Corruption as a Problem in Nepal: Effects on the Economy-I

Devendra Raj Pandey 

Introduction

Nepal is passing through a very difficult phase in its national life. The economy shows little sign of breaking away from its traditional stagnation. The social and economic divide between peoples and communities is increasing. Ethnic tension is rising. There is a growing sense of insecurity and injustice among the ordinary people. There is a Maoist insurgency, with associated violence already contributing to the death of more than 1000 citizens across the country. The politics and politicians are in a state of disarray, and unable so far to guide the process towards peaceful and democratic transformation of the society. Almost the same appears to be true of the country’s development partners. The more important of them routinely prepare and adopt "country strategy frameworks", which they find difficult to implement. The government blithely says "yes" to policies and programme suggestions, but rarely honours them in practice.

Social scientists and analysts, according to their intellectual persuasion, will variously trace the problem to the country’s history, society, economy and international relationships. And the arguments they might make can be generally valid as far as interpreting the context is concerned. From the practical perspective of public policies and action, however, the intellectual discourse also remains short of practical suggestions and remedies that might be put forward for consideration of the political society. Why the historical, societal and international relations could not be transformed in manners and forms that are conducive to a process of change that guarantees public welfare remains an enigma, especially for the protagonists of democratic idea and democratic governance.

In this presentation, I try to explore if public corruption in Nepal is not behind most problems the country faces in the economy, in politics, in society and in managing access to external resources for the benefit of the people. This is of course a new wisdom that is gaining ground around the world. National and international leaders and statesmen are now emphasising rightly corruption as the principal issue facing national development, and the success of international cooperation to that end. This is true of the donor community as well. A remark that is very pertinent to the condition of Nepal was made by no other than the President of the World Bank at the International Anti-Corruption Conference in Durban some months ago. For the World Bank, like some other development financial institutions and bilateral donors, poverty eradication is a matter of priority – a priority that meshes well with Nepal’s needs. But, as Mr. Wolfenshon has said, in spite of a series of policies and priorities instituted to fight poverty, its incidence is increasing, not diminishing in the developing world. And as he went on to say, at the core of the incidence of poverty is equity, and at the core of the issue of equity, is corruption. What this means, among other things, is that corruption is not only detrimental to economic development, but also that its cost is borne disproportionately by the poor. This is an important point to remember because, until recently, an influential school of thought believed that corruption could be beneficial or even economically efficient to some countries under certain circumstances. Here I follow up on this matter by slightly broadening the domain of discourse and seeing how corruption also contributes to institutional and moral decay of a society, making the challenge of poverty eradication or development in general a formidable responsibility for us. I will discuss how corruption in Nepal has adversely affected not only economic efficiency and equity, but also the democratic exercise and the essence of public morality and morale that may ultimately decide whether Nepal can indeed succeed in its struggle for development and nation-building. One can even postulate, though it is not done here, that corruption also affects inter-state relations and inhibits the emergence of a framework of bilateral and regional cooperation for peace, security and development. It is my hope that from the discussion, it will be possible for at least those national and international actors, who are engaged in development partnership, to examine how they might conduct themselves constructively as they engage in such activities in the developing world.

The Issue

Nepal is one of the poorest countries in the world, with an average income of much less than US$ 1 a day for its 23 million people. The country’s development campaign began, as in many developing countries, soon after the War. Until recently, however, this campaign res ulted in little or no increase in per capita income of the people. Since the mid-1980s, there has been some growth in income, but the increase is scarcely commensurate with what is needed or with the amount of resources and efforts used for this purpose. Gross domestic investment was 21% of GDP (more than half of which is met by foreign sources) in 1998, when it was only 6% in 1970, reflecting a three and a half times increase in investment rate without a corresponding increase in the growth rate.

Because of extremely inadequate return on investment and development efforts, the issue becomes more than one of low income. The distribution of income has become worse. At least 42% of the population is surviving below the poverty line. The highest 20% of the people claim 45% of the country’s income. This degree of inequality may not look that bad to economists well informed of conditions in other countries, developed as well as developing. But we should remember that we are speaking of the distribution of income which, on average, is only US$ 210 per person per year.

Apart from the issue of income poverty, there is a growing concern about potentially debilitating pathologies such as social deprivation, exclusion, gender-related inequities, environmental degradation, and general loss of self-esteem in the society. The consumerism in Kathmandu, the capital city, fuelled not so much by the outcomes as by the resources siphoned off from development efforts, stands in stark contrast against the misery and deprivation in most other parts of the country.

To make matters worse, the country, which was like an oasis in South Asia in this respect, has begun to experience unprecedented violence perpetrated by Maoist insurgency. There is a wide spread belief that the insurgency, though a misguided adventure in itself, is borne of and perpetrated by inequities and injustices imposed on a large section of the population amidst growing affluence, avarice and ostentatious consumerism of a few. The country’s grim social condition has been underscored most recently by the report of the Amnesty International (AI) that has just been publicised. According to AI, Nepal is now "courting a human rights disaster" that may match the intensity of other conflicts in the South Asia region. Nepal must not go the Sri Lanka, Kashmir, Karachi way, pleads the AI report. This is not to deny that in Nepal there has been modest progress in some areas over the years, in education and health, in particular, and in accessing the wonders of modern technology in the form of satellite communication. But the overall condition remains very discouraging for the common people. For all the progress made in recent years in this area, a Nepali citizen borne today can still hope to live to be only 57 years of age. Infant mortality rate is 82 per 1000 births. And, 72% of Nepali adults are illiterate. The condition appears worse when one observes the gaps and discrepancies in relation to gender, ethnicity, geographic regions and so on.

The country’s adverse economic situation is highlighted routinely these days in donor reports and expressions that are growing more vocal by the day. Nepal of course is not an exception in dismal performance and the accompanying insecurity. In fact, I use my country only as an illustration of the general tendency of corruption and its debilitating impact on a society aspiring for development. What corruption has done to development aspirations and to resources meant for their realisation is also demonstrated by some hard facts. How much Nepal has actually lost in resources due to corruption is yet to be studied and reported. But one can guess from data available elsewhere. To cite some figures from other countries and regions, it is reported that as much as US$ 30 billion in aid for Africa has been siphoned off to foreign bank accounts. The amount is more than the national income of several African countries put together and more than 6 times the gross national product of Nepal. It is reported that, in the Philippines, US $ 48 billion was lost in 20 years due to corruption. Nepal’s is a smaller economy. But its loss due to corruption should not be any less in relative terms. "has triumphed over every resolve, every ideology, every mass movement". (To be continued)

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