Minimum Consensus Agenda

<br>Krishna Hari Baskota, Finance Secretary

Sept. 10, 2012, 5:45 p.m. Published in Magazine Issue: Vol. : 06 No. -07 Sept. 07-2012 (Bhadra 22, 2069)<br>

Some Economic Indicators For Comparison 
                                                Last fiscal year   Year before last
GDP growth                           4.6 percent             3.8 percent
Inflation                                   8.3 percent             9.6 percent
Export growth                        16 percent               5 percent
Remittance growth               40 percent              10.5 percent
Revenue growth                    22.2 percent          11 percent
BOP surplus                          113 billion               3 billion
Foreign currency reserves   450 billion              272 billion 
(Some are rounded figures. Figures are either in NRs or in percentages)

In the previous year all our economic indicators were positive. If we compare the last year’s indicators with data for the year before it, all economic indicators were moving in the positive direction. Not only economic indicators, there were improvements in even the realty sector. The capital market also grew on an average as the Nepse index reached around 390. In the previous fiscal year, we were able to make the overall economic indicators positive. The country is now searching for investments, we have also already declared an investment year for attracting investment. In this scenario, if we had been able to bring a full budget, we would have been able to attract much more investment. We would have been able to give industrialists and businessmen various offers for their investment like special economic zone act, and other investment friendly acts.

We were on the verge of taking economic pick-up but we were not able to bring full budget to kick-start the growth.  At a time when the economy was heading in the right way and when the economy had already taken a certain positive direction, it is sad that there were obstacles in the economic growth, that also due to political reasons. We are trying to separate economy from politics and find consensus on minimum economic agenda from all political parties, if not all, at least major political parties should agree on the minimum agenda for economic prosperity.

If political parties ask me as the finance secretary to make the common agenda for minimum consensus then I would like suggest the following list and put it up for consensus.

First, I would like to suggest giving continuation to the liberalized market economy, which we have been implementing from the 90’s and all political parties should continue on this free market track. Then, we should not nationalize any private investment. We became a member of WTO (World Trade Organization) in2004, likewise, we are also the member of SAFTA (South Asian Free Trade Area), we have also agreed on all harmonized codes of WCO (World Customs Organization), and we have also adopted 40+9 recommendations of FATF (Financial Action Task Force). All the agreements made with these economic international agencies should be followed as agreed on and all political parties should agree on these issues.

The private sector is asking for making tax rates predictable. So we should not raise the current tax rates at least for the next ten years and also should agree on not bringing any new taxes and only increase the tax boundary if necessary. We have 37 public enterprises; there are various obstacles in privatizing these institutions. So we should start decreasing and removing the government’s liabilities in these institutions gradually.

Land is a limited asset and if the government wants to take any land for development, the government should be allowed to take it without any hindrances. Land is the property of the nation. However, for the public, the government should give them the right to housing, not land. People have the basic right to food, clothing and housing. People do not have the right to the land. If land becomes the property of individuals then it will be impossible to do many developmental works.

Another is the price of petroleum products; we have to import petroleum products as they are not the products of our nation. There are always troubles in setting the prices of petroleum products. So all parties should decide on fixing the prices of petroleum products according to the market and that should be automated. Prices of petroleum products move according to the international market and there is no point in burning tires in Nepal after any hike in prices of these products. If a nation is economically strong, then, yes, the government should give subsidy in these products. In our nation it is difficult for the government to even give NRs 500 as old age pension. The government has not succeeded in even providing basic fertilizers to farmers. The government has not been able to give basic educational facilities to the people of the rural areas. So there should be no argument on providing subsidy to only 26 percent people who use petroleum products.

Similarly, nobody should be allowed to bring in any hurdle in the developmental works in productive sectors and infrastructure development. If the businessmen invest in some physical infrastructure or productive factories in the rural places, then the common people have the tendency to ask for various kinds of support from these businessmen in the form of support to the development of local schools, clubs and other causes. An investor invests in rural places for his profit, not to address all the local problems. So investors should not be forced into these things unless they themselves want to do it as part of their Corporate Social Responsibility.

We also have to increase local productivity and local consumption and then only there will be trade balance. The public sector should buy local products and it should be given legal form.

As we are searching for investment, if any country wants to sign BIPPA or DTAA or any other investment protection act, then we should sign these treaties to attract investors of those nations. We should not debate on issues like in the present context. It is not debate that we are seeking, we are seeking investment. Only if foreign investors find their investment safe, they will invest, otherwise why will they risk their money? If these issues are not understood by the leaders, then who will address such challenges?

We will also have to decrease the transaction costs. If the investment is less, consumers will get products at a low price and businessmen will also earn more profit. We should make rules and regulations as flexible as possible and provide one stop services. People are complaining that the government has not done anything much as businessmen are openly selling substandard products and what we are feeling is that rules and regulations should be made very tight. But in reality, we will not be able to control anything that way. We should be as flexible as possible and provide all the necessary freedoms. If we take an example of a small kid, then if that kid is protected extensively by his parents then there are high possibilities that he will be involved in bad practices but if the same child is given all the freedom and only given directions by the parents then chances are less that he will do anything bad. So care and freedom are far more important and better than outright control.

We have to increase export from NRs. 75 billion of last fiscal year to NRs. 100 billion. The government should give various subsidies to small and medium enterprises, especially to agro-based industries. They should be provided with various subsidies directly from the government. The government should be crystal clear about whom to support and whom not to support. If an industry uses raw materials produced in Nepal, which is using Nepali workforce for the production and the final product is also consumed by the Nepalis, then we should provide support to those industries. But if an industry is established only to take the locational advantage of Nepal,  and if that industry brings raw materials from other countries and again the final product is also sent to other nations and if it is running only to tap the market of neighboring nations, then those industries should get less support. And it is not good to provide subsidies to them considering them as productive industries. Industrialists also get various subsidies just by being close to some political parties that also should be stopped outright and only those industries should get support which work only for national welfare.

Nepal should swiftly move towards industrialization. Only after being an industrial nation, there will be chances for employment, our economic activities will rise and so will our exports simultaneously. Likewise, industrial relations with other nations will also be better and other countries also think industrial nations as developed. Saying very briefly, development of a nation means development in infrastructure and industries.

There is also the need of a flexible labor law. This doesn’t mean that laborers will be provided no rights. Laborers should be provided facilities according to ILO 102. They should receive nine social security facilities according to ILO provision. But labors should not be allowed to close the industries or make insurmountable demands with the investors. Everybody should remain within the bounds of discipline.

Another thing is the lack of banking services in rural areas of the country. All the political parties should commit to increase the reach of financial institutions. Still there is an informal economy and people still play ‘Dhukuti’ and follow other informal approaches, and the main reason for such practices is the lack of banking services.

All the land acquisitions that the government does, or the other environmental protection activities and resettlement works for development should not be politicized. Everyone should become a development lover. For instance, in the case of Melamchi water project, it is not necessary to stop the project by bringing forward various unnecessary environmental issues. These unnecessary environmental degradation rumors have kept the country at bay in development front for a long time. We have to analyze where our country is. Nepal’s 40 percent land is still forest, we are in a position to trade carbon and take premium. So, we are not in a bad environmental condition and the country cannot afford to do unnecessary environmental research for 1-2 years before doing any big projects.

Likewise, in the case of land resettlement also, people should follow the government directives and orders. If one political party’s government tries to resettle people in one location then the other opposition political party should not politicize the move and should not influence those people for their sake. Rather, there should be a common consensus.

Also there is the need of consensus among political parties in all the projects of national pride. Kathmandu-Terai fast track, Terai rail road or mild-hill highway, and other national pride projects should not be hindered by the change in government and all political parties should form a common agreement on this.

Furthermore, the date for the promulgation of the national budget should be fixed and the full budget should be allowed to be brought that day irrespective of the nature of the government or the type of the government. The Finance Ministry should bring the budget that day compulsorily.

Finally, there should be a permanent coordination committee to keep track and to monitor on the agreed agenda. The coordination committee should comprise one member who has knowledge about economy from all the major political parties.

Then the political parties will win the confidence of the private sector. We will also be able to attract foreign investment. Likewise all the donor companies which are suspecting that politics has taken too much toll in Nepal, will receive positive messages. This will increase the grants and loans from donor agencies and foreign investors will also invest in Nepal, not only foreign investors, domestic investors’ confidence will also be high. It will increase the overall economic activities of the country and Nepal will be on the path to prosperity.

Every nation searches prosperity. Prosperity basically means economic prosperity. Prosperity can be achieved by various other means like raising awareness, or through women empowerment, and also by the development of cultures and languages, among others. But if people are aware and empowered but have no money for their bread and butter, then that empowerment is near futile. Only if people are economically prosperous, other prosperities will work. And for economic prosperity, there is the need of common consensus on minimum economic agenda. Various adjustments can be made on other agenda but this is the better way forward for the nation.

(Baskota is a finance secretary. As told to Debesh Adhikari) 

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