Correcting South Asia’s political anomalies

By KHILENDRA BASNYAT

The political dynamics of South Asia are shaped more by ethnic, tribal, regional, sub-national and religious identities. Hence, political parties in this region seem to find their genesis in caste, class and other forms of social and economic hierarchies. In fact, caste might preordain political parties’ development with the key posts occupied by Brahmins and Chhetris in Nepal. In Pakistan, political parties are still the other forms of feudal and affluent classes. In Bangladesh and Sri Lanka, family and personality factors determine the origin and continuity of political parties.

In the post-colonial South Asia, various kinds of constitutional elements gave birth to group, caste, ethnic and regional configuration which were also used for political mobilisation. If one fails to comprehend the interface of a class, caste, ethnic, religious, sub-national and parties, it not only becomes arduous to locate the political parties but will also be virtually impossible to show the interrelationship between parties and governments. Since the creation of political parties has been a continuous process, South Asia, barring India and Sri Lanka, has had intermittent experiences of parties’ role in the process of governance.

In Bangladesh, Nepal and Pakistan, the spell of authoritarian regime tried to incapacitate political parties taking them as foreign imports or unnatural to the regimes innovated by the new rulers. However, due to the problems of legitimacy, they revived old political parties with which they could present some semblance of the representative character of these regimes. India, except for a brief emergency period, and Sri Lanka have been able to retain their democratic character throughout, although they faced endemic crises.

The most serious menace to the democratic process in South Asian countries lies in the degeneration of democratic institutions. In these countries, the quality of parliamentary discourse has deteriorated. Instead of discussions on issues of public concern and policy issues planned to improve the quality of governance, parliaments in most of South Asian countries are exposed to intemperate exchanges, horse-trading, periodic walk-outs by the opposition parties and even resort to violence on the floor of the House. The degeneration in the quality of the legislatures appears to be augmented by the increasingly confrontational style of politics in all South Asian countries.

Actually, South Asia’s parliament does not do what it should and strives to do what it should not. The use of parliament as a political battleground has compromised its effectiveness as an instrument of restraint on executive behaviour and the apex law-making body in most countries of this region. It has been realised that the bureaucratic growth in South Asia has encouraged political interference planned to abuse the recruitment process as an instrument of political patronage and for the politicisation of administration. This process has encouraged political opportunism among the bureaucrats rather than promoting independence of thoughts and actions. Moreover, it has protected the incompetent and the corrupt from being exposed to disciplinary action and ultimately undermined the integrity and efficiency of administration.

Over the years, criminalisation of politics and the subsequent entry of criminal elements into legislature has increased slowly in South Asia. The relationship between politicians and criminal gangs has increased in the past few years because both sides accrue from such association. In this region, political parties and politicians reap benefits from the illegal money, power and muscle of the criminal gangs.

Similarly, the criminal gangs and mafia wield power indirectly through their close nexus with the politicians. They themselves have been entering politics and wielding power. As the distinction between politicians and criminals is steadily narrowing, it is natural to say that we have criminalised politicians and politicised criminals. Under these conditions, political parties’ interests are directly opposed to people’s interests. Their main motive is to capture and retain power from both the politicians and their supporters.

In most Asian countries, each political party seems to have developed its own vested interests and none of these is prepared to dissolve its identity in preference to its own self-interests. In these countries high ranking people misuse public offices to promote their public agendas and interests, whether political or otherwise. Democratisation of these countries has brought the problems of governance to the fore. There is a general feeling among the people of this region that they have governments, but no governance.

In most South Asian countries, the so-called politicians are inspired by the lust for power. Actually, this shortcoming cannot be blamed on the constitution. Its source has to be sought in the kind of ruling classes that have developed through the manipulation of the electoral system. They have been using their power for their own benefits, denying people’s constitutional rights. This has led to increasing people’s alienation from the government and political parties from their own constituencies.In such a situation, the South Asian people are more and more confounded with the present political system. The middle-class youths are becoming cynical. There’s more, the poorer among the poor are being criminalised while being involved in diverse anti-social activities.

In South Asia, politics should be for strengthening democracy, people’s fundamental rights and overall development. The objective of all political parties should be to strengthen people’s rights, raise their living standard and ensure overall and sustainable socio-economic development of their respective countries. Despite the common objective and goal, political parties do not seem to have chalked out a common strategy and approach for their national development and improve the social as well as economic status of the people at large. In many cases, political parties and politicians still appear to be bogged down in their petty partisan interests even on the development issue. This is one of the impediments in their development strategies and campaigns.

Till now, in South Asia, there is no active people’s participation in politics. However, such participation should be intensified in this region to help expedite various kinds of development. In addition, social groups such as women, the low caste groups and the poor must be assisted by the political process to access capabilities and to expand their stockholding in their respective countries’ affairs.

In recent times, South Asian countries need leadership of high caliber and quality. Survival of democratic institutions and hopes of sustainable development depend on the ability of these countries to bring up strong and patriotic leaders, honest and disciplined men and women imbued with a spirit of social service. None of the major South Asian countries has even two or three healthy political parties based on distinct ideologies, policies and programmes evolved. With the existence of a large number of parties, the existing political system in these countries has often resulted in candidates being elected only with a minority of votes cast. Sometimes the number of votes received by a candidate is only ten to twenty percent, therby creating legitimate doubts about the represenative credential of those elected.

A healthy system of political parties based on ideology and programmes must evolve in these countries, restricting the number of political parties. Political parties must themselves be democratic in their organisations. They need to be regulated and disciplined. Apart from this, party membership should be open to all citizens, and party elections must be regular, free and fair. The sources of parties’ funds should not only be declared but also be opened to scrutiny. Actually, the constitution, the rule of law and democratic institutions cannot be expected to last long in a situation of feudalism, mass illiteracy and poverty. Therefore, endeavours at land reforms, economic development and education are very essential.

In reality, politics will be meaningful if it is used to utilise resources, to decide priorities and to formulate plans for the equitable allocation of funds to the regions by the state. Such allocation should be based on arbitrary and subjective considerations and proper care of objective factors must be taken.

In the present circumstances, parliamentary reforms are necessary in South Asia. In this region, members need basic qualifications and credentials. Membership of legislature or any other public office should not become a lifelong profession of anyone. In addition, persons with criminal antecedents should not be allowed to contest any election.

In order to improve South Asia’s existing politics, the people of this region should be vigilant and active. Unless they are active enough to uproot the existing political anomalies, the vested intrests of politicians will never allow people’s empowerment.

Quest for gold and human values

By SUJATA RAI DEWAN

As I sit down to dinner every night the conversation is somehow always governed by money matters:

# Our cousin so and so got married to a very rich guy.

# Do you know Ms X, she’s married a doctor.

# Any doctor would marry someone who would bring such dowry.

# Without money your’re nobody, so it’s only natural for people to run after money.

# Oh and you know today I met Mr G. He’s "high" class, for he’s got so much money.

And this, I’d like to remind you, is normal coversation amongst the educated middle class.

Surely money has become the mesaure of worth.

We may pride ourselves of the fact that we are "educated" and "civilised" yet we still weigh others in gold. Money is the sole determinant of whether a person is someone worth being acquainted with. I am pretty certain that many of you would have heard, if not used, this line when it comes to socialising- "He is a "ganthwala" (literally the one who has bundles of money) so to be acquainted with him is "faidajanak" (profitable)"

If all one thinks is in terms of profit and loss, the world must surely be fast growing into a global shop where one has to pay for everything- love, affection, respect and brotherhood-too bad. If you can’t pay for them you’ll certainly incur heavy losses.

The Ten Commandments that a prophet in this century might draw up are as follows:

1. So what if you’ve earned the money by cheating others? Nobody is intrested where the money came from -the important thing is that you have it.

2. Why do you bother about giving your child formal education ? Just drill into him that the one end in life is money, and it doesn’t matter what means one applies towards that end. However, if you should decide that your child should go to school, make sure that it is more expensive than the one that your rival is sending his child to.

3. Then, when your child is old enough to be married, always make sure that his in-laws are "ganthwalas", so that even if you don’t already belong to the high class you can buy a membership to a rich club.

4. If you happen to be a parent to daughters, you needn’t send them to school, hoard money- (beg, borrow, steal) to buy sons-in-law, and make sure that your daughters wear long fingernails for high class people are supposed to wear long fingernails as they needn’t work. It would certainly be to the girl’s benfit if she wore a haughty manner. Only members of the so-called low class or bumpkins are polite, courteous, respectful and loving.

5. And if you should have sons, make them realise early that owning several cars and lots of property is more important than going to unversity and marrying women with a huge dowry is an intelligent career move.

6. Never mention the days when you used to be poor- not even the time when you were dying of some sickness but couldn’t go to a doctor for want of money-for your were born with a golden spoon. In fact you can actually trace some blue-blood in your ancestry.

7. Immediately disown poor relatives for they will certainly ruin the image of your high class origins you’ve worked so hard to project.

8. A mobile phone or a pager is a must especially during social gatherings- its beeping will serve to remind other people that you are somebody. Never mind if the mobile phone serves no other purpose other than "Khana Khaisakyo-Ke Chha" kind of dialogue. Just pretend it’s very important, excuse yourself from your group and lengthen your communication from where you can, only be observed and not overheard.

9. Memorise the names of a few "ganthwalas" and sprinkle them in your conversation, taking care to appear casual while you mention them. This will give leverage to the mould you’re trying to fit into.

10. Last but not the least re-christen yourself, for now you’re no longer who you were.

Losing leasing companies

By L D MAHAT

Leasing industry in Nepal is nearly six years old. Leasing in Nepal is essentially financial leasing; market and regulatory compulsions have yet not forced any major move towards operating leases. Leasing business has not been able to get momentum although it passed a fair length of time. Lease finance outstanding as of mid April 2001 stood at Rs 243 million representing 2.2% of the total credit granted by finance companies.

Accounting and tax implications of leasing business are governed by the gazette notification of the government published on September 23, 1996. The notification provides that the leasing company is required to book the assets leased as fixed assets and recognise the lease rental as income. The lessee is required to make disclosure of assets obtained on lease instead of capitalising such assets and book the lease rental as expenses. The leasing company is entitled to claim depreciation on leased assets every year and terminal depreciation at the time of transfer of leased assets to the lessee after the expiry of lease period.

In any financial lease, the recovery of leasing company from the lessee (termed as lease rental) comprises of two parts: the real income earned from financing the assets leased and realisation of own capital. The latter, though not an income in true sense, if offered for tax, as part of the whole realised by the leasing company and accounted for as lease rental income. This leasing company is required to pay tax on such income which can be termed as tax loss incurred on capital recovery. As against this, the leasing company can claim depreciation on the leased assets which is used by the lessee and get tax gain on such depreciation. Over the tenure of lease the tax benefit equals the tax loss if we ignore the time value of money.

A major chunk of lease deals executed in Nepal have been in the area of vehicles, plant and machinery. In case of most of the plant and machinery and light vehicles the depreciation rate prescribed for tax purpose is 15% on diminishing balance method. Generally lease rentals fixed by leasing companies are flat rentals, ie equal rental over the term of lease. In case of flat rentals the residue left after recovery of the finance income, the capital recovery takes a back-heavy pattern. On the other hand, depreciation charged over a period under diminishing balance method has a front-heavy pattern. Moreover, as the depreciation claimed at the rate prescribed for tax purpose cannot write-off a substantial portion of assets over a period of lease, the terminal depreciation claimed by the leasing companies represents a major portion of the leased assets. This results into a timing difference between the tax gain and the tax loss, the net being a small gain or loss in the initial year; accelerating loss in the subsequent years of the lease and gain at the time of expiry of lease because of terminal depreciation. In this situation, leasing companies will have to fight hard to protect their income against mounting tax burden in the initial years of lease.

Nepalese leasing companies generally provide lease facility for 2 to 5 years. We will take an example of 3 years lease to explain the loss suffered by leasing company because of timing difference between the tax gain from the claim of depreciation and the tax loss on the recovery of capital portion of the leased assets included in the lease rental. Suppose a leasing company provides a finance lease with the following terms:

Lease facility amount Rs 1,200, 000

Lease period-3 years

Flat lease rental per month Rs 42,188

Implicit rate of interest- 16%

Rate of income tax-33%

Rate of depreciation-15% (diminishing balance method)

The table shows that the total tax loss suffered by the leasing company equals the tax gain obtained by it over the period of lease. As heavy tax losses were incurred in the initial two years and gain obtained only in the third year, the leasing company loses in totality when time value of money is considered. If we assume cost of capital of the leasing company as 10% and this rate is used as a discount rate, the present value of tax burden to the company becomes Rs 325,000 while the present value of tax shield comes to Rs 310,700 resulting in net loss to the leasing company to the extent of Rs
14,300 (1.2% of the amount of lease facility). It is interesting to note that some leasing companies are offering lower rate of interest on lease facility compared to rate offered by them for other credit facilities despite the tax loss incurred on leasing transactions.

The prevailing rate of depreciation prescribed by tax authorities discourages leasing business in Nepal. In developed country, like the US, the contribution of leasing towards gross capital formation is in excess of 25%. The government should not overlook the potential existing in the leasing industry and adopt a lenient encouraging attitude to this industry at least in the initial stages.