Concerns shown by the NDF delegates on effective implementation of reform actions are genuine and noteworthy

-Dr. Ram Sharan Mahat, Finance Minister, Nepal

As you are aware, we confronted many unanticipated impediments that stood in the way of Second Generation Reforms. Nevertheless, the government did not roll back from its commitments. Rather it stuck with its reform agenda. The government has been moving ahead with the reform initiatives steadily even though the pace is not that fast as we expected it to be.

It gives me great pleasure to note that all the members of the Forum seemed satisfied with our overall progress of reform. However, the concerns shown by the delegates on effective implementation of reform actions are genuine and noteworthy. You expressed your dissatisfaction, among others, over weak public service delivery system, slow pace of decentralization, weak governance, corruption and security.

The government recognizes the concerns of development partners particularly the concern that this may turn out to be another "business-as-usual" process with commitments being made, but little urgency to implement them afterwards. I would like to assure you that this will not be the case this time. I would also like to reiterate that the government is unequivocally committed to pursue the reforms that are in the broader interest of the economy by addressing the concerns and suggestions from you. I would like to assure you that the government is serious and fully committed to enhance the quality service delivery. We have different set of actions of intervention to improve the delivery. They include devolving more and more areas of services to the local bodies, increasing participation of the civil society organizations and changing incentive structure of the civil service.

There is not denying that the corruption is there inspite of our effort to combat it. Realizing that corruption involves big economic cost, a number of preventive and curative measures will be taken to combat it. Commission on Investigation of Authority, CIAA's, capacity will be strengthened in terms of investigation of corruption cases. The Corruption Control Act will be amended to include more stringent actions against corrupt practices. Similarly, the role of civil society will be further promoted in making public works transparent and holding public officials accountable to their duties as well as in inculcating awareness among public against corruption.

Most of our valued development partners participating in the Forum emphasized on the need of effective decentralization. I fully agree that unless and until we empower the local bodies entrusting them with the authority and providing them with the resources, we will not be able to make significant progress in reducing poverty. We have already a piece of legislation on decentralization, which is one of the best legislation in South Asia. The task ahead is to translate the visions of the Local Self-Governance Act into reality. Along with devolving more authority and sharing resources, the institutional capacity of the local bodies will be enhanced so that transition will be smooth. Against this backdrop, I would like to assure you that the process of decentralization will be speeded up with the spirit of the Act.

I am encouraged by your support to three of our policy proposals namely, Tenth Plan/PRSP, MTEF and the Foreign Aid Policy. I would like to express our thanks to you, our esteemed development partners, for this support. Your concerns about the effective implementation of the policy instruments articulated in this document (are) genuine. But the thing we need to keep in mind is unlike the past, the level of ownership of these documents is higher. That the MTEF was prepared by concerned line ministries testifies this fact. In addition, all of these documents are the result of a wide consultation between all the stakeholders. However, we are willing to revisit and revise the Tenth Plan/PRSP and the MTEF priorities to incorporate your valuable comments and suggestions during the Forum. At the same time, we will also eliminate/phase out low priority programs and projects.

However, there is a need to develop concrete implementation/action plan to translate MTEF into actions in critical areas by ensuring that resources allocated to priority areas are used effectively to produce quick results. Within next few months we will come up with a concrete and time-bound action plan which will also include monitoring and evaluation mechanism.

As you are aware, restoring peace and security has been the number one priority of the government at least for immediate run. As Rt. Honble' Prime Minister noted in his inaugural speech that the government is considering to adopt the approach of "shield" and "'support". It will not only help smooth the implementation of development projects but also combat terrorist activities. Further, ongoing development activities and the economic opportunities created thereby will help restoring lasting peace. Therefore, cutting development expenditure will be detrimental to the health of the economy and to the stability of the system as a whole.

However, we have been passing through the most difficult time in our recent economic history. On the one hand, government expenditure is ballooning due mainly to increased security related expenses. On the other, revenue performance has been sluggish consequent upon internal security problem coupled with global economic showdown. This unfavorable situation has led to severe fiscal stress. For the first time we have been facing the situation of revenue deficit.

I am encouraged by the indication by some of you to assist the government with flexible budegatary support as well as sectoral and program support.

Your support to the Foreign Aid Policy has added new dimension in our development partnership.

I am confident that this Forum has added new dimensions in our partnership. This will be further strengthened in the days to come.

We need to work together.

Concluding remarks made by Nepal's Finance Minister Dr. Ram Sharan Mahat at the Nepal Development Forum meeting held in Kathmandu and Pokhara-Chief editor.

Export Production Input Management

-Dr. Suman Kumar Regmi

Recent policies in the export sector have benefited principally carpets and ready-made garments. The liberalization of import licensing and elimination of import duties on raw wool directly benefited carpet exports. The carpets industry has faced particularly well. As a result, the share of these items (carpets and ready-made garments in total commodity exports) have risen sharply from around 4 percent in 1981 to about 70 percent now. The most profitable export small industries are carpets, hides and skins, handicrafts, and garments. Currently, the most successful import substitution industries are sugar, cement, pharmaceuticals, some cotton textiles and plastic and polythene goods.

Raw wool was exported from Nepal between the 1971/72 to 1973/74 due to the lack of development of carpet factories in Nepal. But after 1973/74, raw wool export from Nepal ceased as the domestic carpet industries expanded. Raw wool is being currently imported from overseas. The main raw material for ready-made garments is cotton textile (non-synthetic). The import of non-synthetic textile has also been expanding as ready-made garments units in the country are expanding. It is learnt that national thread factories are lagging behind due to the unavailability of necessary raw material in the country. The capacity utilization in the thread factories is constrained by short supply of raw cotton. Apart from the locally grown cotton, the industry imports large quantity from India and Pakistan. Polyester fiber is mainly imported from South Korea, Taiwan, Thailand and Japan.

Cotton Development Board (CDC)in Nepal is engaged in finding out ways of resolving the problems of cotton farming. CDB has a plan to grow cotton in different districts in Nepal. More than ten thousand farmers are directly involved in cotton farming in Nepal. However, cotton growers in Nepal are facing several technical and market related problems.

(The writer is associated with Trade Promotion Center-Ed)

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