Economic policies going South?

On its own, the timely presentation of the Principles and Priorities by the finance minister and the Programs and Policies by the president is clearly a good sign. Under careful consideration, however, we begin to see mixed signals in the context of who is formulating the budget and why. It becomes clear that the government has not addressed a major, and serious, suspicion that economic reform policy is getting reversed: It fails to clarify doubts about the future course of the economy, including the role of private sector in the development process of the country. Hence, it is only natural that the genuine private investors feel threatened and remain suspicious of the long-term intentions of the communist parties. It is high time to address the suspicion that the private sector is going to be marginalized or taken over by cooperatives and or new institutions controlled and manipulated by political parties. Despite this policy statement, or perhaps because of it, the burden of proof falls on the ruling communist parties to do this. Contradictory statements will only heighten the confusion.

Let us recognize that in this period of transition it is not wise for this government to unilaterally make, or even indicate, fundamental changes to the economic structure of the country. Firstly, these changes might be reversed by future governments or be given lower priority. Secondly, making fundamental changes without consultation risks alienating important actors. The more realistic alternative is often to move on a basis of consensus between the political parties, especially the Nepali Congress, and continue those policies to which all parties have agreed to in the past. Rather than rushing to introduce new changes to the foundations of the economy, or trying to satisfy disparate, short-term, political interests, it would show greater foresight to focus on consolidating national achievements made in the past.

We may write what we want in words, but it is important to remember that actions will always speak louder. The actions of most communist governments in Nepal and elsewhere suggest that the private sector is considered as, in Mao’s words, ‘useful idiots’ and engaged for the short-term strategic gains, but is then systematically sidelined and taken over in the long term. Whether justified or not, Nepal’s communist parties inherit this historical legacy and therefore certain questions remain widespread.

Industrialists ask whether they will continue to be coerced or harassed by strong worker unions in the workplace. Workers ask whether they will have the freedom to choose which union to join, or be threatened to join particular ones. In some sectors, investors ask whether dogmatic cadres will try to take complete control over investment, employment policies, and production by threat of force. Based on Nepal’s recent experiences, no responsible government should consider these questions unfounded or paranoid. Therefore, in the shadow of these widespread suspicions, what can be done to assure investors and help workers to feel secure? Is life going to get even tougher for private investors, workers and consumers? The government has not tried to directly answer these questions, although it must do so if it wants to develop confidence in the economy and in itself. Indeed, the policy statement is weak in making these commitments and assurances.

The onus is now on the ruling parties to address the widespread suspicion that this budget is another small but irreversible step toward informalization and communalization of the national economy.

Asking for input into the budget making process at the last minute is not collaboration. Therefore, this budget cannot be seen as endorsed by other major parties. Since this is a budget created and endorsed by the allied parties alone, its implementation also falls squarely on their shoulders. On the other hand, the stance of the Nepali Congress and similar parties has also been made clear: Economic development is possible only with private sector investment within a framework composed of liberal, open and socialist elements. The government can take them positively and consider implementing their policies.

Ultimately, an open, liberal, modern economy that is at the service of society requires the private sector in some areas, cooperatives in others, and the state in yet others. Though roles for these entities are spelled out in the current budget, the stated roles are not articulated clearly and in some instances appear contradictory: The domination by cooperatives or the State in major sectors of the economy should not be the goal of Nepal’s modern economic policy. Nor should Nepal’s economy be dominated by corporate hegemony. It is a delicate balance that cannot be addressed by words alone, let alone words that could be considered inadequate in the current climate of confusion and doubt.

Overall, careful consideration of the Program and Policies suggests that the government has yet to assure investors and the private sector of its long-term importance, and workers of their freedoms and rights. This oversight is critical, if indeed the ruling communist parties agree that the private sector should remain important in Nepal’s economy. The onus is now on the ruling parties to address, on the one hand, the widespread suspicion that this budget is another small but irreversible step toward informalization and communalization of the national economy. While, on the other, it must make attempts to convince the public that this budget represents a movement forward, rather than a reversal of previous successes achieved by modernizing the economy to harness the private sector.

Writer is former Vice-Chairman of the Planning Commission

jagadishcpokharel@gmail.com