Overhauling education

With the proposal for a licensing mechanism for teachers gaining ground on the parliamentary floor, there is reason to be optimistic that the malicious fake certificate racket will be ended, at least at public schools. But the question that lingers is over implementation. Innumerable policies, with promising tags, have come and gone. Some have died a natural death, while others got aborted midway. Now if everything goes as expected, and if there is no unscrupulous intervention, thousands of teachers with fake education certificates will be shunted out of public schools. Informal estimates put the number of dubious academic certificate holders at thirty percent. The proposed licensing mechanism requires about half a million public school teachers to sit for tough exams. That is not all. Plans are also afoot to make academic institutions a non-political zone, and to provide free education at public schools up to primary level only. But talk of non-politicization has to be taken with a pinch of salt. More than anybody else, the major political parties must be held accountable for the dirty politics at academic institutions. If the seventh amendment to the Education Act gets enacted, the education sector, which has been receiving shabby treatment over the decades, will be able to breathe a sigh of relief.

That education is a great socializing instrument needs no emphasis, but unfortunately, this sector has been treated with disdain for long. Plagued by ills, the education sector wobbled in uncertainty and the perceived threat of violence. Until recently, the All Nepal National Independent Students’ Union (ANNISU-Revolutionary) had turned academic institutions into a victim of their wrath against the establishment. Terror reigned at schools and colleges. The road to normalcy was indeed very difficult. With security threats still looming, it will be no exaggeration to say that academic institutions are at risk of manipulation and violence. In those days of terror, the government appeared to be far away, somewhere in Singha Durbar, watching but not acting, and the law enforcing agencies went limp. It was only after the deployment of army personnel and the infamous raid on college hostels that the government was able to restore peace in the education sector. Security concerns aside, the quality of education suffered due to unqualified teachers with dubious credentials. No wonder the pass percentage for SLC exams has been grievously low. And many who pass through the Iron Gate are likely to flunk at higher secondary or intermediate levels. Given such a pathetic situation, the amendment Bill must be enacted without delay. Even a single day counts as it affects hundreds of thousands of students.

The proposed plan to restrict free education is likely to draw flak, given the low per capita income of the majority of Nepalis and low literacy rate. Rather than facing the irregularities of the past, it is better if public schools charge nominal fees and offer scholarships to the poor and needy. With the fees should come proper infrastructure, qualified teachers, and a better learning atmosphere. Just renaming schools won’t help. The government must come up with distinct policies for the newly named "community schools", and do its best to bridge the widening chasm between public and private schools. Another proposal is bringing private schools under the tax net. This is undoubtedly commendable, but one cannot help suspicions of under the counter dealings. This is no figment of perverse imagination but a product of prevalent culture. With the parliamentary session drawing to a close and a number of crucial bills still in queue, it would indeed be wonderful if the Education Bill gets enacted immediately.

NPAs at Nepalese financial institutions

By Bishwambhar Neupane

Thinking rationally no one shall be surprised to note two of the giant commercial banks of this country viz: Nepal Bank Ltd and Rastriya Banijya Bank accounting for the highest number and amount of non performing assets (NPA) among players in the industry. In general, and more specifically in least developed countries like ours, the larger the size of the credit portfolio the larger the amount of NPAs.

The concept and realization of NPAs in the Nepalese financial sector evolved round about a decade ago along with the notion of prudential accounting norms. I reckon that ten years time frame should have been more than enough to formulate and implement strategies for identifying and channelising the ever accumulating NPAs at Nepalese financial institutions (FIs). However, the Nepal Rastra Bank (NRB) seems to have realized the panic only a year ago. As a result, the NRB came up with a nineteen point strategy, primarily pertaining to ways to tackle NPAs. Some of the measures the NRB has envisaged are formation of an assets reconstruction company, credit rating agencies, legal reforms, strengthening administrative/monitoring/supervising mechanisms etc, and above all, the recent NRB directives (number 1 to 7). Although the NRB, vis-a-vis the FIs would have been much better off had it come up with all these philosophies some five years ago, better late than never.

The one major reason that can be attributed for the already prevalent and ever increasing NPAs is unhealthy competition among the commercial banks. Since the size of our economy has remained more or less stagnant over the past half a decade or so, the size of the total pie has not changed much. Every player in the market means business and its primary motto is "making profit". This has enhanced unhealthy competition among the banks through interest rate reduction, issuing loans irrespective of borrowers’ credibility and authenticity, etc. In course of making their credit portfolios bigger, all the players have been pouring their investments into the same pie thereby over financing the pie. Given this scenario, it is no surprise to discover a good loan turning into an NPA because of over financing.

Today, the world economy is empathizing more with liberalization, privatization and globalization (LPG). Policy of liberalization has encouraged effective mobilization of local resources as well as foreign direct investment (FDI). The government’s realization that it’s role, from a long term point of view, is to govern and not to play that an industrialist or businessman has made it focus more towards achieving a market economy where economic activities are guided and dictated by the forces of demand and supply. And thus the ownership of state owned enterprises (SOEs) is being gradually transferred into the hands of the private sector. Globalization, a concept where the entire world market is considered under one roof, has enhanced free competition. All these opportunities are inviting professional experts to come forward and deliver. Having stated the above, it is apparent that only the forces of demand and supply are liable to drive the market, and the banking sector is no exception. This economic theory provides customers with lots of options to decide upon their banks. One good thing this theory has brought about is improvement in service delivery. However, the other side of the coin is it has given the customers an unfair advantage. The competition among banks has grown so intense that it may be termed "cut-throat". Guided by this motive, commercial banks in Nepal have become least visionary. Without giving due consideration to long-term consequences and appraising proposals properly, banks are extending their loans. They do not even hesitate to hunt for bad loans, which are bound to turn into NPA a few years down the line, all for the sake of short-term profitability.

It is perceptible that NPAs not only leave a perpetual impact on the particular FI which turns out to be the victim but have a grave impact on the overall economy of the country. Some of the major reasons that contribute to the enhancement of NPAs in Nepalese financial sector are appraised hereunder.

There is no denying that no capital market around the world can be termed perfect. However, the capital markets are primarily driven by certain norms which make lots of sense, and every single movement including stock price fluctuation is guided by prudential norms. By contrast, share prices at the Nepal Stock Exchange (NEPSE) move very surprisingly. Share prices at NEPSE are bound to move upward if a bank registers say Rs 800 million in profit, an accounting profit, even if it does not contribute anything towards shareholders’ wealth maximization. The bank, even while accumulating a sizable NPA, can manage to fool the general public in terms of the accounting profit it registers.

Except for Nepal Industrial Development Corporation (NIDC), no other FI has a different set of analysts for the appraisal of a project. A single analyst or a set of analyst handles the entire project appraisal ranging from technical viability, economic viability to financial viability. Although having engineers to ascertain technical viability and MBAs to ascertain financial viability may not necessarily rule out the possibility of the project turning into NPA, which is apparent upon looking at the total NPA of NIDC itself, nevertheless, it can give a more distinct picture of the project under consideration. Apart from the educational backing of the analyst, vision in appraising the project is also very crucial. The analyst should be competent enough to perceive the picture of the project at least five years down the line, to be precise, up to the final repayment of the bank loan.

Even the most profitable sector of the economy, be it a primary source of foreign currency earning, should not be over financed. There should always be an upper limit for any sector that deserves bank financing. Recently, the NRB came up with a directive to lessen risk concentration on a single borrower/single sector of the economy. The directive states that large sectoral concentrations constitute a source of risk. Bank managements shall have adequate internal policies and systems in place to monitor the bank’s sectoral exposure. However, if the NRB so directs, judging it necessary, a bank shall have to provide additional capital with a view to providing uniformity in the categorization of various sectors of the economy. NRB’s policy of limiting FIs from pouring their lending into a single sector of the economy can be regarded very positive since it is likely to diversify the risk of the total investment evenly and thereby minimize the risk of NPA. NRB shall continue to be more stringent in formulating firm policies in the days ahead too to protect shareholder interests.

Even if the banks endeavour to recoup NPAs through the auction of mortgaged property, the legal system and the regulations are so shabby and defaulter friendly that they have to struggle for many years to realize the auction process. Just imagine this process; a borrower, initially, defaults payment, the bank calls back the loan, six months thereon the concerned authority blacklists the borrower, a 35 days notice goes to the papers for auction and after that a 7 days ultimatum and so on and so forth. Hundreds of cases have been lingering in the courts for many many years. Inefficient legal provisions, from the point of view of the bankers, have encouraged borrowers to default and contributed more towards enhancing the quantum of NPA in Nepalese FIs.

(To be continued)

Craze for junglehood

By Razen Manandhar

Preferring the jungle to the city has become a fashion these days. The Maoists have been in the jungles since the last six years. The charm of the jungle is so strong that they threaten the government about going to the jungles again. Now, Hridayes Bhaisaab has also threatened the government that he will follow Baburam Bhattarai. What’s there in the jungles?

In Hindu philosophy, going into the jungle means the end of all worldly desires. This is the period when you no longer expect anything from anybody, you just want to see your ‘self,’ become mingled with that of the almighty. It is to be a saintly life. You see no person, there is no cheating, no property, no power...

But today’s Hindus are not like that. They are almost the opposite. When they can’t see their desires being fulfilled in the city, they threaten the elders (or those who have the authority of giving or not giving what the people want) with going to the jungle. You can imagine your kids threatening you with going to the roof if you don’t buy them chocolate. Or your daughter threatens you that she will go to Ranipokhari if you don’t allow her to date a Chatpate seller.

Going to the jungle is a most popular threat these days. I think this is a better ultimatum than closing schools and cabin restaurants. It at least shows some environment friendly behaviour. I don’t know, the environmentalists had to spend quite a thick wad to make people aware of this hot-cake warning. Being in the jungle is living amid the biodiversity of the Himalayan Kingdom.

You might think that those who go to the jungle must practice Tapasya and pray to Lord Shiva. How pious even to think of it. A small hut, a firewood stove, some clay pots, orange robe, beads, a trident, and nothing else. They must be spiritually satisfied and this should reflect in their physical appearance as well.

Indeed, those who have been in the jungle look so fresh and energetic. Have you seen the pictures in newspapers? The young militia, boys and girls together, explore all in "nature" that can keep them healthy physically and mentally. That is the secret of their success in the Janayuddha. I was unaware that was the reason behind the gender-friendly decision of Maoist leaders to recruit women soldiers. They respect women’s hearts much, how can they exploit them?

Now, let’s talk a bit about Hridayesh Bhaisaab’s plan to enter the jungle. In a starred hotel, the lawmaker declared that he would go to the jungle, to counter the recommendations of several political parities on not changing the constituencies for 25 years and not giving citizenship to 4 million migrants.

He and his company will go into the jungle with guns in their hands. Okay, I can understand it. But for what? They want to have their 4 million people added to the voter’s list without going to the jungle. Working out a relation of bilateral benefit with the ruling party is easier than announcing this.

Let’s imagine what would happen if all the supporters of Hridayesh’s party go to the jungle. First, a big part of the Terai jungle has been cleared away during the Panchayati system and also in this democratic environment. There is less chance that the now sparse, unprotected and unwanted jungle of the Terai can hide all the people including those 4 million.

Mediocrity in regional area studies

The state of regional area studies in South Asia leaves a lot to be desired. In Nepal, a beginning towards area studies was made at the Centre for Nepal and Asian Studies in the 1980s but the program did not really take off. In our region, the oldest and the most extensive effort towards regional area studies has been made in India. However, there too such programs are not doing well. For instance, the state of Nepal Studies in India is not very good. Why is this so?

The main reason why area studies including Nepal Studies programmes are not thriving in India is their overall poor financial management. Area study centres within universities supported by the University Grants Commission (UGC) are supposed to get 100 percent assistance from the UGC under two categories: recurring and non-recurring costs. Under the former it should provide salaries for four faculty members - one for a Professor (average annual salary of IRs 300,000) who is also the director of the centre, one Reader (salary of IRs 216,000) and two Lecturers (salary of IRs 168,000 each). The UGC should also provide honorarium for two research associates with fixed tenures of two years at the rate of IRs 4,000 a month. Calculated at current average salary rates, the total salary commitment amounts to about IRs 948,000 per year. Under the non-recurring costs, such centres are eligible to get limited amounts of money for the construction of a building, equipment, library materials, fieldwork and conferences.

While that is what the UGC had planned, is it in fact providing those amounts to the area study centres? During the fiscal year 1998-99, the UGC disbursed a total sum of IRs 9.653 million to nineteen centres in seventeen universities at an average of just IRs 508,053 per centre. The average amount each area study centre received was not even enough to pay the salary of one professor and one reader (total of IRs 516,000), let alone be enough to buy books for the library or pay for fieldwork. The centres have also not received the non-recurring grant amounts promised by the UGC.

The implications of this severe fiscal deficit are evident in all areas vital to the active life of area studies centres. Due to lack of money, such centres can not buy new books, journals and other materials for their specialist libraries. Others have computers but they can not afford Internet connectivity. Funding shortage also explains why the building of the Centre for the Study of Nepal in Banaras Hindu University remains incomplete eight years after its foundation stones were laid by the former Prime Minister of Nepal, Girija P Koirala. Similarly research scholars do not have access to adequate amounts of funding for long-term fieldwork in the countries they want to study. Moreover holding of conferences with participation of scholars from all the countries of the region has proved to be very difficult.

Due to the inadequacy of committed monies under the recurring category, area study centres have not been able to provide good language training to its students. Such centres have become unable to retain, replace and recruit outstanding faculty members. Anirudha Gupta, a veteran Nepal expert and the former dean of the School of International Studies at Jawaharlal Nehru University has said, "Facing acute shortage of library material and facilities for field work, the faculty in area studies indulge in petty factionalism or, if based on Delhi, seek gainful outlets as unofficial PROs of the external affairs ministry or embassies of the countries which fall within their areas of specialisation." In other words, the funding crunch has made a direct impact on the quality of work coming out of such institutions. For the same reasons, such centres are no longer able to attract the best students. Talking about the situation in his School, Gupta writes that it attracts students "who bide their time either because they have little else to do or use the University’s hostel and library facilities to prepare for Civil Service Examinations."

If they can not be sustained, under what kinds of long-term management plans were these centres opened to begin with? Most area study centres have been opened in Indian universities without there being any long-term financial and management plans regarding their operation. They have been opened under the fancy of individuals who were interested in creating academic jobs for themselves and those they patronized. As Gupta has observed, "Very often, such initiative lacked convincing rationale. Nor did the beneficiary university make any effort to build up suitably trained staff, language experts or library resources." Gupta further added that the UGC’s approach to the opening of such centres "has been regrettably overindulgent or innocent of self-analysis."

If they can not be sustained, can some of the current area centres be closed? This is possible but often difficult. Once a centre has been set-up, those who secure permanent jobs understandably want all the facilities of pay and promotion offered to faculty members in regular departments. They eventually become an interested party in continuing the life of these centres even when there is hardly any academic activity in them. In addition, once they are around, these Centres become susceptible to the fancies of university bureaucrats who feel no shame to add more programmes to the burden of already disabled area studies centres for very personal reasons. For example the already disabled Centre for the Study of Nepal has now been asked by university bosses to add a Japanese Studies wing to it. This is so because the wife of a top university bureaucrat is Japanese.

Based on the above discussion, it is fair to conclude that area studies programmes on the South Asian region are languishing in at least two countries of South Asia, Nepal and India. Moreover, there is no published evidence to suggest that it is any different in the rest of the region. Not much investment is being made in this field in the universities and the concerned research centres in all of the South Asian countries. Hence regional area studies has a bleak future in South Asia.