Four months since the 7.8 magnitude earthquake, much of the heavily affected population is still distraught and reliant on government and foreign agencies. Approximately 117,000 people are dislocated from their homes and living in open-air sites as nearly 600,000 houses have been completely destroyed while another 280,000 have been damaged. In addition, with seeds for plantation and livestock lost, the country's agriculturally dependent population is struggling.Therefore, Nepalis and the government are heavily reliant on foreign aid and loans. Right now, it appears that this is the only way for Nepal to get out of this mess. In a recent report, the National Planning Commission estimated that the total cost of reconstruction would be US $6 billion. This is nearly a third of the country's US $19 billion GDP. Of this, the Donor Conference raised a total of US $3 billion. However, these donors are concerned about how the government plans to utilize the aid money.
Prime Minister Sushil Koirala has assured the international community that corruption would not be tolerated and concerned stakeholders would be updated with every step in the utilization of these funds. Future pledges that would be made in the second donor conference are going to be important. However, only having a reconstruction plan will not be able to meet Nepal's long term goals.
With a new constitution just around the corner, it is vital that the country take initiatives and formulate a comprehensive plan that is beyond the reconstruction agenda. There may be different strategies and plans. Nevertheless, we could start with three developmental tools.
Transparent taxation
Nepal is bedeviled by rampant poverty and income inequality. According to 2011 data, the bot-tom 20 percent of population controls just 4.1 percent of total wealth. Meanwhile, the bottom 10 percent controls only 1.5 percent of national income. On the other hand, the top 20 percent con-trols a resounding 56.2 percent of national income; the top 10 percent controls 39.5 percent of national income.
These figures showcase the problem of economic inequality in the country, largely caused by inequalities in control of capital, as most high earners control a lot of inherited capital causing a decline in labor share of national income. This not only creates inequality in terms of income and wealth but also in regard to basic needs such as education and health which is unhealthy for the country's long term development goals.
To solve this inequality, the government should have a better progressive tax on both income and capital. At this point, it is necessary to increase tax on the rich including those who control a lot of wealth and those regarded as super managers to create a more level field. This should be coupled with high transparency both in the public and private sector so that wealth in the private sector is not hidden, and the income generated by the government is not misused.
Agriculture and education
Redistribution of national income does not mean linear transfer of resource from the rich to the poor. It rather means investing in sectors that could benefit the entire population.
One of these vital sectors is agriculture which is the primary sector for growth for a developing country like Nepal. Countries like Japan and South Korea first increased their agricultural prod-uctivity that in turn created more commercial jobs. This is similar to England's path to the Industrial Revolution in the 19th century.
The government has in fact already taken steps towards a comprehensive agriculture strategy. Recently, the Ministry of Agricultural Development (MoAD) was given the green light to im-plement the Agriculture Development Strategy (ADS). This 10-year development strategy could be a catalyst in the graduation of the country from LDC to developing country status by 2022. Expected to cost Rs 50 billion a year, the ADS may be a big boost for Nepali economy. Accord-ing to the MoAD, once the Ministry of Finance approves it and the strategy is presented to the cabinet, foreign donors have pledged to invest. Agriculture is also an important sector through which the government can redistribute wealth in the long run.
Another sector that needs government investment is education. Nepal's public education system is a disgrace. This year's SLC exams had a pass rate of only 47.43 percent. The performance of the government schools is particularly poor. The SLC is in fact quite easy for students of private schools. But the majority of the population is incapable of sending their children to expensive private schools.
The situation of higher education is similar. Not a lot of funding is available for proper research due to which the country lags in innovation. Therefore, it is important to invest heavily in higher education to not only create jobs but also to increase wages, thereby decreasing inequality in the country and improving the labor share of national income. Scandinavian countries enjoy the fruits of economic development and are more equal societies, in part due to their massive investment in building an inclusive educational system.
This would also help in proper mobilization of Nepali youth. Some parts of the country like Kathmandu and Pokhara are already experiencing such youth mobilization. For instance, after the earthquake, a group of highly motivated students from Kathmandu University School of Management initiated Euta Gaau Hami Afai Banau (Let's Rebuild One Village Ourselves) cam-paign, through which they rebuilt Kolanti Village in Kavre. They raised funds online and through a fundraising program called "Portrait for a Cause".
The above example is one of the many ongoing youth initiatives. However, this is limited to only a few people in the cities with access to proper education. This is another example of inequality in the country. In order to create a level playing field, it is vital that the government invests more in education so that all of today's youths have a brighter future tomorrow.
Trade agreements
The trade negotiations and resulting agreements, specifically with India and China, will now be more vital than ever. With a very high trade deficit, the government should make sure that the country now gets a better deal in any trade agreement so as to enable Nepali economy to create jobs and export without any hassles. In the donor conference, India promised US $1 billion while China promised US $483 million for reconstruction. These funds are vital, but the best thing Nepal's neighbors could do for it is to open new trade negotiations for the benefit of Nepalis.
At the same time, to promote long term growth and reduce the country's massive trade deficit, Nepal needs to focus on sectors in which it has comparative advantage. One such sector is hydropower. Although the country is afflicted by long hours of power cuts, and has to import electricity from India, the country does have great prospect in this sector. In the past, although Nepal and India have taken initiatives to develop hydropower sector in Nepal, they have not been able to make much progress due to onerous regulations and insufficient investment. Due to this, a fixed price for electricity has not been decided yet. So it is important that Nepal government, along with India, worked out a sustainable and progressive hydropower plan.
It is important that the government utilizes these tools so that other developmental strategies can have a strong base to build from.
The author is an intern with the United Nations Human Settlements Programme in Nepal
AManandhar.17@westminster-mo.edu
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