BUDGET 2011 Private Pain

The jubilation of the private sector over the timely presentation of budget after three years of untimely ones turned out to be a short-lived one. They were alarmed with what they call ‘subtle and not-so-subtle’ shift in the focus of economic policie

July 24, 2011, 5:45 p.m. Published in Magazine Issue: Vol.: 05 No.-3 July 22-2011 (Shrawan 06,2068)<BR>

The wide consensus among the parties to pursue the ‘three-pillar economic policy’ of promoting private sector, cooperatives and government role in national development is starting to cause distress among the private sector.

Although the opposition to the policy adopted way back in 2007 in the interim constitution had been muted till now, the budget of 2011 has re-opened the debate in a fiercer manner.

Deputy Prime Minister and Finance Minister Bharat Mohan Adhikary outlined promoting the role of state, cooperatives and private sector as the major objective of the budget.

Coming from the government almost totally dominated by the communists, the policy sent shockwaves to the private sector already used to the open market economy followed actively since the political change of 1990s.

No wonder, the first point in the official reaction statement of the umbrella body of private sector – the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) – to the budget was the expression of their anguish to ‘move towards controlled-regime.’

“It is quite clear from the budget that the government wants to increase the role of government and cooperatives. It is also clear that in the pretext of mixed economy and three-pillar policy, government wants to take the economy towards controlled regime,” states the FNCCI statement.

Private Role

At present, the country’s economy is dominated by the private sector. They contribute to almost 70 percent of the GDP followed by the government at around 28 percent and cooperatives sharing the remaining few percent.

Leaders of the ruling parties, who have openly backed the three-pillar policy, contend that the time has come to explore the possibility of promoting cooperatives particularly to create economic opportunities in rural areas.

They don’t, however, portray themselves as anti-private sector.

“It is inconceivable at this point to negate the role of private sector. But having said that, we must not forget that had the old policies worked well, we wouldn’t have seen conflicts and discontentment. Therefore, the current shift is towards promoting the coordinating role of the state in developing balanced economy,” said Surendra Pandey, former finance minister and a senior leader of the ruling Unified Marxist Leninist (UML).

But the private sector is not ready to buy that argument.

“Economic transformation of Nepal is impossible without open and liberal economy. The role of government should be limited to regulator and facilitator. Controlled regime could further worsen the economic crisis,” reads the FNCCI statement.

For Equitable Distribution

One logic the proponents of the policy shift present to strengthen their case is the failure of the market economy to address the problem of inequitable distribution of wealth.

They say that past experiments are ample proof why the country needs the shift in policy.

But the libertarians reject this logic. They disagree that government can ever distribute the wealth equally.

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