View Point (Spotlight Weekly)

Economic Dimension of Conflicts in South Asia A Case of Nepal II

By Dr. Ram S. Mahat

Nepal has been suffering from the conflict situation since the Maoist started violent movement since 1995. There is no doubt that the Communist Party of Nepal (Maoist) decided to take resort to violence, when they saw no hope of capturing state power through peaceful electoral means, as they could not win more than 9 seats in the House of 205 in the first parliamentary election. The starting of their movement with a call for a constituent assembly, stripping of royal privileges and abrogation of "unequal" treaties with India makes the political nature of their movement very clear. However, the country's uneven development, poverty and underdevelopment, existing social and economic deprivation of socially excluded and ethnic communities provided a congenial environment for their organizational expansion. Their anti-imperialist, anti-monarchy and anti feudalism rhetoric with shrewdly coached offers for self-determination to ethnic communities was designed to attract the lower caste "Dalits" and ethnic groups called Janjatis and Adibashis who had genuine grievance of exclusion and marginalization in the nation's social, political and developmental processes. Although the Maoist leadership remains predominantly upper-caste with Brahmins and Chhetries dominating their central committee and the polite bureau, their persistent efforts at making inroads at Dalits, and Hill Janajatis like Magar, Gurung, Tamang and Rais, and Tarai Janjatis like Tharus are well known, and most of their rank and file come from these communities. Since the first publication of Human Development Report in 1990 by UNDP, Human Development Index (HDI) has been generally used to measure a country's relative position in human capabilities. HDI is the aggregation of three components including longevity, educational attainment and standard of living - measured by life expectancy by birth, adult literacy and mean years of schooling, and per capita income.

Nepal's status of human development is low even by South Asian standard. The country's HDI according to the global Human Development Report 2002, was calculated at 0.490, as compared to 0.478 of Bangladesh, o.499 for Pakistan, 0.494 for Bhutan, 0.577 for India, 0.741 of Sri Lanka, and 0.743 for Maldives (Table 1). Using different sources of data for the year 2000, Nepal Human Development Report 2001 estimates Nepal's HDI at 0.466, with a life expectancy of 59.5 years and adult literacy rate of 50.7 percent.

The disaggregated human development index, by ecological and development regions, will provide some insight on unequal living conditions and social status between different regions. Nepal is divided into three ecological zones - mountains, hills, and the tarai - and five development regions - eastern, central, western, mid-western and far western regions - each of which contains the three distinct ecological belts. Against the national HDI at 0.446, the HDI for urban and rural areas are 0.616 and 0.446 respectively, clearly indicating the urban bias of the development activities so far. Disaggregated by ecology, HDI for mountains, hills and tarai are 0.378, 0.510 and 0.474 respectively. The mountain region, in view of its difficult geography and highly dispersed settlements making their access to public resources extremely difficult, has the lowest HDI. Looking by ecological regions, the central development region where the nation's capital is located has the highest HDI (0.493}, closely followed by eastern (0.484) and western (0.479). On the other hand, the mid-western and far-western regions with 0.402 and 0.385 HDI, remain economically and socially the poorest regions reflecting their traditional neglect in development priorities. If one looks at statistics by Eco-development region, the mid-western and far western region mountains emerge as the most backward ecological regions with 0.322 and 0.286 HDI (Table 2).

It is no coincidence that the pressure of the Maoist movement is the highest in the mid-western hills with one of the lowest HDIs. The launching pad of the "people's war" by the Communist Party of Nepal (Maoist) was the Rapti zone in the mid-western development region. The HDI of mid-western region in 1996 about the period when Maoist violence started stood at 0.276 compared to the national figure of 0.325. The average HDI of five mid-western hill districts - Rukum, Rolpa, Salyan, Jajarkot and Kalikot where the intensity of Maoist movement was highest - was 0.234. Their respective HDI ranks among 75 districts were 58th, 60th, 63rd, 71st and 73rd places.

In recent years, Gender-related Development Index (GDI) has also been developed to measure gender disparities. In the Nepalese context, gender-related exclusion covers physical survival, health and educational opportunities, ownership of assets, mobility and overall cultural status. Statistics show that the country's GDI of 0.452 is closer to equality (HDI 0.466), disparities exist along the pattern of human development. GDI is the highest in the hills with 0.494, women continue to suffer exclusion in the mountains (0.355), and the mid and far-western regions are marked by high gender disparities (Table 4) Another indicator developed to measure the women participation in economic, social and political decision makings is Gender Empowerment Ratio (GEM) which is derived from women participation in elections, and their shares in administrative, managerial and technical jobs. Nepal's overall GEM is 0.385 - their participation in political process is one-fifth of men, and similar pattern is observed with respect to professional and administrative jobs, and their share in earned income is one-third of that of men.

About one-third of the Maoist cadres are reported to be young girls. A report by the chairman of National Women Commission based on her field visits to the insurgency affected areas says that majority of the women who have joined the militia was due to ill treatment by abusive husbands, alcoholic fathers, polygamy, exclusion by mainstream parties, and also because of the freedom of sexuality and they have a chance to have safe sex. A sizable number have joined the militia for citizenship either for themselves or their fatherless children. Among other reasons responsible for this phenomenon are: right to choose a husband, non-delivery of services by district government, lack of social protection of women in communities and attraction of the revolutionary culture and lifestyle including dance and music, traditional hegemony of patriarchal society etc. Another report by the National Commission of Women says that Mahila Mukti - women's liberation was the main plank of mobilizing women by the Maoists. Having come from background of social exclusion and neglect, these women raise issues of legal-political, human-psychological, social and financial nature. They said - under traditional system they were "nobody", now they had "status" and responsibility to accomplish tasks.

The Dalits and other disadvantaged communities of Adibashis and Janjatis represent another group targeted by the Maoists for their support base and from where they largely draw their cadres. The Dalits, which represent the extreme case of exclusion in the Nepalese society, have remained poor because of social and cultural factors, and historical inequalities in the distribution of social and economic power. Caste biases have reduced these "untouchables" to the lowest paying menial jobs and have limited their access to government and public resources, and common goods. Naturally, poverty remains extreme among the occupational castes of Kami (blacksmiths), Damai (tailor) and Sarki (shoemaker) who remain the object of social discrimination. Similarly, the incidence of poverty is relatively higher among ethnic minorities such as Limbus, Tamang, Magars, Tharus and Mushahars, reflecting deprivation of opportunities in all aspects of life. The situation of women who belong to disadvantaged groups is even more disturbing; their social indicators fall well below that of the male counterparts. Only 30 percent of the Dalit children attended school compared to national figure of 66 percent and their literacy rate is about half of the national average.

An analysis of educational attainment of the Nepalese population based on the 1991 census[1] shows that three elite groups - Brahmins, Newars and Chhetris account for 70 percent of all graduates in Nepal. The natural consequence of this is reflected in their domination in professional occupations. Social composition of Tribhuban University teachers and the Government bureaucracy makes this clear. Of the 3871 University teachers, 80.9 percent are drawn from Brahmins, Newars and Chhetris who constitute about 37 percent of the total population. The share of the hill ethnic with 20 percent of the total population is only 2 percent in the graduate population and 3.2 percent in university teachers' population. The imbalance is even more pronounced in the civil service. The social and economic entrenchment of the dominant groups further enhances their position and tends to accentuate disparities.

The impoverishment and exclusion, both at regional and social levels, has provided fertile ground for insurgency. A conflict situation over the years has pre-occupied the government's attention to the law and order situation, rather than addressing the root causes of conflict. Furthermore, the law and order situation in the conflict areas did not allow meaningful development activities from the Government. Absence of reasonable state authority, and extreme impoverishment made it easy for the insurgents to expand their activities, recruit the poor and unemployed young boys and girls by using all means - economic temptation, ideological appeal, and abduction in their ranks. A glance at the social and economic status of the districts hardest hit by the conflict confirms the classic case of a vicious circle of poverty, conflict and further poverty. An analysis of the human development status over time by the Human Development Report 2001 concludes that while the country has a whole registered significant improvement in the HDI between 1996 and 2000, the most glaring disparities persist: the mid-western and far-western development regions where HDI levels were the lowest at the outset, show less empowerment than the country as a whole (Table 3).

Effects on the economy

The economy has been the principal casualty of the conflict. The damage has been wide and far-reaching - from destruction of infrastructure and displacement of families to reordering of national priorities. Over one third of 4000 village development committee (VDC) buildings have been completely destroyed. Projects that were helping local people to help themselves through decentralized planning and community participation have stopped functioning. Not only government-run programs, but even pro-poor community development activities administered by non-government organizations have been withdrawn for lack of security, in the wake of closing down of government security outfits in the countryside. Physical infrastructure including bridges, telecommunications and power stations have been widely destroyed. The Maoists have struck the US $20 million Jhimruk hydroelectric plant, several other mini hydro power stations and telecommunications repeater stations rendering the telephone system dead for most hill districts. Other targets included airstrips of remote districts such as Dolpa, 37 telecommunications sub-stations, school buildings, and water supply schemes. The National Planning Commission puts the rehabilitation cost of the damaged infrastructure at US $400 million.

Worse than the loss from damaged infrastructure is the crippling effect the Maoist violence has inflicted on investment and business climate. The tourist arrivals went down by 6 percent in 2000 and 21 percent in 2001. The country's export trade, which had been increasing at a rate of 18 percent in dollar terms for more than a decade registered a net decline in 2001-2. The Maoist bomb attacks on multi-national companies like Coca-Cola, Lever, Colgate and Palmolive had a chilling effect on the investment climate. Many private schools were either forced to close down, or were allowed to run with regular payment of extortion money. Their frequent calls of Bandhs disrupted public life and reduced economic activities. Targeting of political opponents, village leaders, teachers and businessman for physical liquidation, abduction, physical cruelties and extortion forced such people to migrate to secure urban centers. This stripped the countryside of crucial leadership and entrepreneurial activities. Districts hardest hit by the insurgency are now devoid of young population who have now either joined the militia or fled away for fear of conscription. Internal travel declined, so did economic activities. Development activities came to a halt in rural areas. Many road construction projects connecting remote regions to highways, irrigation and bridge building programs were halted. Notable among such projects include: Surkhet-Jumla, Chinchu-Jajarkot, Salyan-Musikot-Burtibang, Dhankuta-Bhojpur, Dhankuta- Khandbari, Melamchi Drinking Water Project, as these projects became easy targets for stealing explosives such as gelatin by the rebels to make country bombs.

All these took a toll on the Nepalese economy. The economy, which grew at an average of five percent for a decade, had a negative growth in 2001-2, and expected to grow by 2.3 percent this year. Development expenditure declined by 8 and unprecedented 25 percent in 2001-2 and 2002-3 respectively. Private investment not only declined, but also the investors responded to conflicts by indirectly helping the rebels by paying extortion, and by shifting their capital elsewhere. National priorities were reordered. Security consideration, instead of development, assumed the center stage. The law and order situation created adverse effects on all aspects of national life; this made it necessary to allocate increased resources to the security system. The large expenditure in security put heavy pressure on fiscal resources. To meet their costs, the government raised taxes, diverted funds from development budget, and resorted to extra borrowing. This placed the reform process in jeopardy. Macro stability was disturbed due to rising fiscal deficit, widening current account deficit, the discrepancy in trade account, and increasing foreign aid debt burden. Large-scale program lending from the World Bank and Asia Development Bank, and extra budgetary support from some bilateral donors eased the budgeting pressure somewhat. The respite and hope generated by the latest cease-fire and the initiation of the peace process proved to be too fragile and short-lived. The Maoists have started a fresh round of violence and terror with heavy toll on human lives and business activities.