Double-digit growth and the new NPC

Double-digit growth and the new NPC
ekantipur, 28-Dec-08
By Chandra Prasad Bhattarai

Laying foundations for a double-digit growth in Nepal in the next three years is an important vision of the 2008/09 national budget prepared by the current Maoist- led coalition government. Finance Minister Dr Baburam Bhattarai, who hails from the same party, presented this budget at Parliament last September. While discussing the required pace of economic growth, the minister had coined two contrasting approaches: "the crawling of snake" and "leap-frogging." He had referred the former approach to the current sluggish growth, which he wants to be replaced by the latter. The leap- frogging approach, according to the minister, will eventually help the national production grow by at least 10 percent annually.

This ambitious goal of the Finance Minister has since then been viewed skeptically by concerned professionals and Nepal's development partners alike. This unconvinced section's concern is quite obvious when viewed in the context of Nepal's history of 2 percent average annual economic growth in the last five decades. The suspicion itself, rather than the economy, has grown rapidly in the meantime. Several questions are coming forward, the most pertinent of them being what miracle will be done in Nepal to help the country to achieve a double digit growth in three years in such a growth-unfriendly economic environment.

One does not need to be an Einstein to come to a conclusion on how Nepal's economy is performing over the recent years. The economy is unceasingly characterized by deep rooted poverty, stagnant agriculture sector, widespread unemployment and underemployment, excessive dependency on foreign assistance, corruption, and weak service delivery system. The Nepalese industry sector, except for a couple of commodities, has always remained uncompetitive in the world market. Although there is huge potential in the tourism sector, the frequent strikes, closures, conflict of interests between the employers and employees, etc. have affected this sector critically. It is quite interesting to note that while the government constantly talks about private- public partnership in Nepal's development endeavors, the private sector was never ever so frustrated in the country's history.

Institutions and government policies can create rays of hope in such an environment. It has been established that sound policy environment and institutions are crucial for promoting growth. Nepal's immediate neighbors China and India have already shown the world how well an economy can grow if the policies are good and institutions are efficient. In a planned economy the central planning agency is instrumental in formulating appropriate policies that ultimately contribute to economic growth. In its monitoring role this agency attempts also to ensure that government policies, plans and programs are launched in an integrated way.

In Nepal, the National Planning Commission (NPC) is the one with these roles. This institution is in place since the country entered the planned development process in the mid 1950s. The NPC is mandated to provide guidelines, advice and suggestions to sectoral ministries. Its roles are vital and wide-ranging: it formulates the basic development policies, prepares periodic development plans, explores internal and external resources, determines annual budget ceilings for government agencies, formulates annual sectoral development programmes, monitors the implementation of development programmes and projects, and explores innovative approaches to sustainable development.

Immediately after the formation of the coalition government, the then existing NPC Vice Chairman and members had resigned from their respective positions to clear the way for the appointment of a new commission. The government has appointed a Vice Chairman and six Members. The stakeholders in Nepal's development process feel that the government's decision to appoint a competent person like Pitambar Sharma as the Vice Chairman of NPC is highly commendable. However, it’s been widely perceived that the government grossly failed to find real talents for the positions of NPC members. The political parties in the coalition government became totally unaware of the fact that they were supposed to recommend professionals with appropriate backgrounds. The key point is that while the Finance Minister's budget speech has definitely raised the people's aspirations for a better life, no one knows how appropriate economic policies the new Vice Chairman's team will deliver for the country to achieve a double- digit growth in the next three years.

The author is a development economist and can be contacted at cbhattarai@wlink.com.np