‘Rs. 100 bln budget may make media history, not fiscal history’

Madhukar Shumshere J.B.Rana, 60, is one of the few economists in the country with the managerial perspective and strong intellectuality. Master in economics from the MacMaster University, Canada, Rana has watched Nepal’s economic development activities in the global context. Born in Jawalakhel, Lalitpur, in 1941, he completed his schooling in Darjeeling and did his advanced studies in India, Switzerland, England and Canada. In 1967, he started his public career in Canada as Manpower Economist with the Federal Government and later as an Economics Lecturer. He returned to Nepal in 1971 to join the Centre for Economic Development & Administration (CEDA) as Associate Professor (Senior Research and Training Officer).

In his impressive professional career, he served as Special Advisor to Ministry of Foreign Affairs (1996-98), Chief Economic Advisor to the Ministry of Finance (1983-84), senior regional programme manager of the UNDP for South Asia (1994-95), Commissioner of the SAARC Independent Commission on Poverty Alleviation. His work in UNCTAD, ESCAP Transit Mission to Mongolia and Turkmenistan, National Trading Ltd, and in a number of international, supra-national and national organisations has gained accolades. He was elected President of the Management Association of Nepal (MAN) for two consecutive terms in the past. Also veteran tennis player, he has been bestowed upon with various awards and honours. Endowed with strong academic and intellectual prowess and analytical dexterity, he is modesty personified.

Rana, the sexagenarian economist, recently talked to The Rising Nepal on the forthcoming budget and other contemporary economic issues. Excerpts:

TRN: What reformative measures in agricultural and industrial sectors are essential in the budget to accelerate the economic growth?

MSR: Reform measures for the agricultural sector have been laid down already in the long-term Agricultural Plan (Agricultural Perspective Plan). Implementation of the key recommendations should be the main mantra for the budget. Ownership of the plan should be handed over to a technocracy—and not to politicians with a compliant, subservient bureaucracy that includes the National Planning Commission. For the industrial sector, it is necessary to reform the so-called One Window Policy and its superstructure— the Investment Promotion Board. Given the critical constraints on the budget in the face of the new demand for internal security and development of the neglected regions, on the one hand, and the massive recurring demands for pension funds, on the other, there are only two ways to accelerate economic growth.

One, by curtailing waste through a National Austerity Movement that should be seriously spearheaded by the Office of the Prime Minister and supported by a full-time Minister without Portfolio, who should be accountable each quarter for measures taken to enhance national productivity, minimise wastage of national resources and maximise austerity.

Two, by mobilising foreign direct investments by targeting India, USA, Japan, Germany, UK and China through the policy of economic diplomacy as already enunciated by HMG in 1995.

TRN: On the trade front, operation of the inland container depot or dry port with the broad-gauge railway linkage is expected in Birgunj in the near future. Being one of the key persons involved in the formulation of Nepal-India trade and transit treaty in the past and also former special advisor to the Ministry of Foreign Affairs, what do you think should Nepal do to maximise the benefits from the treaty?

MSR: The concept of a dry port was visualized as far back as 1975 when I headed an HMG Task Force on Trade and Commercial Policies set up by Dr. Harkha Gurung when he was the Minister of Industry and Trade. It is heartening to see that the dry port will soon be in operation. More such dry ports are required not only along the Indo-Nepal border but also further inland to curtail trans-shipment costs. It maybe feasible to extend the Indian broad gauge lines into Hetauda, just as well as from Jogbani into Dharan, including from Gorakhpur into Lumbini. Nepal must develop the infrastructure for handling container traffic in which case the benefits of dry ports will multiply. So, also if shipped bills of lading can be negotiated through our banks when effected from theses dry ports themselves.

The Indo-Nepal treaty has benefitted Nepal; there is no doubt. Further benefits may be possible if we now seek new opportunities provided by this treaty. For example, with the cooperation of India, we can set of EPZ’s (Export Promotion Zones) along the Nepalgunj -Lucknow-Delhi corridor to build Japanese and Korean townships within Nepal, so that the Japanese and Korean business houses can locate their industries in their ‘own’ townships in Nepal (rather than India), while targeting the Indian market utilizing the provision for duty free access to Indian markets. So also with the agreement of India, we may think of having our second international airport in Bhairahawa as a regional transport hub to serve north Bengal and Bihar, Sikkim and the North-East states of India. The Indo-Nepal treaty has benefited Nepal by permitting trade with and through Bangladesh. It is high time that we thought of developing a multi-sectoral, long-term strategic partnership with Bangladesh for mutual benefits (including) also the benefit of the eastern seaboard of India.

TRN: What specific measures would you suggest for checking the budget deficit in the country?

MSR: To check budgetary deficit we must stop political largesse paid from the earnings of tax payers to the Members of Parliament in respect of their allowances, perks and privileges. High-level public servants were given the privilege to import duty free cars with the aim that they would use their own and not cars, petrol and drivers paid for by the taxpayers’ money. Has this happened?

On the contrary, they are actually having their cake and eating it too rather blatantly! Then, it is fashionable for a Finance Minister to show a large budget. The temptation to cross the Rs 100 billion budget will, I am sure, be strong this time as it will make media history, if not real fiscal history. With the exception of Dr. Prakash Chandra Lohani, in the mid-1980s, no minister has dared curtail budget that eventually means recourse to deficit financing and eventual hurt on the poor people—specially, urban poor—from the resultant inflation. So many austerity measures can be taken to curtail the deficit as a veritable gold mine of prospects exists given the inefficiencies, graft and corruption and the general mismanagement of our national resources. The budgetary deficit can also be curtailed by expediting the entry of foreign direct investments (FDIs) in transportation, energy, telecommunications and offshore banking as these businesses will pay royalties to the government for their operations.

TRN: In a recent write-up, you have opined that Nepal should "move away from its aid dependency and its past strategy of international penury—or selling its poverty." In light of the same, what measures do we need in this process of the human intervention on poverty reduction?

MSR: I made that remark as I believe foreign aid is having, at the margin, very negative utility on the economy. I did not mean to imply that all aid should stop. Not so, as the total utility of foreign aid is still immense. One such example of negative utility is that there is hardly any sense of efficiency in the decision-making process as aid is conceived to be ‘cheap’ or near (cost) free and, who knows, it may never have to be paid back with the talk of debt forgiveness. Hence, invite more aid from wherever and for whatever. At the outset, I have said it is time to mobilize foreign direct investments as a balanced alternative to aid since this investment through mobilization of the international and national private sectors will have greater dynamism on the economy and society. Faster growth means quicker poverty eradication through the creation of productive employment.

With regard to poverty reduction, His Majesty’s Government is (reportedly) going to create a separate Fund for Poverty Alleviation in this budget session. This is a welcome move to have all pro-poor programmes under one umbrella. It is to be expected that the budgetary process will be refined and made far more sophisticated in future as we will now know how much is being spent to benefit the poor and ultra-poor directly and the various ministries engaged in poverty alleviation programmes can be downsized or reengineered to cope with the new demands for economic efficiency and growth. Delivery of development services is likely to be the domain of the NGOs working through the DDCs, Municipalities and VDCs. May I take this opportunity to appeal to HMG and the people of Nepal, through your esteemed newspaper, to christen the proposed Poverty Fund as the King Birendra and Queen Aishwarya Fund for Social Mobilization and Poverty Eradication in honour of their late Majesties’ contribution to Nepal and its people.

Appeals for charity and largesse should be made to all the citizens of Nepal to generously contribute to this fund and to target campaigns for contributions at times of births, weddings, deaths and other solemn occasions. The media can play a grand role to develop amidst the urban and rural elite groups a charitable ethos for caring, empathy and sharing with the poor. More, very much more, national resources can be made available by earmarking a substantial portion of the proceeds from the privatisation of all the public enterprises to be effected by this Budget into this Royal fund.