It was the Koirala-led government that declared that market-oriented liberal economic policy would be the official economic policy of the country. The declaration was so important that even after 18 years, liberal economic policy, that has witnessed many upheavals worldwide, has remained the country´s largely unquestioned economic guiding policy. [break]
In his first address to the nation immediately after becoming prime minister, Koirala made a public commitment to institute ´a new economic order´ in Nepal in which democracy and development would move forward hand in hand.
In line with liberal economic policy, the government pushed for massive economic reforms, opening up almost all sectors to private and foreign investors. As a result of such far-sighted policy, the economic fundamentals of the country strengthened impressively over the years.
The result of these deep-seated reforms enabled the economy to face many challenges and one can see the major indicators of the economy still intact despite a decade-long insurgency and years of political instability, said former finance minister Mahesh Acharya.
Another former finance minister, Dr Ram Sharan Mahat, shared similar views and added that the liberal economic policy that the Koirala government introduced has been the principal guiding policy for all types of governments that came to power after 1990. "All the political parties, no matter what their political ideologies, accepted the policy without any question," he said.
The financial sector reforms -- that had partially opened the banking sector to private investment following the financial crisis of the mid-1980s -- were further opened up to private players. As a result, the economy witnessed more private as well as joint-venture financial institutions. "The massive expansion of banking services that the economy is enjoying at present is the result of the financial sector reforms initiated under Koirala´s leadership," Acharya said. Likewise, foreign trade, which was reserved for select businessmen close to the power centers, was liberalized and restrictions on both imports and exports were lifted.
Koirala´s bold and massive economic reforms were also reflected in his commitment to implementing Value Added Tax (VAT), despite stiff resistance from the business community which took to the streets in protest for weeks. "His commitment to economic change was so solid that no force was able to make him compromise on the basic issues of reform," Dr Mahat said.
As a result of his boldness, VAT has become the backbone of our country´s revenue today and because of the reforms in tax administration, the mobilization of revenue in the past years has been excellent.
Kiorala always inspired us to reform and, most importantly, he extended full support to the finance ministers in economic reform, never shifting blame on others when there were criticisms, recalled Dr Mahat.
The late Koirala also played a crucial role in accelerating decentralization and empowering local bodies. The Kiorala-led government constituted a commission for administrative reforms in 1992 and as per the commission´s recommendation and the constitution itself, the government in 1992 promulgated separate acts for villages, municipalities and district bodies, naming them Village Development Committees, Municipalities and District Development Committees respectively. The recommendations of the commission became the guideline for the government in enacting necessary laws and regulations. The acts were the most important measures in promoting and strengthening local governance in Nepal, Dr Mahat said.
Among all the major policies for a liberal economy, privatization is probably the only policy that could not produce the expected results, mainly because the post-privatization performance of most of the privatized institutions remained pessimistic.
prem@myrepublica.com
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