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Nepal's Senior Economists
Telegraph Nepal, 22-Apr-08
Prof. Dr. Bishwa Keshar Maskey, Senior Development Economist, Nepal
Transparency needed for private sector promotion
The global economy is going through rapid changes. Such changes are not only intensifying the globalization process but also resulting in greater integration of economies at global and regional level.
We are also passing through a period where the trade flows, technological innovations and business transaction techniques are going rapid changes.
Economic development largely depends to an extent on the existence of supportive legal, financial and institutional framework, therefore the economy needs a major drive in making open, competitiveness and consistencies in policy regime for both domestic and foreign direct investments.
The new government which is in the offing has to be transparent in private sector promotion and concentrate its efforts aimed at furthering the globalization process.
There is already some signals that the new regime will pursue as per its declaration and efforts will be made in this direction. That’s all.
Professor Dr. Guna Nidhi Sharma, Central Department of Economics, T.U
Maoists basically want State Supported economy
It’s a kind of traditional economy where many fundamental rights are guaranteed, including the right to property, freedom of movement and expression. The Maoists are committed to competition or the competitive economy where we will have free enterprise economy.
What the Maoists basically want is State Supported economy where government intervenes only in the interest of larger society by way of investing in economy and social infrastructure and the supply of basic needs such as basic education, health, rural development, delivery of essential supplies of the goods and services which need social regulations.
The Maoists are mainly guided by the fundamental rights in the interim constitution as for example, the rights to basic wealth and education, food security and employment.
The Supreme Court has already directed to enact acts to these areas of constitutional guarantee.
Professor Dr. Mahendra Singh, Founder Head of the Central Department Rural Development, T.U
Neglect of Madhesh economy a sin of previous governments
The central goal of peace process in Nepal in my opinion is to build durable, domestic peace. It can be achieved only through promoting liberalization on every front. In political realm, liberalization means promotion of election, protection of human rights and constitutional limitations of the exercise of power.
In the economic realm, liberalization means of movement towards market oriented economic model, public private partnership, and friendly atmosphere for investors and protection of the economic interests of the consumer.
In this context, Maoists seems to be committed to this liberal thesis of peace and prosperity in Nepal.
Their peaceful participation in the recently held election and latest speeches on economic policies clearly indicates they are liberal in their approach.
Reasons are prevailing over their passion. It must be appreciated. However, Maoists should be very much careful while talking about liberal economic policy, the benefits of economic development will trickle down to the majority of the poor in Madhesh, mountains and the hills.
In this regard, cooperation from neighbors and donors will be most important.
Lastly, agriculture is the mainstay of the Nepalese economy and Madhesh in this regard is the rice bowl which has been miserably neglected by the previous governments. Therefore, the fertile land with irrigation support in Terai will ensure durable peace and inclusive development.
Professor Dr. Pitambar Rawal, Former Head of CEDA
Economy should be productive
The Maoists should have a policy to create more jobs. Without high economic growth, you can’t create more jobs. And for high economic growth, there should be more investment.
The economy should be productive one and another pertinent point is that the all pervasive corruption must be reduced. In this regard, the Maoists should consider certain economic sectors, for example, one is Hydro power and the second is Agriculture.
The Maoists should lay high emphasis on providing irrigation facilities to the farmers and secondly, there should be good extension system of the agriculture.
If you can provide these two facilities, you can even impose higher taxes on agriculture sector as well.
For rapid economic development, is should be a participatory one, it should be a transparent one and taxes can only be better imposed if there is adequate incentives given to the producers and investors.
For all this to happen, the nation should feel confident with the government.
Prof. Dr. Madan Kumar Dahal, Former HoD, Economics Department, T.U
Address immediate economic crisis
The Maoists party should accord a high priority to resolving the immediate economic crisis facing the country of late, for example, the acute load shedding, shortage of drinking water and that of the petroleum products and rising inflation.
In the long run, there is also the need to implement viable economic programs envisaged in the manifesto of the Maoist party released recently during the election of the Constituent Assembly.
At this critical juncture of decelerating economy, the Nepali people have enormous expectations from the Maoist party.
Household food stocks down to half in 38 districts
eKantipur.com, 11-Feb-08
BY PRABHAKAR GHIMIRE
Nepalis are already reeling under the rising prices of essential commodities, chiefly foodstuff. Worse lies ahead: Food, mainly food grain, is becoming scarce even at higher prices.
This could be a serious problem for a food-deficit country. International agencies, local officials and business persons acknowledge the looming crisis.
The Food Security Monitoring and Analysis System of the World Food Program (WFP) has reported that average household food stocks have gone down by half in 38 districts in the last three months (November 2007 to January 2008) compared to the same period a year earlier.
Increasing food prices mean that household stocks will be further strained in the next few months when recent harvests will have been consumed.
"The situation is very critical, particularly for the extreme poor who make up about 15 percent of the total population," said the WFP report, which estimates that around 3.8 million people will suffer greatly.
The crisis is looming large, said Richard F Ragan, country director of WFP-Nepal, who attributed the problem to factors like India's export ban on non-basmati rice, meager rise in domestic rice production and an unprecedented increase in international food prices. Nepal relies heavily on imports from India, which meet about half its total rice requirements.
"March, April, May and June will be the toughest months, as household stocks with the poor will be exhausted by then," Ragan added.
This shortage will be compounded by disruption in transportation (due to strikes and the tarai unrest) and lack of access to markets will also prevent many from being able to buy.
"Indications are that the tarai, a major production hub of the country, will also witness food shortages, unlike in previous years when the scarcity was limited to hilly regions," said Ragan.
Ministry of Agriculture data shows that the production of summer paddy will be higher by 17 percent this year. Even then, the cutoff of food shipments from India has caused prices to go up by 15 percent over the past few months.
"It signals a trend of increasing prices until the next harvest," the WFP report says, adding that once the old stocks in the market are exhausted, prices are expected to rise substantially.
Ganga Bishan Rathi, central vice president of Nepal Rice, Oil and Pulse Producers' Association, said that with rice stocks already running low, Nepal is going to witness a further rise in prices by at least 20 percent in the months ahead.
Recent WFP and FAO reports show that rice prices in the mountains are already 177 percent higher than in the tarai.
Food expert Bhola Man Singh Basnet said that Nepal needed a "food security mission" to increase food production and productivity as a way of dealing with the situation.
Although ambitious plans like food security banks have been mooted at the South Asian level they seem to be just an academic exercise with implementation nowhere in sight.
Beni Bahadur Rawal, general manager of the state-owned Nepal Food Corporation (NFC) - which has 15,000 tons of rice in stock - said that the corporation planned to buy an additional 20,000 tons against the expected crisis.
However, with the shortage already affecting rice mills and other producers, officials are skeptical the corporation will be able to make the procurement.
WFP has also warned about the possible consequences of the food shortage: It will force a large number of poor Nepalis to leave their villages and head for India to work as laborers. "Daily wage earners and low-end workers will be the most affected groups," said Ragan.
In the face of the rising prices, Nepali is raising the issue at the 31st governing council meeting of the International Fund for Agriculture Development (IFAD) which is being held this week in Rome, Italy, said Hari Dahal, spokesperson of the Ministry of Agriculture.
Food shortage and consequent rise in prices are however a global problem today. The International Rice Research Institute, the Manila-based global body, reported that worldwide food stocks were down to 143 million tons in 2007, the lowest in 25 years due to the worldwide effects of floods, drought and global warming. The Food and Agriculture Organization (FAO) has also cautioned that lower food stocks and rising prices would mainly hit the least developed countries.
Foreign Aid Far From Adding Growth: Report
ArthaExpress.com, 7-Feb-08
Foreign aid in whatever form has not made any significant contribution for reducing poverty and supporting income generation activities in Nepal, says a report.
Although the volume of foreign aid has increased over the years and has been instrumental in meeting resource gap, it has been unable to enhance sustained growth.
The report entitled -´Role and Effectiveness of Foreign Aid Under PRSP in Nepal´ says that the aid is primarily contributing to induce aggregate demand in the economy for a short term. "The foreign aid measurably failed to enhance productive capacity of the Nepali economy which could have helped unleashing resources for sustained growth and, there by lessening of external dependency over the time."
Releasing the report, Speaker Subash Nembang on Wednesday stressed on the need to initiate public debate on aid effectiveness and its contribution to the socio-economic development in the long run. He pointed out that the status of foreign aided programmes and projects should be made transparent and people should have the rights to know about them.
Prof Bishwambher Pyakuryal said that the procedural complications and delay in disbursement have slowed down the effectiveness of foreign aids. He, however, claimed foreign aid played an instrumental role in the country´s expenditures, as it contributed almost one fourth of total expenditures.
Another economist Dr Raghab Dhoj Pant argued "Why should Nepal constantly beg donors for support, if foreign aid has not made any contribution to poverty reduction or enhancing incomes and savings. He also criticised the programmes and policies initiated by PRSP as being donor predominant, which ultimately failed to yield the projected results.
He criticised the government for implementing PRSP or the Tenth Plan (2002-2007) without realising the economic structure and ground realities of Nepal. Dr Pant countered the government´s claim of increasing flow of grants and said, "It will be useless to be happy unless we have counterpart fund to receive in large volume of grants."
Stating the most striking features of the 10th Plan, the report states that there were no attempts made to bring about a consistency between objectives and strategies, policies, programmes and implementation modalities. ´The donors´ policy conditions were predominant.´
The report findings observe that a unique phenomenon of foreign aid to Nepal is that more than one third of the total aid is neither audited, nor has proper records. The ratio of disbursement to commitment is not consistent. Besides low disbursement, on an average, aid utilisation capacity has remained less than 50 per cent.
The report also blames the state mechanism and government for low utilisation of the aid. "Despite expertise and qualified people inside and outside the government, no initiatives are taken to make detailed homework to identify major constraints and evolve better policy or programme options taking political economy and institutional into account," it says.
Contemplating Nepal´s aid dependency and its effectiveness, Dr Dilli Raj Khanal, principal author of the report said, "Unless foreign aid strategies and donors´ behaviour are changed following an overhauling approach, the debt trap situation will perpetuate accompanied by continued dependency on aid with some zero sum game type effect."
Nepal's Geography of Underdevelopment
Monthly Review [www.monthlyreview.org] - November 2007
by Richard Peet
Baburam Bhattarai, The Nature of Underdevelopment and Regional Structure of Nepal: A Marxist Analysis (Delhi: Adroit Publishers, 2003), xx, 540 pages, hardcover, Rs 600 ($14).
Emerging from a middle-peasant family background in Nepal, Baburam Bhattarai excelled at school and then, with a Colombo Plan scholarship in hand, studied architecture and planning in India. By the early to middle 1980s, the theoretical structure of spatial and regional planning studies had changed—in a Marxist direction. Bhattarai wrote his doctoral dissertation at one of the centers of political-theoretical ferment—the Centre for Study of Regional Development, at Jawaharlal Nehru University (JNU) in New Delhi—finishing in 1986. While he was a student, Bhattarai was president of the All India Nepalese Students Association on its founding in 1977. He joined the illegal Communist Party of Nepal (Masal) in the early 1980s. Returning to his native Nepal in 1986, he was the spokesperson of the United National People’s Movement during the 1990 uprising, and from 1991 the Coordinator of the United People’s Front Nepal, the legal front of the Communist Party of Nepal (Unity Centre), which in turn gave birth in 1995 to the Communist Party of Nepal (Maoist) (CPN[M]). Bhattarai served prominently in the Peoples’ War 1996–2006, and is now de facto second in command of the CPN(M). As of the date of writing preparatory negotiations for Constituent Assembly elections are still taking place, with the fate of the monarchy and the future direction of Nepalese society to be decided in the continuing struggle.
Marxist social science at the time this book was written in the early 1980s was in the late stages of a flourishing era of radical scholarship and political activism that had begun in the 1960s. The poststructural and postmodern philosophical movements were criticizing Marxism as totalistic totalitarianism, but few on the left bothered to read all that vague, carelessly argued text, and cared less when they had. Neoliberalism was taking over the world, yet we Marxists were lulled into complacency by our successes of the 1970s. India had not yet gone through its New Economic Policy (1991), and Indian critical political-economic thought was still firmly based in Marxism, especially at JNU. This book emerges from the late stages of this global, leftist intellectual culture. It is essentially Baburam Bhattarai’s doctoral dissertation, with a recent preface bringing the Nepal context up-to-date, and a foreword written by Prachanda, Chairman CPN(M). The book resounds with statements made within the left’s optimism and confidence of the time. This is Marxist objective analysis, capable of differentiating correct from incorrect ideas. This is science carefully thought, and beautifully written, on behalf of the oppressed.
Most basically the book argues that Nepal is underdeveloped because its forces of production have been retarded by a retrograde form of society. This argument rests on a critique of two related traditions in Marxist thought—theories of underdevelopment and theories of space—within an overall political philosophy drawn from Marxism- Leninism-Maoism. Bhattarai rigorously dissects underdevelopment and space theory with the analytical mind of a completely committed, thoroughly convinced, utterly confident Marxist dialectician. So, for him, neo-Marxist dependency/world systems theory is a deviant, “neo-populist” current prevalent in radical academia that, by overstressing exogenous relations of exchange, proves unable to explain the inner causes of underdevelopment. The theory of the articulation of modes of production is better, yet still too exogenist. Hence, the need for a new, historical-materialist approach to the basic contradictions in Nepal—essentially development as a process triggered by contradictions between the forces and relations of production, with underdevelopment resulting from blockage in the transition to “higher” social formations.
In terms of theories of space, the “Anglo-Saxon” school of regional development, neoclassical location theory, growth poles, etc., is quickly dismissed in favor of radical theories of space, and Marxist geography in particular. At the time, much ink was spilled on the relations between space and society: space as a manifestation of social processes, yet space as a causal factor in these same social processes, with a profusion of terms, like “socio-spatial dialectics,” trying to bridge the gap. With hindsight we can see that a lot of the agonizing was due simply to the need for two words (space, society) to refer to a single entity (space-society), or in Bhattarai’s terms a “dialectic in unison.”
Out of this entanglement Bhattarai manages to emerge with a relatively coherent concept of socio-spatial process that avoids the mechanistic determinism of the one side on the other. Basically he finds “scientific” the view that spatial formations are the manifestations of, and to a lesser degree causal factor in, the particular configuration of social formations. Specifically, development/underdevelopment is a socio-spatial process that manifests contradictions in the mode of reproduction of life, with this process occurring somewhat differently in each social formation. In the case of Nepal, the codetermining specifics include a unique history in that the country was never formally colonized, although neocolonial relations with Britain and India have long played a determining role—for example, 200,000 Nepalese soldiers served in the British Indian Army during the First World War. Additionally, Nepal has a spectacular array of physiographic regions, within a landlocked position between contending India and China. And then there is the persistence into the present of a medieval socio-political formation under the hegemony of a centralized, despotic state. Nepal, Bhattarai says, should be considered as a society at a transitional, pre-capitalist stage, whose motion is engineered by the interplay of contradictory forces of both endogenous and exogenous kinds, within a specific geographical context.
Bhattarai’s argument proceeds by differentiating Nepal vertically and horizontally. The vertical distinction, according to the production and circulation of surplus value, is drawn between surplus-producing sectors (agriculture and industry) and non-surplus-producing sectors (trade and finance). Horizontally, he differentiates the country spatially—contrasting regions at altitudes ranging from 100 meters in the Terai along the Indian border to 8,800 meters in the Himalayas, all within a distance of 200 kilometers—Nepal as “stair steps to the sky.”
At the time the dissertation was written, 91 percent of the working people labored in primary production activities (agriculture, forestry, and mining); 0.5 percent in secondary activities (manufacturing); and 6 percent in trade, commerce, and services with the rest unknown. By 2001 the relevant percentages were 66 percent in primary activities, 13 percent in secondary, and 21 percent in trade and all others. Thus the conditions of agricultural production loom large in the analysis of Nepal’s underdevelopment. When Nepal was unified by the Hindu Shah family into the Gorkha kingdom in the late eighteenth century, the king was recognized as sole repository of land proprietorship and, with the exception of tribal territories in some fringe hill areas, a system of landlordism known as raikar was imposed that involved direct payments to the state in return for inheritable occupancy of land.
However, the extensive and difficult territory of Nepal could not be controlled effectively, and in the middle nineteenth century, the Shah state collapsed. Under the Rana autocracy (in which a small group of noble families ruled) the state began allocating land to private individuals, religious institutions, royal vassals, local tax collectors, and others in a system that matured into a kind of feudal capitalism as the Indian railroads reached the Terai in the late nineteenth century. As late as 1950, 60 percent of Nepal’s cultivated land was tenanted by peasants paying rents that reached as high as 75 percent of the rice crop. A series of land reforms following restoration of the Shah dynasty in 1950 proved cosmetic rather than fundamental. Nepal’s peasant agriculture remains characterized by the extremely small, and declining, size of land-holdings per farm household, with surpluses appropriated through share-cropping, state taxation, and usury. Overwork and underconsumption by the peasants forms the underdeveloped base of the economy and constitutes a fundamental source of the rural discontent that founds the revolution in rural Nepal.
Baburam Bhattarai theorizes that “higher” social formations are characterized by a greater share of labor engaged in non-primary production—specifically industry. This is because greater factor mobility and increasing returns to scale, along with an increase in the ratio of constant to variable capital, allow a “faster rate of expansion and development of higher relations of production in the industrial sector” (172). Along with other underdeveloped countries, Nepal suffered from deindustrialization that almost completely eradicated its previously highly developed artisanal and craft production, especially after the signing of a “Treaty of Friendship” with Britain in 1923, whereupon cheap British-Indian manufactured goods flooded the country! Bhattarai calls a later increase in export-oriented industrial production “spurious” because it was essentially processing of agricultural materials (jute and timber) rather than production aimed at meeting needs in other sectors of the economy. So Nepal has a “chronically anemic and inverted” industrial structure, with a low level of technology and productivity.
The recent increase in industrial employment comes from growth in the woolen carpet and garment industries triggered by the “generalized system of [lower import duty] preferences,” instituted by the United States in 1974, which the author views as a device by metropolitan capital to exploit the cheap labor of underdeveloped countries. As part of this same “liberalization” Nepal has privatized many of its public sector enterprises at throwaway prices. Without a basic restructuring of endogenous and exogenous relations, Nepal cannot have the industrial revolution Bhattarai finds necessary.
The main form taken by capital in such an underdeveloped situation is merchant-commercial and interest-bearing and money-dealing, or circulation capital. The economy is marketized mainly in the Katmandu Valley and the Terai, with far simpler markets elsewhere in the hill and mountain areas. Activities like tourism, touted as foreign exchange earners by the ruling class, create “dysfunctional spatial enclaves” within Nepal, while the income that is generated flows out of the country, leaving at best a few service jobs. Nepal also suffers from the “civilizing mission” of the metropolitan countries and their international financial institutions that first gave grants in aid for development but later pumped in loans, with the result that foreign debt now amounts to 50 percent of GDP, while the debt/export earning ratio is a dangerously high 600 percent.
In keeping with his geographical emphasis, Bhattarai summarizes his sectoral analysis in spatial terms. In Nepal, the overwhelming proportion of settlements are of a very small size, with depopulation occurring in the hill and mountain zones, and increasing polarization of economy and people around the state capital of Katmandu and at the points of integration with India and the outside world. Nepal’s underdevelopment is essentially a problem in the transition of a pre-capitalist society, hybridized under its retrograde internal social structure, but increasingly mediated by exogenous capitalist/imperialist interests. The social and spatial problems of development/underdevelopment are unlikely to be solved without a basic restructuring of society. And with that Bhattarai finished his doctoral thesis and returned to Nepal to help carry out “basic restructuring.”
This dissertation/book can be recognized as a fine example of applied radical (Marxist) scholarship. It is a brilliant synthesis of Marxist historical and geographical materialism with detailed, empirical analysis of the specific context in Nepal. Several weeks of highly committed time are needed to read this dense and complex work. During my own immersion in the book, I came to admire the author as an intellectual with an innovative theoretical mind as well as a revolutionary activist. But I also, reluctantly, developed a critical attitude towards the version of Marxism practiced by many of us at the time the dissertation was written, and by Bhattarai, then and perhaps now.
The book employs a dialectical materialist theory of history in which progress comes from the interplay among the parts of the social whole, unless it is blocked by retrograde social and spatial relations. Bhattarai’s position, derived from Kautsky and Lenin, is that the decisive role in the movement of society to a “higher” mode of production is played by the urban industrial sector—because with industry, capital, labor, and instruments can be combined and enlarged more readily. Dynamic industrial capital then emits impulses of commodity production into the countryside, and transforms it. Without industrialization peasant agriculture remains perpetually “backward”—it is the less dynamic component, the passive part in the dialectics of change. Yet, in criticism, exactly the peoples of the “backward” areas of Nepal’s hill and mountain regions form the base of peasant support for the CPN(M). So we have a “backward” area populated by progressive people? And restructuring in the postwar period will have to involve a strategy of complete land reform (that removes the landlord class) and productive transformation (investing in rural means of production) if a future socialist Nepal is to respond to the popular aspirations of the vast majority of the people of the country and to the revolutionary peasantry in particular.
For this reviewer, such a situation entails developing a different kind of Marxist theory, in which the countryside and the peasantry are seen as dynamic and progressive, and not just the city, manufacturing, and the industrial working class. Nepal cannot develop by copying the industrial history of the capitalist West. Nepal cannot develop by copying post-Maoist China, either. Rather, Nepal has to conceptualize its own model of socialist development if it is to self-transform in a way that serves the people, and not the ruling class and global capital. This means an internalist model of development in which specialization, division of labor, productivity, equal exchange, complementarity, and social justice are brought together without the domination of one sector over the others—forced industrialization at the expense of rural transformation, for instance. Conceptualizing this model means releasing the revolutionary, theoretical imagination from the constraints of a mechanistic, Leninist Marxism that derives from a critical analysis of the Western, industrial experience. The CPN(M), Prachanda, and Bhattarai can produce a specifically Nepalese political-economic model to the extent that they learn from their own history and empirical experiences, including their mistakes.
Nepal is not “backward” in a universal developmental experience. Nepal does not have to go through industrial capitalism to transform into socialism. Nepal, it seems to this reviewer writing from the other side of the earth, needs more creative, particularistic, even subjective Marxist thought based in the real experiences of its predominantly rural people.
We are also passing through a period where the trade flows, technological innovations and business transaction techniques are going rapid changes.
In the economic realm, liberalization means of movement towards market oriented economic model, public private partnership, and friendly atmosphere for investors and protection of the economic interests of the consumer.
The economy should be productive one and another pertinent point is that the all pervasive corruption must be reduced. In this regard, the Maoists should consider certain economic sectors, for example, one is Hydro power and the second is Agriculture.
In the long run, there is also the need to implement viable economic programs envisaged in the manifesto of the Maoist party released recently during the election of the Constituent Assembly.