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| Kathmandu, Friday August 08, 2003 Shrawan 23, 2060. |
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Accountability matters
The government’s initiative to enforce
accountability in the public enterprises is welcome news. By forming a task force to work
out indicators for evaluating the performance of the public enterprises, the government
has shown its genuine commitment to improve their performance. In absence of the reward
and punishment mechanism, which offers key incentive for willingness to work, most of our
public enterprises have turned into inefficient, corrupt and unaccountable entities.
A clear cut benchmark for corporations and
unambiguous authority to the ministries concerned to sack the general managers and
dissolve the management committee, if they fail to achieve the minimum benchmark, prepares
a ground for transparent and effective reward and punishment mechanism. The political
leadership should now remain committed to the principle of non-interference in policy
executions, operational strategies and staff recruitment of these corporations and let
them follow the economic rationale.
We should keep in mind that every rupee that
goes in subsidizing the loss making public enterprises has an opportunity cost since many
Nepalis still lack access to drinking water, primary education and primary health
services. After all, at the end of the day, we should be able to justify why it is worth
investing in the loss making enterprises at the cost of the poor Nepalis. The huge
investment the state has made, thus far, in the public enterprises has gone waste. The
average rate of return on state’s investment in them is meager 0.24 percent. At that
rate, it does not make any economic sense to invest more or bail out these sick
enterprises.
Besides the monetary loss, many of our
state-owned enterprises have also failed to meet the very purpose for which they were
established. They were formed under the philosophy that they would check the excesses of
the market, chiefly the monopolistic tendency of the private capitalists, and also set a
benchmark for the supply of quality goods. Unfortunately, in many areas, these public
corporations themselves have become the emblem of monopoly and providers of sub-standard
goods and services. That the state-run monopoly, Nepal Telecommunication Corporation, is
sitting on a heap of over two hundred thousand telephone applications, is a case in point.
Luckily, we opened up private investment in airlines sector in the early nineties, thereby
drastically improving the quality of domestic air travel services.
Therefore, a little philosophical thinking, too,
will be good. Adam Smith’s suggestion that the state’s responsibility is to
guarantee security to its people, not to sell shoes, can work as some sort of guideline.
The state should immediately withdraw from the public enterprises of commercial value,
such as, the Royal Nepal Airlines Corporation, which only crowds out the private sector
investment. However, it should continue its presence in the areas of basic utility
services, notably drinking water and electricity, but with improved efficiency. |
