EconSpeak: When Maoists’ Rhetoric Collides With Nepal’s Economic Reality

EconSpeak: When Maoists’ Rhetoric Collides With Nepal’s Economic Reality
Commentary by NepaliEconomy.com

The successful conclusion of the Constituent Assembly (CA) election on April 10 2008, and the resounding victory of the Maoists over Nepali Congress (NC) and UML, and the emergence of MPRF as a major political force in the eastern Tarai mark a tectonic shift in Nepali politics. The Maoists, given their electoral success will certainly lead the new interim government with the mandate to draft a new constitution. The process could take about two years. Assuming that everything goes smoothly (big if), there will be a new election to elect a permanent government. The Maoists leaders are confident that they will win that also, and at this point it is hard to argue otherwise. Now the Maoists are in the cockpit of the country, so to speak, they will have to start delivering on their economic promises and take the country to the Promised Land. That won't be easy and how the Maoists navigate the challenges ahead will likely shape the political as well economic life of the country for years to come.

The knee jerk response of the business community following the Maoist victory exposed their deep-seated worry. The NEPSE fell more than 5% following the election results although it has recovered some of the losses. There have been rumors of capital flight out of the country principally to India. The FNCCI is concerned enough to call on business community to unite to protect its interests. The international community was also caught off-guard by the Maoists' achievement and is still somewhat shell-shocked. While respecting the outcome of the election they have not whole-heartedly embraced the Maoists.

The subdued reaction from domestic and international economic players to their triumph has not gone unnoticed by the Maoist leadership. They are making an extra effort to reassure the skeptics. Dr. Baburam Bhattarai, the chief ideologue of the party gave an extensive interview to the Nepali Times to ally fears about their intentions vis-à-vis the economy. He articulated such moderate views that it would be hard for sensible folks to raise qualms about them. He explicitly ruled out collectivism and nationalization, and his advocacy for greater government role in the economy should be expected given his party's leftist tendencies. He advocated land reform although did not provide the details. He promised to protect domestic industries but did not discourage foreign investment especially large-scale ones, which according to him would be done using BOOT (build-own-operate-transfer) model. He assured that the labor agitations by the Maoist-affiliated unions were things of the past. He pledged to end corruption and leakage in the system.

Dr. Bhattarai's assurance could have been taken at a face value but for three reasons. First, there was one ominous comment in Dr. Bhattarai's interview. He said, "Revolution means a radical rapid change in the socio-economic structure, that can happen through violent or non-violent means. At some point in a revolution, violent means need to be adopted." I am not sure what he meant. Can we infer that if the Maoists do not achieve their revolutionary goals, whatever they are, peacefully they are going to resort to violence? He did not get the opportunity to answer that question but there are reasons to be concerned. In an interaction sponsored by the BBC couple of days later, he said in no uncertain terms that the Maoists will first fulfill their political goals and then their economic goals. Does that mean that he will deploy the YCL as well as the state machinery and the legal monopoly of violence at their disposable against any political, administrative, societal, judicial or other type of impediments (perceived or real)?

Second, there are contradictions between Dr. Bhattarai's current positions and his earlier ones. In an earlier incarnation, as a revolutionary leader, he wrote 40-point demands to then HMG government led by Sher B Deuba. The Deuba government tragically ignored them and that triggered the 10-year insurgency. Now the Maoists have realized many of their political demands, are they going to take steps to fulfill their economic demands as well? If so, they have to realize that there are many contradictions between their past and present pronouncements. For instance,
#4, Gorkha recruiting centers should be closed and decent jobs should be arranged for the recruits. Does this also apply to people working in the Middle East and the SE Asia?
#6, The monopoly of foreign capital in Nepal's industry, trade and economic sector should be stopped. How does this square with foreign investment especially the ones done using BOOT model?
#28, Brokers and commission agents should have their property confiscated and that money should be invested in industry. #35) Education for profit (private schools?) should be completely stopped. How do they square with free enterprise economy?

Third, the Maoists have made many outlandish economic promises (in their 40-point demands and in recent CA election manifesto), which will be hard, if not impossible to attain especially in the context of Nepal. For instance, they promised to increase per capita income from $270 to $3,000 in 10 years. That is 27% a year growth in per capital income and 30% GDP growth if we include 2% growth in population. No country, especially resource poor has achieved such feat. Secondly, they promised to increase hydro production by 10,000 MWH in 10 years. Using the rule of thumb of 1MW costs $1 million, that requires $1 billion investment a year, possible but very unlikely. Finally they want to make Nepal a developed country in 20 years and highly developed one in forty years.

The Maoists' economic goals and promises will certainly collide with the reality that is Nepal. Needless to say, most of Nepal's economic woes are either structural (rural underemployment, load-shedding, water shortages) or beyond its control (high food, energy and fertilizer prices), and there are no obvious quick fixes for them. The Maoists will certainly find it very difficult, if not impossible to meet the high benchmark they have set for especially if they start alienating domestic businesses, the intelligentsia, and influential foreign countries. When they finally realize their own limitation, how are they going to respond? Are they going to accept it and try to reset the expectations of their cadres and supporters to more manageable levels? Will their cadres accept anything less than full promulgation of the Maoists programs given that their party is in power and that they have sacrificed their blood for that cause? Will the tension between the moderate top and the radical bottom tea apart the movement? Or will the Maoist leadership try to placate the impatient and disillusioned troops and make up for their own shortcomings by inventing a scapegoat and unleasing radical socio-economic programs i.e. Nepal's versions of Great Leap Forward and Cultural Revolution? The answers to these questions will have profound long-term impact.

Despite all the big question marks, we must give the Maoists the benefits of the doubt but not a blank check. After all they have morphed from radical revolutionaries to the dominant political party in just two years, and they have the mandate from the people. There are still many internal contradictions that they need to sort out. Probably the best reason why they should be given a fair chance is because so-called mainstream parties have lost all credibility in the eyes of Nepalese people. In 15-years of their rule, they never missed an opportunity to waste peoples' mandates and disappoint their hopes and aspiration.