10th Plan Exercise in Guestimates

The uncertainty about the future of the country has reduced the 10th Five Year Plan document into a mere formality.

Planning for the long-term looks ridiculous at a time of such abnormalities as the present in Nepal. The GDP growth rate in the year that ended only 5 months ago (on mid-July 2002) was negative (-0.63%) and the indicators are still not any better for the on-going year. But the Nepali government had no alternative than finalizing a plan document if it was to continue getting the donor assistance. So, despite suggestions from some economists to observe a plan holiday for a year or two (coincidently, present Finance Minister Dr. B.P. Shrestha was the one who was strongly in favour of a plan holiday), the National Planning Commission (NPC) made public the Tenth Five Year Plan (2002-2007) on December 17 (though the plan in book form was still not available when this material went to the press) more as a “begging bowl” than as a “blue print for development”.

The government’s dilemma in introducing the plan is indicated also by the fact that the announcement of the plan was doubly delayed. The current plan period started five months ago on mid-July 2002, but the formal plan document was not finalized. The new government announced in late October that the plan document would be finalized and made public by end-November. But in reality it was made public only on December 17.

However, the delay in announcing the document has not been the matter of any serious debate. The important questions being raised by experts are related to how realistic the targets and strategies are. Some experts label the projections as simply "guestimates" or wild guesses. They also question the authority of NPC to change the major features of the plan that was fixed by the National Development Council (NDC).

According the NPC sources, the plan document has however been based almost entirely on the Concept Paper approved last year by the National Development Council, but it has also incorporated a number of important changes looking at the current realities. First, it has planned for two scenarios. And the second, it has added a chapter under the heading “Peace and Development”.

In normal scenario, which will be there if peace and order is restored, the expected economic growth rate is 6.2% per annum (with agriculture sector growth at 4.7% and non-agriculture sector growth at 7.5). This is exactly what the approach paper had projected. In the low (or the worst) scenario, the economic growth rate expected is 4.3% per annum (agriculture 2.8% and non-agriculture 5.2%). The medium scenario is worked out at 5.25% growth in GDP per annum. Given the negative growth in GDP in 2001-02 (see statistics column in this issue), the targeted 4.3% growth rate for 2002-03 requires a number of immediate miracles.

In the chapter “Development and Peace”, the plan document has incorporated some programs such as bringing the dalits and oppressed classes into the mainstream of development, rehabilitation of those who have been affected by the violence, reconstruction of the physical infrastructure destroyed in the violence, coordinating development and security aspects and insuring good governance.

As in the ninth plan, poverty alleviation has been retained as the sole objective of the tenth plan also. And the target set is to reduce the poverty incidence to 30% by mid-July 2007, when the 10th plan period will complete. Poverty incidence is estimated to have reduced to 38% by mid-July 2000, according to the mid-term evaluation report of the ninth plan. But the negative growth rate of the fiscal year 2001-02 is feared to have increased poverty incidence again. However the actual situation is expected to be brought out only when the living standard survey to be started in the near future is completed. The previous such survey had come up in 1996 with the poverty incidence figure of 45% which was later revised downward to 42% of while preparing the 9th plan in 1997.

Tenth Plan Data-Base

* includes 7% with access to electricity from alternate sources

WTO Accession: Opportunities & Threats

by Rajendra Khetan

World Trade Organization (WTO) is the latest buzzword among the professionals, the intellectuals and the corporate managers of Nepal, and rightfully so, because it will have a wide-spread impact upon all of us: from what we eat and what we wear to how much we earn and how we earn it.

Nepal formally applied for the Membership of WTO in 1995, and in these past seven years, there have been countless debates on Nepal’s accession to WTO. While the issues of ‘should we or should we not’ frequented the first few years; we are now rummaging over the issues of ‘when and how’. Moreover, the debates and the discussions in the last one or two years have been more purposeful. The dismal performance of the ‘big three’, i.e. carpet, garment and pashmina, in the recent days only adds that extra bite to these debates.

As a small economy with limited resources, Nepal has all the reasons to worry about its accession to a multilateral organization such as the WTO. The strong-arm tactics that are usually exercised by big negotiating-partners is an ever-looming threat to our long-term interests. Also, unlike other international agreements that our ministers love to sign-and-forget, WTO agreements are binding and will have a lasting impact on the future of our economy. Therefore, it is a matter of utmost importance that we strongly apprise ourselves on our country’s areas of strengths and weakness and, subsequently, come up with an effective road map that, if properly implemented, will in fact transform our economy to a higher level.

As a part of the accession process, we have already participated successfully in two working committee meetings and also in a series of bilateral and multilateral interaction programs in between those meetings. As a result of these intense negotiations and untiring diplomacy of our representatives, we have been able to present the international community of our economic reality and have thus been able to exact a certain degree of flexibility in negotiations. Equally important is the consensus that we have been able to achieve among the SAARC member countries on areas of common interests.

Most importantly, WTO-membership will enable us to be an equal member of global family and an equal partner in trade legislation. We will have unrestricted access to the global market, especially agriculture markets in the Americas and the Europe that are currently protected by steep tariff barriers. Enjoying equal status under the legislation and privileges of WTO we will certainly have a stronger negotiating stand Vis-a-Vis India on issues regarding trade. In juxtaposition with the advantages though, we will find some drawbacks of free trade, while at the same time, there is overwhelming apprehension that we will be over-flooded by the foreign products. More importantly we will have unconditional and unrestricted access of point of transit but equally it might render the special privileges conferred by India a misfit and we will be competing for the market of India as any other South Asian neighbour.

Equally important are the privileges under the Special and Differential Treatment, bestowed to the Least Developed Countries of the world. Under this treatment, countries like Nepal will have longer insulation period to implement tricky agreements on Intellectual Property Rights and agreements on agriculture. Our country can also, for instance, benefit from the European Union’s present provision of duty free access to all commodities except ‘arms’ for Least Developed Countries, which Nepal cannot avail of currently as it is not yet a member of the WTO regime. Again, though free and unrestricted trade is at the heart of multilateral negotiations of WTO, it still does allow us to maintain relatively higher tariff barriers on some commodities. Of course, the stand on these commodities will have to be justified and commodities identified should be the ones where we have the highest potential in the longer term.

We also have to chalk out a strategy to come out of the limitation imposed by our small economy and the limited resources and technology at our disposal. Our bio-diversity (both flora and fauna) can be an effective answer. Equally feasible are Eco-tourism based on our natural gifts such as Mt. Everest and religious-tourism based on the global landmarks such as birth place of Lord Buddha and Sita. These are the uniquenesses that no other country can boast of. Now, we need to convert these areas of comparative edge to a competitive edge, which in the longer term, will become a viable source of foreign currency and generation of employment.

However, there are probable stumbling blocks in the efficacy of the bureaucracy in introducing expedient legislation and providing a sound physical and social infrastructure to do effective business. Equally important is the acknowledgement of the stark reality by the business community that the future of this economy rest on their ability to drastically eradicate inefficiency and cultivate competitive advantage. The ability of the government and the private sector to embrace transparency will also be crucial in winning confidence of the outside investors and buyers.

Now, the question of membership of WTO is not of “when” but of “how”. How well-geared are the legislation and the administration to support the business activity? How informed and prepared are we to face the world? En resumen, we should honestly acknowledge our weaknesses and strengths and thus prepare for the possible opportunities and threats that will be open to us after the membership of WTO.

(Khetan is the second Vice President of FNCCI and also heads the recently established WTO Cell of FNCCI.)

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