"We Need To Assure Investors That Nepal Is Investment Friendly" Dr. Ram Sharan Mahat

As Nepal has been passing through a political crisis and facing severe economic challenges, former finance minister and leader of Nepali Congress DR.RAM SHARAN MAHAT spoke to KESHAB POUDEL on various contemporary issues. Excerpts:

March 29, 2019, 8:54 a.m. Published in Magazine Issue: VOL 12 No.16,March 29-April 18, 2019 (Chaitra. 15, 2075) Online Register Number: DOI 584/074-75

The government is fully backing investment summit, expecting to lure a huge private sector? How do you see the future?

Communists are experts in target setting and they never give any concentration to materializing them. So far as making commitments are concerned, investors will publicly announce their commitments. Given the current state of government when prime minister is centralizing power and cutting the role of private sector, I don't think any investors will put their money in such risky conditions. Two years ago, Nepal also organized similar kind of summit and there were over 20 billion dollar commitments. However, none of them came to Nepal to materialize their commitments.

What does Nepal need to do to lure investors?

Firs of all, we need to assure investors that Nepal is investment friendly. For this, the government needs work to enhance institutional capacity, promulgate investment friendly laws and regulations, make competent bureaucratic set up. However, the current situation is different.

Prime Minister KP. Oli led communist government has been claiming that they have drastically changed the economy, introduced social welfare schemes and new infrastructure projects like rail, shipping and new airports. How do you look at it?

Prime Minister Oli has been saying whatever he wants to. Rail, ship, airports, pension and so on. However, I can say that all his claims are all show with no substance. People are frustrated just by listening to his paragons. When Oli was elected prime minister, there was high hope among the common people. Hope has already faded from the mind of the people during his year in power. NC has a big opportunity to emerge as a replacement.

Along with Prime Minister Oli, Finance Minister Dr. Yubaraj Khatiwada is claiming that they will lure huge foreign investment. Enough for double digit growth from coming years. How do you look at it?

They have been preaching about all sorts of things but they have not really showed action. They are championing the same Foreign Direct Investment which they opposed while in opposition. Prime Minister Oli has been urging foreign investors to come to invest inNepal. However, I have not seen genuine foreign investors willing to invest in Nepal.

Why is it so?

One need is to improve the quality of governance, change behavior and gain trust. So far, the government has done nothing to assure investors in changing laws and improving governance. Few years ago, Nepal held a similar summit and received commitments of billions of rupees for investment. However, no one showed up to for the actual investment. If you see the recent trend of FBI, the number of investors has further gone down. As the government is centralizing the power, investors are waiting and observing the situation.

The government has recently introduced number of bills like the FDI Act, Technology Transfer Act, Nepal Investment Board Act in the parliament to make Nepal friendly for FDI. How do you look at it?

The recent amendment on these acts will further complicate the situation for investors. The provisions of the new act are more confusing and complex for the investors. For instance, the government has given excessive power to Nepal Investment Board to decide on the FDI without improving its governance and capacity of the employers working in the board. We can lure foreign investors only through good governance, enhanced capacity of institutions and zero corruption.

Prime Minister Oli has been saying that he will link Nepal with north and south by rail, access to sea through ship and bigger infrastructures projects like road and airport. How do you look at it?

The Prime minister is selling his dream andmaking nonsense agendas like rail, ship, big airports and high ways. However, the government has not shown any serious interest to improve the existing infrastructures. The Prime Minister has never said anything on improving basic infrastructures and quality of governance. Instead of talking big, the prime minister should have focused on improvement of basic infrastructures, construction of roads. Nepal needs more quality roads, extension of existing airports not railway or river navigation. Instead of improving state of Tribhuwan International Airport, the prime minister wanted multi-billion dollar Nijgadh and other infrastructures. Having done no detailed feasibility study, PM Oli is only selling dreams and populist slogans.

Despite so many things, the government is able to achieve over 6 percent GDP in the last two years and prime minister KP. Sharma Oli is harping for double digitin coming years? How do you look at it?

The current sate of growth has nothing to do with the programs of the government. There are several factors behind it. Acceleration of reconstruction activities, improvement of power supply, formation of provincial and local governance, good monsoon and progress in service sector due to remittances. Given all these indicators, Nepal can achieve 6-7 percent growth. However, our country still needs to take lot of initiatives and policy changes. Double digit growth can’t be achieved just on the basis of one individual's wish. Prime Minister Oli is merely dreaming about the double digit growth instead of taking any initiative to materialize his target.

Do you mean there are no indications for high growth?

Yes. People are fed up with PM Oli’s toll and populist promises who have been talking about rail and river navigation. They are merely nonsense. At a time when the government has done nothing to upgrade and improve basic infrastructures, the Prime Minister is just selling dreams.

If railway and navigation are cheapest means of transport, what is wrong to expand them?

I am not denying your facts. For Nepal, improvement and upgrade of surface transport should be a major priority. Similarly, there is an equal need to upgrade Tribhuwan International Airport. My suggestion is that the government should focus on improving existing infrastructures before launching new projects. The prime minister should first make Gautam Buddha International operational then, move on to Nijgadh. Instead of taking any technical feasibilitystudy, the government is just selling dreams.

How do you see the economy?

Not going for macro level analysis, the export import ratio indicates bleak economic condition. During 1990s, the export ratio was just over 50 percent. Now, the ratio is much higher and the trade deficit is 600 to 700 percent. Export is drastically declining and import is swelling.The contribution of manufacturing sector in the national economy has declined. In 1990s, the contribution of manufacturing sector was 9 percent and now it is below 6 percent.

How do you see the scenario?

There is excessive centralization and bureaucracy is politicized. New constitution has adopted a decentralized and federal system but the government is working for excessive centralization. For instance, Prime Minister's Office is controlling all the investment through Investment Board. It is reported that even investments of Rs.5 billion needs to go through the Investment Board. Ministry of Defense has tabled a National Security Council Bill giving power of mobilization of the army to the prime minister. All authorities have been centralized to the Prime Minister. This will create very dangerous situations.

Since the Prime Minister is the head of executive of House of Representatives, what is wrong with giving power to elected leader of the parliament?

The prime minister is an elected leader of House of Representatives and accountable to the people, does not mean that he should be given excessive power. The Prime Minister’s role is to give directives and monitor progress. I don't think giving excessive centralization of power to Prime Minister will promote democracy and good governance. Excessive power centralization will only produce a democratically elected authoritarian ruler.

How do you see the financial activities?

The government is spending more on consumption and distribution. The constitution of the new building to the president and a guest house under prime minister are excessive use of financial resources. At a time, when the private sectors are operating many renowned hotel chains and hospitality centers professionally, there is no sense in the government running hotels. Constructions like these will drain money.

If the constitution has itself said that the aim of the country is to turn socialist, what is wrong to have centralization of power?

Socialism propounded by our constitution has nothing to do with classical socialism. The state cannot nationalize property and it cannot control rights. A socialism oriented state means launching programs to reduce poverty, uplift the poor, lower disparities and provide welfare schemes to elderly. Experiences of communist countries including China have shown that centralization of power cannot contribute for economic upliftment. By “turning socialist,” our constitution intends to spend more money for poor and backward. Fiscal redistribution is necessary to uplift the poor.

How do you see the current level of revenue?

Our policies of past have changed the state of revenue collections. When we were in the government for the first time in 1994, our revenue was just 12 billion. Now, the government generates a revenue of over 500 billion. There are significant progress in health and education sectors. The World Economic Forum hailed Nepal's progress in human development and social sector. We have made these achievements in the period of political insatiability and violence.

What should be Nepal's priority now?

Nepal's first priority should be economic progress. Strengthening democracy, enhancing capacity of bureaucracy, strengthening institutions, laws and good governance. With the government of two thirds, the government has to launch programs to make Nepal prosperous. However, the government has been going in the opposite direction instead.

As Nepali Congress has suffered badly in the last few years failing to perform well in parliament and elections, don't you think time has come to change the leadership?

Nepali Congress has been facing several problems. Of course, theleaders are also also responsible for all the debacles. However, several other factorsare also responsible for it. NC has trailed in parliamentary elections due to unity of two major communist parties failing to manage internal squabbles and highlight the contribution made by our party to bring peace, managerial weakness and organizational weakness.

Despite the efforts of leaders like you, NC is yet to end factionalism and internal rivalry between Sher Bahadur Deuab, Ramchandra Poudel and others. Having started your political carrier almost at the same time with people at the top of party, don't you think your time has come to claim leadership?

Of course, Deuba and I started politics almost at the same period and I also went to prison. However, I have not decided about contesting the elections yet.I am not a self centered man. I am ready to assume the leadership in an appropriate time.

Don't you think this is right time to claim leadership?

My friends and well wishers have been advising me to claim leadership. I believe in work. Thus, I have not claimed leadership. I have to accept the fact that Deuba and Poudel had spent more time in prison than I did and I have accepted them as leaders. Also, I have avoided any unhealthy completion in the party and took steps to avoid intensifying the factionalism. If my leadership is necessary this time, I am ready to enter the contest. Looking at the current times, my opinion is that consensus is more necessary in the party.

As Nepali Congress has been facing several problems, particularly, intensifying of factional war, do you think revival of Nepali Congress is possible?

Revival of Nepali Congress is possible. Given the present state of the communist party government, Nepali Congress can come back in power. However, there is a need for the party to bury differences and factionalism. As you know, we have been suffering from factionalism. We need management.

What efforts have you been taking on your own?

I have been urging Party President Deuba to avoid promoting factionalism and internal rivalry. My only mission is to end factionalism and to unify the party.

How do you see the present state of the country?

For the first time, through new constitution, Nepal is exercising three tires of government under the federal structures. All three tires of government center, province and local level have been given full executive and legislative power. The Federal system is economically a very expensive for of government. Federalism is not a panacea because we have seen the splitting of Yugoslavia due to poor management.

How do you see the present constitution?

The current democratic constitution is a good constitution with federal structures. However, writing democratic constitution enough to establish democracy alone. Along with the constitution, strong institution and capable bureaucracy is also required. I always remember BP Koirala's statement regarding constitution. He used to say that the Soviet Union then, had a constitution with the highest volume with everything about the rights of people elections and democracy. However, the constitution gave birth to an authoritarian communist state. So far as United Kingdom is concerned, it does not have a written constitution. However, Britain has best democratic government in the world guaranteeing all democratic rights of citizens. This can also apply to us. We have written an inspirational constitution but it is very difficult to materialize.

During the finalization and promulgation of new constitution, Nepal's friends and well wishers from far and near suggested to make the constitution inclusive and functional.

Why are your party leaders in a hurry to promulgate the constitution?

I had also suggested our leaders to first, discuss all the clauses, words and context in the Constituent Assembly and take the advice of our friends to make the constitution inclusive. Honestly speaking, our leaders did not listen to me or anybody else. The Constitution of Nepal was passed hurriedly without any clause wise discussion in the Constituent Assembly. CA relied heavily onthe subject committees ‘recommendations. All the CA members voted for the document without expressing their views. I haven’t read all the clauses as well and we did everything in a hurry. This is the reason there are so many ambiguities surfacing in the process of implementation.

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