It didn’t.
The protectionist, inward looking economy founded on the principles of import substitution and the vehicle used to achieve it, a massive public sector insulated from competition both foreign and domestic, failed miserably. Under the centrally-planned rather than market-determined priorities and investments, the monopolistic public enterprises (PE), that included the frequently nationalized banks and other entities were supposed to produce, distribute and trade goods and services needed by people and the state in a low cost price.
This didn’t happen either. Low or high cost, productions/supplies were always short of demand and as such consumers had to wait long even after paying in advance; for an earlier delivery of the merchandise/service they had to pay extra (not as price, but as bribe) or find and use a powerful connection. The license raj that aimed at checking competition made producers, not the consumers, the king; delivery of an Ambassador car or a Chetak scooter or the installation of a telephone line or a new LPG gas connection would always be seen as a prize won rather than a purchase made. Nevertheless, most of the ‘prized’ products/supplies would be of poor quality or sub-standard, but the monopolists wouldn’t bother.
Simultaneous collapse of the Soviet empire and the severe balance of payment crises in 1991 forced the Indian policy makers to mend their ways and ethos as foreign currency reserves sank to a level where the nation wouldn’t be able to pay its import bills even for 3 weeks; this happened despite the fixed exchange rate system with tight controls over foreign currency exchanges and imports. Therefore, an International Monetary Fund bail out was arranged followed by liberalization measures and opening up of the economy. Irrespective of which party- Congress or BJP- comes to power, the reforms that have bestowed an average growth of 8 percent to the nation for almost two decades, as against the stagnated growth of pre-1991 era, continue.
Nepal’s case and condition is different. As communists, defeated or changed elsewhere in the world, are at the helm of affairs, their failed economic theories, at least some of them have to be experimented here - it is politics! And they want to retain and if possible, even expand PEs; so, they recently decided to form an ‘all powerful and independent (?) body to oversee the performances of PEs and improve them’ (see Republica, March 7).
Unlike their Indian counterparts, PEs in this country used to produce even liquors besides producing and/or trading cigarettes, consumer goods, food grains, to exporting paddy and rice to operating transport services both for people and goods, airlines services, telecom services, song recording companies you name it. Although most of their products/services enjoyed monopoly market, majority of the PEs made huge losses. The numbers of profit making PEs are less than half of the 36 remaining entities whose average annual return on investment had been around 5 percent for last some years which is less than the corresponding rate of inflation, thus less than the cost of the capital injected.
No more trial and errors, it is time politicians and policy makers accept the universal truth that governments are bad entrepreneurs when compared to individuals and also that in the developing world, the politician-bureaucrat nexus along with the employees and their unions are the only ones who are benefited when governments do business.
Whatever few PEs are making, profits are because they enjoy virtual or actual monopoly markets and not because they are efficient. For instance, despite its poor services Nepal Telecom Ltd (NTL) earns a huge profit, simply because its competitors are too small and too new to challenge its domination in the lucrative market. Other monopolists like Nepal Electricity Authority and Nepal Oil Corporation that enjoy huge captive markets are not as lucky as NTL; with chronic ills like oversized structure, swollen staff, wasted resources, high leakage in operation and corruption their financial health is very poor. The condition of other PEs too, is not very different.
PEs’ performances and profitability cannot be improved by the formation of a new government agency. And anyway the concept is not new; during the Panchayat regime too a powerful and ‘independent’ body- ‘Corporation Coordination Council’ (CCC) - was created under the direct command of the prime minister. Despite some of its good research works on PEs, CCC was a failure. No such half-measures will work now. The only prognosis to the ills PEs suffer is privatization with suitable reforms based on past experiences as all alternatives to privatization like awarding management contracts to the so-called experts, bringing strategic partners, management by employees et al, have failed.
No more trial and errors, it is time politicians and policy makers accept the universal truth that governments are bad entrepreneurs when compared to individuals and also that in the developing world, the politician-bureaucrat nexus along with the employees and their unions are the only ones who are benefited when governments do business; people or tax payers in general and the concerned PE in particular, are the losers. And in a country like ours where bhagbanda, corruption and politicization of everything are norms rather than exceptions, PEs are the worst hit of all by those malice.
Privatization has been successful wherever there has been political commitment and good governance- for example UK (during the eighties) or China (since last two decades). Although for political reasons the Chinese use the nomenclature ‘listing in stock exchange’ instead of privatization, in effect it is the transfer of ownership to private entrepreneurs/investors. If privatized companies have performed poorly in our country it is not because the concept is wrong; it is because our corrupt/inept politicians and bureaucrats failed to include/implement suitable safeguards in the deeds of the deal, such as post-divesture follow-ups or effective oversight/regulation by statutory bodies.
After all, why should the tax payers’ money of a poor nation like Nepal be spent to pay the huge losses of Janakpur Cigarette Factory, that of all the commodities produces cigarettes, can’t compete with its private sector rivals and is home to excessive labor activism and political meddling? Why should the state own/run National Trading Ltd - another loss making PE - whose job is to import and sell duty-free liquor and cigarettes and few other consumer goods through its fewer outlets? Why public sector cement factories, one after another, turn insolvent or tend to become so, while the private ones thrive? How have the employees of Nepal Airlines Corporation and even the bus conductors and drivers of Sajha Yatayat made fortunes while the employing companies are heading towards bankruptcy? They are just a few examples. Wouldn’t it be prudent to sell them and invest the proceeds into more productive, needy and equitable areas like health-care, education, infrastructures and social welfare, rather than to form another CCC with an aim to retain them or add more like them, Comrades?
jeevan1952@hotmail.com
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