Dr. Bhattarai and capital market

Dr. Bhattarai and capital market
ekantipur, 11-Nov-08
Dr. Raghab D Pant

The speech made by the Minister of Finance Dr. Babu Ram Bhattarai, reportedly the No. 2 man of the CPN(Maoist), on Nov. 4 while inaugurating the Elite Merchant Bank is worth reading. The only problem (detail in a minute) with the speeches of Maoist leaders is that it is not taken seriously by many. The reason is simple: They are well known for giving speeches to please the present audience with little concern about the implications.

Dr. Bhattarai's speeches on economic issues are of different kinds, relatively speaking. It is, however, difficult to draw definite conclusion from the consistency test. A definite gap is easy to notice between the promises made and the policy or programmes pursued. His speech, for example, given at the World Bank-IMF meeting was very formal. But at the same time, it is reported in the press that the Nepali delegation, headed by the Minister of Finance himself, has indicated its need to borrow from the International Monetary Fund under Poverty Reduction Growth Facility (PRGF).

The loan under PRGF is used by the developing member countries of the IMF only in case of severe financial problems. The loan is available with a nominal service charge. On the contrary, the policy-makers have to accept severe conditionality imposed by IMF. In fact, our domestic financial policy will be dictated by IMF.

It is reported in the press that a mission from IMF is coming this month for detailed discussions. Are we facing financial crisis? If not, why is an interim government with the responsibility to prepare the constitution of the country planning to borrow from IMF under PRGF? On the one hand, the government is providing complete waiver of loan for the small borrowers of banks and financial institutions at the cost of Rs. 9.2 billion and, on the other extreme, it is planning to borrow under PRGF! Bhattarai sir, we are a bit puzzled.

The mind's first step, it is said, is to distinguish what is right from what is false. But as far as Maoist speeches and programmes are concerned, the contradiction is easily visible between what has been preached and what has been practiced. Further, the minister of finance, on other occasions, has announced with open confidence that their aim is to establish a communist society in Nepal. At the same breath, it has also been explained that it may not be achieved immediately as the country is still following feudalistic pattern of society.

The question is: How is the minister of finance -- or for that matter the Maoists -- planning to move from what they call current feudalistic society to communist society where, according to Marxian prophecy, each will have according to his needs. At the theoretical level, there are two schools of thoughts. Karl Marx has explained in detail with the help of theoretical model that it is not in the nature of economics to make jump from one type of economic system to another in that it must follow a unique pattern; socialism, for example, will come only after the full development of capitalism. This view, however, was not acceptable to Lenin. In his view 'it is a reactionary way of thinking to try to find salvation in the working class in any other way but in the top-heavy development of capitalism'.

Therefore, the minister of finance and the CPN (Maoist) as well has to make it clear whether they want to follow the path of Marx or Lenin. We can not have both. Lenin believed in the prophecy of Marx but not in the historic process developed by him. For him, it was nothing but historic determinism. Lenin, therefore, tried to impose a revolution at a time and in the country where Marx had foreseen that a revolution could not take place. As a result, it is safe to conclude that Marxian theory failed in 1917 and his prophecy began to dominate. And prophecy, by nature, functioned on a long-term basis is not possible to prove. In the long run, on the other hand, we are all dead.

We are not yet sure about the overall economic policy of the CPN (Maoist).

We can have a flavour from the afore-mentioned speech if it is a genuine policy rather than a strategy of the party that Dr. Bhattarai is associated with. "We are against the idea", explains Dr. Bhattarai, "of contracting the role of the private sector. We will play the role of facilitator so that more capital can enter the market to augment industrial capital and for infrastructure development". If this is what he aims to achieve with the government role confined to that of a facilitator, it will be easy to attain, as he had hoped, the goal of "simultaneous growth of the real sector along with the booming financial sector to achieve the expected level of economic development".

But the investors -- and the general public too -- have to be convinced first that the policy measures explained by the Minister of Finance will be implemented in the same spirit as it is announced. This trust has to be earned honestly. It cannot be earned by showing the political power that the Maoists command. The ball is now on Dr. Bhattarai's court. We hope it will be translated into action.