GRAND LARCENY: Reverse Robin Hood behind the Privatization of Infrastructure

Even in the 1990s and early 2000s, it was widely whispered that CIAA chiefs had three drawers in their desk: one for files of corruption cases to be pursued, another for those to be left pending and forgotten, and the third to be used for bargaining

Nov. 17, 2016, 5:45 p.m. Published in Magazine Issue: Vol 10. No.7, November 18, (Mangsir. 03,2073)

The country remains transfixed with the impeachment saga of the chief of the Commission for the Investigation of Abuse of Authority (CIAA); but those of us who have been studying that body from its very founding during the waning years of the Panchayat and its “carpet scandal” know that there is nothing really new here except the scale at which blatant misuse of power occurs. Even in the 1990s and early 2000s, it was widely whispered that CIAA chiefs had three drawers in their desk: one for files of corruption cases to be pursued, another for those to be left pending and forgotten, and the third to be used for bargaining and extortion from those under the scanner.

What is happening now, it should be emphasized, is that it is essentially an impeachment of the 2005/06 Loktantra itself and its failed (and corrupt) political leadership that has ruled the roost since the 1990s. Hence it is important to step back and reflect on the more fundamental underlying drivers that allow Nepal’s governance to sink to such a nadir of corruption. Luckily a lucidly written book has arrived that helps us do just that. {Nicholas Hildyard (2016). Licensed Larceny: Infrastructure, financial extraction and the Global South. UK: Manchester University Press}

Hildyard, a former editor of the Ecologist, had come to Nepal in the immediate aftermath of the Arun-3 and Tanakpur/Mahakali hydro/water treaty controversies in the late 1990s. After travelling around the country and meeting people, he met me and bluntly told me: “Dipak, for the kind of issues you are raising and the alternatives you and your friends are advocating, there is absolutely no support among your political class, left right or center.” We were then still under the spell of “multiparty democracy” and I told him he was being unduly pessimistic. A decade later, when I met him at IDS Sussex and he was with the London-based advocacy research group Corner House, I confessed to him that he had been extraordinarily prescient. Indeed, no political party or leader is interested in eradicating corruption: rather the prevalent Nepali phrase bhastachaar niyantran (and NOT bhrastachaar nirmulikaran or eradication, mind you) says it all – “bring corruption under control (of yourself and your party)”!

Sometime after I had left being minister of water resources in mid-2003, I had got a call from the CIAA: they were investigating the German-funded Middle Marsyangdi hydroelectric project and, since they were going to call all decision-makers for questioning, they said, “sir, although there is no charge against you, we would like to start with you because you are also an academic and by talking with you first we hope we can learn something”. I said give me three days and I will give you my views in written form, which I did.

The 70MW Middle Marsyangdi had been completed at a cost about five times higher than the going market rate with fifty months of time overrun. The original idea was that Germany would provide some 82% of the required finance as grant (actually money already allocated to the aborted Arun-3) while Nepal government and its Electricity Authority were to come up with 18% of the remaining amount. In reality, Nepal ended up paying some 70% of the total increased project cost, which essentially meant that it was not German aid to Nepal but its reverse: Nepali government and consumers paying massively to German businesses. If this was not corruption, what was? But it was perfectly legal even though wholly illegitimate and unjust! A similar saga had happened earlier with Kali Gandaki (and Italian contractors) as well as Kulekhani (and Korean/Japanese contractors) and is repeating itself even now with the Indian company given the license for Upper Karnali: if this project goes ahead in its present form, Nepal will end up subsidizing India to the tune of half the inflated total project costs!! No wonder Nepal’s hydropower is called “White Gold” (for everyone, that is, except the shafted Nepali electricity consumer)!

In my written submission to the CIAA, I described in detail the flawed political economy behind the legal contracts, whether by development agencies such as the World Bank and the Asian Development Bank or by private players from India, China and EuroAmerica. CIAA could not just investigate Middle Marsyangdi in isolation: the rot went all the way back to hydro projects such as Kali Gandaki, Arun-3 and even Kulekhani-1 to 3 although the audacity of the profiteering privateers got more and more ambitious as time went on. One had to go all the way back to decision-making processes (and not just decision-makers alone) in the mid-1990s after the abortion of Arun-3 to understand how modern infrastructure project financing had become “an extractive industry”, to use Hildyard’s phrase. Although we won the “variation order” compensation case against the Kali Gandaki contractor at the court in Milano, rather than getting that money back into Nepal government account, subsequent governments led by the political parties still in power today began “negotiating” with the contractor with the result that the “negotiators” won but Nepal and her consumers lost.

I never heard anything further from the CIAA, or whether they interviewed other ministers before or after me. It seems their investigation files went into the second or third drawers mentioned at the outset, either forgotten or bargained away.

Although Hildyard’s book does not mention Nepal, it certainly helps explain our deep-rooted rot of structured and institutionalized corruption. It starts with a challenging re-definition of wealth, capital and infrastructure, showing in the process how Picketty’s much acclaimed book on Capital in the 21st Century falls short in its political economic analysis. Wealth, such as a spear that a hunter-gatherer uses to get meat for his family’s dinner, is certainly a useful material good but not capital, for capital is not a ‘thing’ but a ‘process’ that allows money to make more money. Infrastructure is commonly understood to be those “physical sinews of society” that can only be built and benefited from collectively. However, in the world of haute finance and its Public-Private Partnerships (PPPs), it is a contracted and guaranteed income stream. It results in profound social transformations where an infrastructure such as a hospital “is not a place where the sick go to be healed, but a conveyor belt of patients whose processing rings a cash till”. If it does not do that, it may be a hospital or a highway, but it is not “bankable infrastructure” to the late 20th Century’s finance capitalism.

Hildyard describes the varied means of guaranteeing steady income stream – and thus extracting resources away from the world’s poorest and most vulnerable to its richest 1%. This guaranteed piracy of the public by the private with perfectly legal (but highly unjust) instruments range from minimum revenue guarantee (requiring governments to pay the difference if the revenues actually come in lower than expected), take or pay contracts (to be paid even if the services are not used), loan guarantees (even if the enterprise goes bankrupt), availability (of infrastructure once constructed) payments (even if does not get used), financial and economic equilibrium clauses (allowing the financiers to claim compensation not only for changes in government policy but also for exchange rate fluctuations, and in a bizarre US case compensation for toll operators against loss from car-pooling or exemptions for senior citizens). It would not matter if the voters elected a Bernie Sanders or a Jeremy Corbyn or an Alexis Tsipras who pursued more socially just policies: it is the divine right of capital to make money taking as little or no risk as possible that over-rides any adverse to haute finance expression of the democratic public will.

The book concludes with a rather pessimistic but sadly realistic look at the counter movements: civic engagements limited to NGOs have utterly failed as the latter, especially the bigger ones, have become totally domesticated to the imperatives of fund-raising. A new “impolite politics” is yet to be born. Nepal’s case is even more depressing: the Left, whether democratic socialist Kangress or the more radical Marxists or Maoists, has given up any pretense of not being the henchmen of finance capitalism, their leaders having long ago graduated to the billionaire class. But as old Marx predicted long ago, crises are built into the dynamics of capital’s expansion and are met with resistance, whether Brexit or the Trump Upset. Whether they help usher in a more just social order to the 99% at the bottom is yet to be seen.


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