By D.R. Khanal

At present Nepal is passing through a very unusual crisis necessitating a complete overhauling of the development approaches of the past and the present. Examining the 10th plan approach paper (and the ongoing preparation for the final plan document), it is found that both the government and National Planning Commission (NPC) are unaware of this need.

At a time when the country is paying the price of the failure of more than 45 years of planned development, any initiative toward preparing the next plan should have started by examining thoroughly the strengths and weaknesses of the past plans. However, the 10th plan approach paper has completely ignored this most important aspect of planning.

First, the approach paper is not guided by the broad visions and long-term perspectives set during the course of preparing the 9th plan. Second, the objectives, strategies and working policies are not complementary to each other. Third, the approach paper gives the impression that the performance of the past plans (including that of the 9th plan) has been broadly satisfactory except some weaknesses here and there. Therefore, the approach paper lacks any paradigm shift in strategies, policies and programs needed in the light of present grave economic situation. Hence, the objective of poverty alleviation is only rhetoric. Fifth, the methodologies employed to calculate aggregate and sector targets, resource requirement etc. are based on the same crude methods as followed in the 1st plan. Even the role of the local institutions has not been given a proper thought. This is ironical in view of so much emphasis on decentralized development.

Ninth Plan Review

The paper reviews the ninth plan using some technocratic methodologies that compare the achievements with targets, without going any deeper into the quality of the achievements. It is conceded that the average growth rate of 5% as targeted may not be achieved, but no analysis is made about the growth pattern and about the likely ramifications of such growth. It is interesting to note that except in the social services sector, the sectoral targets are not likely to be achieved. In this context it is needless to highlight that the excess growth rate in this sector is due to the increase in the salary of the employees and it has nothing to do with the policies and programs of the plan. It is also worth noting that the low GDP growth rate did not prevent the authorities from claiming that the saving targets of the ninth plan have been realized. But a thousand and one studies have shown that in countries like ours it is primarily the level of income that determines the level of saving. If the saving figures as claimed are to be believed, this also means that relatively higher national saving was possible due to remittances and other external income, which are not at all related with the government’s performance.

It has been accepted in the review that investment targets of the plan will not be achieved. This also means that a conducive investment climate is not available in the country. Completely ignoring this aspect, the document claims, without anything substantial to back it up, that the policies of liberalization and privatization have started paying. It seems that the rise in exports along with reduction in current account deficit are taken as the bases for making such claims. Clearly, this claim is not based on recent trends of growing volatility in exports and deceleration in foreign exchange reserve owing to sharp fall in both the exports of major export items and tourism earnings. This means the whole review is guided by only one objective of justifying the claimed reduction in the level of poverty to 38 % during three years of the 9th plan period from 42 % in the base year. These new estimates were made, it is said, employing the World Bank methodology of so-called "pro-poor growth index". Nobody knows how the so-called poverty elasticity and income inequality index were constructed.

More controversial is the fact that the whole analysis is based on average per capita income of three years. Obviously it has not taken into account the fact that during these three years the per capita growth in agriculture was too low, barely catching up with the population growth. Since nearly 80% people depend on agriculture, the claimed results in poverty alleviation are not trustworthy. It is beyond comprehension why such a deficient technique was used. Some independent analyses have indicated that a phenomena of wealth concentration and widening income disparity has exacerbated in Nepal. They reveal that the share of 10 % wealthiest people in the GDP has exceeded 52 % now as compared to 23% ten years ago. Nobody knows how this alarming wealth concentration fits with the conclusion of reduced poverty.

Tenth Plan Strategies

The overall objective of poverty reduction is all right. But the way the targets for the 10th plan are set does not seem convincing because the methodology employed does not permit to calculate those parameters with some statistical precision. Above all, the base figure for poverty target (i.e. 38 %) itself is dubious. In the overall strategy, more freedom from accountability has been granted to the government by assigning it very minimal role – that of just being facilitator for the private sector. Accordingly, a prominence has been given to the role of the market in resolving every type of problem that the country is facing at the moment. Thus the experience of failure of the last own decade of liberalized economic system has been completely ignored. The governance aspect has not received the kind of attention that it needs in the present situation. Going by the way the concepts are put forward regarding the role of the private as well as the government sector in the economy, there will be no need at all to continue with an organization such as the National Planning Commission itself.

Despite poverty reduction being the major objective of the 10th plan, no comprehensive poverty reduction strategies with some concrete departures from the past have been suggested. There is emphasis on the poverty fund to be set up with assistance from the World Bank. This means that even this fund is not an original Nepali idea.

Growth Rates

Various methodological problems associated with the projections related to growth, investment requirement etc. have been found in the approach paper as briefly discussed above. As a result, the sectoral allocations do not match with the priority accorded to the various sectors. Because of this, the agricultural sector is the major loser. The figures too are not presented in a comparable way. Totally new projections based on new techniques and methodologies are needed to be made. Despite emphasis on decentralization, it is an irony that there is no mention of how much resource is to be spent through local bodies.

Conclusion

In addition to the serious flaws in overall approaches and strategies, the paper has problems in its structure and compactness. It is a pity that even with the experience of more than 45 years, no attempts are being made in bringing about coherency in the plan document to make it credible. The major lacuna of the paper is that despite poverty reduction being the sole objective, no attempt has been made to propose concrete strategies towards this end. The experiences from many countries suggest that a comprehensive approach is essential in which it is necessary to spell out and quantify the probable contribution of the sectoral growths, land distribution, credit delivery programs and specific target based poverty reduction and employment generation programs as well as socioeconomic infrastructures in reducing poverty.

At the same time a logical framework has to be adopted for the assignment of role to various development actors and institutions in more specific term in order to ensure the achievements and enforce good governance. In other words, whatever policies, strategies and programs are proposed, they should be backed up by quantifiable governance related accountability system so that in case of failures someone could be held fully responsible. The sweeping statements given in the paper have further eroded the credibility of the National Planning Commission.

The paper completely neglects the present economic crisis and underlying reasons. It indicates that simply preparing periodic plans in a ritualistic way is of no use and relevance. In the present circumstances, a short-term crisis management package may be useful even by delaying the 10th plan implementation for one year or more. This may provide also an opportunity toward overhauling the whole approach of the plan to make it more credible, realistic and acceptable to the people.

(Dr Khanal, a former member of the National Planning Commission, is a sitting MP of the lower house of Parliament)

Gauging the Recession
Quarterly Manufacturing Production Index (Base: the same quarter previous year = 100)

All the industries in the manufacturing sector seem to be hard hit by the recessionary trend. In the food industry sector, noodles, sugar and biscuit recorded less production during both of the quarters of the current fiscal year compared to the corresponding quarters in the previous year. The index this year for noodles was 85.20 and for sugar 89.49.

Among the beverages, liquor was the hardest hit followed by soft drinks. Beer however managed to minimize the production decline. Its index was 93.02 in the second quarter this year.

In textile sector, the manufacture of synthetic cloth is increasing but that of jute goods, cotton cloth and woolen carpet has declined.

Same is the fate in garment and processed leather. However, the production of wood products has increased.

Production of brick, iron rods, CGI sheets, wire & cable has been increasing indicating that the construction industry is still alive.

Source : Information published by Nepal Rastra Bank

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