Vol. 3 :: No. 9 September, 2001 (Bhadra-Ashoj)

Economy

The socialist Congress shed its true colors! Or, at least, it lent colors to a scheme that it proudly calls a socialist scheme. Slash the land and give chunk of them to landless!

Politically, or more accurately, in pork-barrel politics, Congress and the Communists are neck to neck.

Earlier, the Communist nearly always stole the show, this time Congress takes the stage.

Thomas Friedman may call it a conflict between Lexus and Olive Tree, and Marx, proletariat’s struggle against bourgeois!

Congress government thinks that its been unfair that the least possess the most in the country. And therefore, the land needs to be down-sized and the possession delimited so as to make everyone have something.

Congress has been on the hot seat of power most of the time in these over ten years of democracy. The Communists led by United Marxist Leninist party held the rein of state machinery for some time.

Neither of them announced the ‘proletariat loving’ land distribution scheme earlier, though it just needed a fifteen minutes speech to make it. It was as simple as that. All they had to do was to make the statement in the parliament and then get down to homework, if and only if, they made noises. That’s all and the hats would be taken off.

What Deuba government could do in one month, no governments did in the whole eleven years. He came up with the land delimiting scheme at a time when the triumphal gun toting Maoists were feared to build a republican empire picking needful substances from crushing poverty, illiteracy and ignorance. Before they could succeed in erecting another Berlin wall, Deuba government produced the land ceiling hammer to fell it.

That’s it!

The idea is opposed by no political party, in principle, for fear of incurring displeasure of the landless. But, none of them are honest in their pursuits. They use the political lenses to look at poverty, but they don’t assess it economically. They all think in terms what the nation can give them to sustain than what they can give the nation to sustain.

Should one suspend the political thoughts preoccupied with the loss and gains, for a while, and think economically in a broader national terms, host of questions spring up in the mind: What will the nation gain by delimiting, fragmenting or down-sizing the land possession? Will that help feed the hungry folks who migrate in thousands from western hills to escape starvation? Will delimiting of land boost production and enable our small landholders compete with those from across the border who flood the Nepalese market with their heavily subsidized agro-products every year? Will it help by any chance the economic recovery of a nation that lean heavily on agro-productions?

Above all, will it really help the very people that the land ceiling scheme target?

In the rugged terrain of the country, they may explore very little or no land, in the planes, even if they can have some, the target group may never own it or may never practically use them for several reasons- the biggest stumbling block remaining the citizenship.

If the scheme aims at reducing poverty, it may turn out a loser’s game. Poverty is in the hills and the land in terai. At least, those with the Maoist beret on their head are mostly hill folks, and the teraians would least want to see their land being plowed by these people.

To put it more simply. Notwithstanding the distributive injustices of land in terai, poverty doesn’t remain a problem as much as it is in the hills. And, the hills have very little arable land to achieve what the Congress may call the distributive justice.

The Congress government may achieve full distributive justice of land or a partial one or none, in practical terms. To achieve a full distributive justice, the government may need to dispossess every one of land and make an equal redistribution of the same among all. To achieve the partial distributive justice, it may need to equally distribute all the land of terai among terians. And, to achieve none, it may still need to draft schemes in papers, much in the same way as the weavers did in weaving Emperor’s clothes, and confine it to papers alone. That still can be justified. Simply say, ‘ you give us votes in papers, we give you land in papers.’

However, to think the whole scheme in economic terms, and even through the lenses of distributive justice, it is nothing more than a political hypocrisy.

If the whole scheme of giving the chunk of land to the landless means to give them a little economic power whereby they can mortgage or sell or lease out their land in return for some money they need, the government may be doing the right thing. But, if the giving of land is meant to sustain the lives of poverty smitten mass through sustained agriculture, and thereby boost national agro-economy, it makes no sense. To aim at the former, the government will need to help them till the land, help them plant, help them harvest and help their access to heavily protected market and help them with the education of their children, health of their children, and host of other things.

Can the government do all these? Yes in rhetoric. No in reality.

If Congress really aims at distributive justice from a socialist angle, it must ask its ministers and prime ministers to keep only that much of wealth and properties with oneself which is needed to sustain by Nepalese standard, and put the rest back to the government coffers from where they stole them. This is exactly what the Communists must do before they make any proletariat loving noises.

Gajendra Narayan Singh is right when he says he wants to barter away his land with the bungalow of Madhav Kumar Nepal. No mistake has Pashupati Shumsher Rana made when he demanded the properties of post-democracy politicians to be accounted for. And, a hundred percent right is the Congress idiosyncratic lady leader, Shailaja Acharya who thundered out the other day, ‘socialist talks doesn’t suit the Pajero riders’.

Why should they fall in deaf ears?

Why don’t any one ask how much money flew in to this country has spilled out of Kathmandu and how much have been sucked away right here?

If land alone could drive poverty away, India would have less poverty stricken mass than England and Japan. And, Bhutanese wouldn’t have a better per capita income than Nepalese.

Doha Ministerial Success in Question

 Director General of World Trade Organization (WTO) Mike Moore in his inaugural address to the Third-WTO Ministerial Conference at Seattle in November 1999 had said, "The Seattle meeting is doomed – doomed to succeed." But that proved false. And the meeting failed miserably amid strong protests and violence. And going by the recent experiences, will the fourth Ministerial Meeting scheduled for this November at Doha, Qatar see a smooth sailing. That is yet to be seen. May be the meet would be held in a restricted venue. But will that alone ensure its success. The chances are highly unlikely. It is not just the threat of demonstrations ‘outside’ that has questioned the success of the upcoming Doha meet. The Least Developed Countries (LDCs) and the developing countries want the settlement of pending issues before the new round of ministerial talks is convened. The promises made during the Uruguay round are yet to be fulfilled. The South’s concern is on the implementation issues that have remained largely rhetoric. And this will most likely prove to be a major determinant for the meet’s success.

So much so that strong lobbyists like India has already said that the WTO body must meet the past promises before the Doha meet. With developing countries taking a tough stand, the Doha ministerial meet is likely to see a rough sailing. Much would depend on the agenda that the meet will take up for discussion. If the issues raised by the LDCs and the developing countries are neglected, of course, another debacle would be imminent. Also, the inclusion of some topics for discussion that poorer economies do not want is likely to dilute Doha’s environment.

First, it is the contentious agreement on Trade Related Intellectual Property Rights (TRIPS). The agreement had made into the WTO books only because of strong backing of the United States that threatened of unilateral sanctions upon countries, like India, that vehemently opposed the agreement. The provisions contained under the agreement have long been a debate between the North and the South. Especially, the efficacy and intentions of the provisions relating to patenting and protection of life forms under the TRIPS agreement have been criticized at various regional, national and international forums. Though the North has finally agreed to address the issue of health and availability of drugs, there is no mention of including the controversial agreement into the Doha discussions. This is likely to dent the efforts that are being undertaken to ensure the success of the round.

Another issue of contention is the agreement on agriculture. Developed economies had during the Uruguay round promised to liberalize their agriculture regime by opening up their markers. However, they continue to impose high tariff barriers. The decision that was taken at the Uruguay round to bring down non-tariff restrictions through its ratification only prompted them to fix high binding rates. Underdeveloped and developing economies are demanding that the promises relating to market access must be fulfilled before the launch of the new round.

The third is the Singapore issues, which include labour, competition and investment. These were the issues that first cropped up during the first ministerial round at Singapore. While the North has shelved the labour issue due to excessive pressure of the South, the remaining two issues still remain to be resolved. The United States is lobbying for the inclusion of the issues and LDCs and developing countries have already reacted sharply against it. The concern of the South is the strict discipline on competition that they may be forced to accept will turn in favour of the developed countries later on.

Finally, the relation between trade and environment that the North has been laying much emphasis on has vexed the third world economies. Though the two was linked even by the General Agreement on Tariff and Trade (GATT), weaker economies fear that bowing to this issue would allow developed countries to resort to a more protectionist regime, which is against the spirit of the global rules based trading system. Discussion on all these contentious issues is likely to be futile, at least going by the present North South divide. Nepal is not yet a member of the global rules based trading system and is at an Observer’s status so far. It will have not have a direct say at the Doha conference that can be of any influence in decision making. And all the issue of contention mentioned above are of concern to even Nepal. And all the issues of contention mentioned above are of concern to even Nepal. And its concern will be strongly voiced through the grouping of the 19 LDCs and the South Asian Association for Regional Cooperation (SAARC). Also, as an Observer, Nepal is expected to be invited to place its concerns during the Doha conference.

The Zanzibar meeting of the LDCs and the meeting of the SAARC members recently had decided to draw a common position in the WTO conference. Mostly of the concerns that are plaguing Nepal was covered by the joint statement of the SAARC commerce ministers and the Zanzibar Declaration. Both have stressed that delay by the stronger economies to address the implementation issues will further erode the credibility of the multilateral trading framework. It also pressed upon providing facilities to the poorer countries for developing areas in which they enjoy comparative advantage. Furthermore, the demand is to make the TRIPS agreement harmonious with the UN Convention on Bio Diversity-in-addition to making the special and differential provisions more substantive.

Furthermore, moves of the developed economies to include subjects such as competition and investment, and trade and environment in the Doha round was opposed by SAARC as well as all LDCs. The request is for a positive approach for further extension of the transition period for developing countries. For those who have not yet become a member of the WTO, the demand is to allow accession on a fast track basis. Obligations of acceding LDCs should commensurate with their stage of development. They also demanded to translate whatever little was achieved during the UNLDC III meet into reality by feeding them in to the Doha process.

However, it is unlikely that the WTO meet would be able to look into all issues pressed upon by the LDCs and developing economies. And this is true despite Mike Moore’s recent statement that the Doha Ministerial round would be a reality check to whatever has been achieved so far. He had argued that Doha had much in stake and losing it would be a big setback to the process of globalization. The Seattle failure may be taken as an accident but another round of failed talks may prove crippling to the WTO itself provided that the meet is held despite the recent terror strikes in the US.

NRB Reports

Budgetary Deficit Higher

The fiscal year 200/01 has been marked with a deceleration in both the monetary aggregates and the inflation rate. Government expenditure accelerated mainly due to a rise in both regular and development expenditures. Higher budgetary deficit was recorded as a consequence of lower growth in resource mobilization in comparison to expenditure growth. In the external sector, moderate growth of exports accompanied by a modest growth in imports has helped to narrow down the trade deficit and subsequently the current account deficit during the review year. The foreign exchange holdings of the banking system rose substantially due to a surplus in the balance of payment emanating from the growth of official capital inflow. The resulting foreign exchange reserve was sufficient to cover merchandise imports of eleven months. In the share market, share transactions has grown compared to the previous month. In the money market, treasury bills rate remained at 4.96 percent whereas the inter-bank rate stood at 4.50 percent.

During the fiscal year 2000/01, broad money registered a decelerated growth of 14.9 percent (Rs. 27,692.6 million) amounting to Rs. 213,813.5 million compared to the growth of 21.8 percent (Rs. 33,320.7 million) in the previous year. A steep slowdown in the growth of net foreign assets compared to that of the previous year was attributed for such a slow growth of broad money. The downward revision in interest rates on deposits and expansion in resource mobilization activities of non-bank financial institutions led to the slower growth of time deposits at banks from 23.0 percent (Rs. 23,403.4 million) in the previous year to 14.7 percent (Rs. 18,427.4 million) during the review year. The growth of narrow money also decelerated to 15.2 percent (Rs. 9,265.2 million) during the review year compared to a growth of 19.4 percent (Rs. 9,917.3 million) in the previous year.

As a result of a sharp increase in the growth of credit flow to the government, total domestic credit of the banking system went up the 18.3 percent (Rs. 28,969.5 million) during the review year compared to a growth of 17.2 percent (Rs. 23,168.5 million) in the preceding year. As a result of a sluggish demand for import credit as well as that for industries, bank credit to the private sector decelerated from 20.5 percent (Rs. 18,647.1 million) in the previous year to 16.8 percent (Rs. 18,423.8) amounting to Rs 127,871.4 million in the review year.

On the fiscal front, government expenditure increased by 20.0 percent amounting to Rs 67,836.6 million during the review year compared to 11.4 percent growth in the previous year. Of the total expenditure, regular expenditure increased by 22.6 percent, development expenditure by 16.3 percent and freeze expenditure by 10.8 percent. During the review year, both regular and development expenditures moved up compared to that of last year. Resource mobilization marked a growth of 15.9 percent during the review year compared to 9.2 percent in the previous year. Revenue, the major government resource, grew at a decelerated rate of 13.9 percent amounting to Rs. 48,861.2 million compared to a growth of 15.1 percent in the previous year. However, an impressive growth in foreign cash grants and non-budgetary income resulted in the higher growth in total resource mobilization. As consequence of lower resource mobilization compared to total government expenditure incurred, a budget deficit of Rs 14,945.3 million was recorded and this was 37.0 percent higher than that of the previous year. To meet the resources gap, the government issued national saving certificates worth Rs 2,100.0 million, development bonds worth Rs 1,700.0 million, treasury bills worth Rs. 1,781.4 million and mobilized foreign cash loan amounting to Rs 3,793.1 million. The remaining amount of Rs 5,570.8 million was overdrawn from Nepal Rastra Bank.

The National Urban Consumer Price Index, recorded an annual average rise of 2.4 percent during the review year compared to a rise of 3.5 percent in the previous year. A fall in the prices of food and beverages group helped to lower down the annual average inflation rate. Of the overall price index, the price index of food and beverages group declined by an annual average of 2.3 percent in contrast to 0.4 percent increase in the preceding year. Despite an increase in the price of sugar and sugar products, spices, restaurant meals, milk and milk products, vegetables and fruits, meat, fish and eggs, pulses and beverages, the declining prices of grains and cereals products as well as that of oil and ghee contributed for such a decrease in the annual average price index of food and beverages group. However, the annual average price index of non-food and services group increased from 7.1 percent in the previous year to 8.l percent during the review year. This was mainly due to the rise in prices of education and recreation, housing, transport and communication, medicine and personal care, cloth, clothing and sewing services, tobacco as well as shoes. Regionwise, the annual average price index of Kathmandu, Hills and Terai increased by 3.2 percent, 5.2 percent and 1.1 percent respectively.

On the external front, exports registered a lower growth of 14.9 percent to Rs. 57,244.7 million during the review year compared to a growth of 39.7 percent in the previous year. During the review year, exports to India and third countries both have decelerated to 28.7 percent and 4.7 percent respectively compared to their respective growth rates of 69.3 percent and 23.6 percent in the previous year. Export of woolen carpets, readymade garments and jewellery to third countries declined whereas that of pashmina, tanned skin and pulses increased significantly. During the review year, Rs. 6.85 billion worth of pashmina was exported.

During the review year, imports grew by 4.5 percent only amounting to Rs. 113,386.3 million as against a growth of 24.0 percent in the preceding year. The import of vehicles and parts, textiles, thread, chemical fertilizer, teaching materials, petroleum products M.S. billet, M.S. wire rod and pesticides from India and petroleum products, betelnut, plastic granules, copper wire and sheet, computer parts, medicine, camera, black pepper, paraffin wax, P.V.C. compound, zinc ingot, steel sheet, medical equipments, paper, silver and palm oil from the third countries increased compared to that of the previous year.

During the review year, as the growth rate of exports remained higher than that of imports, trade deficit declined by 4.3 percent and remained at Rs. 56,141.6 million. Such a deficit had recorded a growth of 13.2 percent in the previous year. The export-import ration, which was 45.9 percent in the previous year, improved to 50.5 percent during the review year.

Based on the available balance of payments statistics for the first ten months of the fiscal year 2000/01, the balance of payment remained favourable by Rs. 4,452.0 million. During the review year, in spite of a decline in net services income, current account deficit declined to Rs 6,231.5 million due mainly to the decrease in trade deficit and an increase in current transfer receipt compared to that of the previous year. However, a substantial inflow of official capital net helped the balance of payments to remain positive. Based on the monetary statistics for the fiscal year 2000/01, the overall balance of payment recorded a surplus of Rs. 5,762,7 million as at mid-July 2001. Foreign exchange holding of the banking system increased by 12.0 percent to Rs 105,168.0 million. Of the total reserve, 76.2 percent accounted for convertible currency and 23.8 percent for non-convertible currency.

In the share market, market capitalization of the companies listed in the stock exchange increased to Rs 46.3 billion at mid-July 2001 from 43.8 billion in the previous month. likewise, NEPSE share price index moved up from 333.2 in the previous month to 348.4 at mid –July 2001.

P= Provisional

R= Revised

1. On customs data basis (includes coverage adjustment).
2. Including unidentifiable items and errors and omissions.
3. Adjusting the exchange valuation gain worth Rs 4415.8 million.
4. Adjusting the exchange valuation loss worth Rs 198.7 million.
5. Adjusting the exchange valuation loss worth Rs 385.1 million.
6. Adjusting the exchange valuation loss worth Rs 116.8 million.
7. Adjusting the exchange valuation gain worth Rs 991.4 million.
8. Adjusting the exchange valuation gain worth Rs 2146.9 million.

Direction of Foreign Trade

R= Revised

P= Provisional

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