens of Nepal should not be forced to migrate, but should be given the opportunity to seek development prospects where they live. On the other hand, experience shows that development in rural areas alone will not prevent migration. Poverty has already become an outspoken phenomenon in most municipalities of Nepal, and an increased focus on urban areas to balance the development efforts in the country is needed, if the projected high level of urban poverty is to be curved.

(The author is associated with UNDP)