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Rudra Pandey

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A Radical Vision

It is infuriating to see how national budgeting is done in Nepal. Nothing visionary is implemented. The people are seldom filled with optimism about the future of the country. What Nepal needs is a radical measure which can transform the face of the country. With this in mind, I have presented a hypothetical case.

Nepal is a nation of about 27 million people. Let us say about 9 million of them are between the ages of 16 and 35. And let us assume that one third of the nine million are unemployed or partially employed. So we have three million young people looking for work.

This is by no means a far-fetched estimate. The implication of this estimate, however, opens up a window of opportunity to do something big and radical. How much does it take to provide employment to all the three million unemployed or partially employed citizens of Nepal of working age? Let us say the average salary for each is Rs. 10,000 ($140) per month. The total monthly cost would be $420 million, which would be $5.04 billion per annum. This means that if we were to employ just a third of that population, the cost would be $1.68 billion annually, i.e. a million people could be employed with a little more than half a billion dollars.

Why do I say Rs. 10,000 per month? The salary will have a range from Rs. 5,000 to Rs. 50,000+ per month. The majority of the laborers will be paid Rs. 5,000 per month. The senior managers could make up to Rs. 50,000 or even higher per month. I am not proposing a communist system here where everyone would make the same money no matter what. This is just my weird proposition. It won’t be this simple when it comes to actually creating a project and employing these people on something productive. If it was this simple, many poor countries would have done this. Such a task needs someone with the courage, vision and determination to lead the nation. I mean someone who can honestly say “I am sorry I failed and I made a mistake.” Only honest, confident and sincere leaders can do that. And such leaders have the courage to take big challenges and are not afraid of failures, and they can convince investors solely on their credibility and confidence.

There are many benefits of such a massive scale project. But first of all, it has to be a national level decision to start a venture/project that can employ one million, two million or three million people. If the government launches a venture to employ a million, more jobs will be created as the money start flowing into the marketplace. As millions start buying goods and services, many other jobs will be created and many more will be employed. Cash flow is crucial to a healthy economy.

I suggest that we start with a plan to employ a million young people first. We need merely $1.68 billion a year, an achievable target. It is not difficult to find $1.68 billion when we go to international agencies and friendly countries with a solid plan. We have to know what to do with the money and we need to have a concrete plan. And we should not be begging — we should be borrowing. No grants please, let us get loans instead.

The projected annual cash floating in our country through the government in the coming fiscal year is about $2 billion – 60% of which could be revenue, 20% loan and 20% grant. When we talk about borrowing $1.68 billion, it may give a chest pain to many bureaucrats and politicians. The mantra should be to borrow and invest. As long as we invest money on building the basic infra-structure like roads, electricity and communication, we should not be afraid of borrowing.

What kind of a National project should we be launching? First of let us think of a project that can employ one million people and they can be efficiently managed. Projects of this scale cannot start with ad hoc and haphazard planning. It needs serious thinking. We also need to think of highly labor intensive project as we are thinking of benefiting from massive labor resources which we have easily available. When I think of a project like this, roads and highways are what first pop in my mind. Highway projects can be segmented and work can start in parallel from different points at different phases, thereby providing us with the opportunity to employ large number of people from different regions at the same time. Furthermore, we can expect a return well within the span of a year or so. Once the road is graveled, people can start using it to some extent and black-topping can follow-up in phases.

Highway construction is a massive engineering initiative and it requires both capital and labor of different levels – starting from core coolies to highly educated engineers and planners. We have enough skilled and unskilled labor and we need to spend money on heavy equipments and raw materials (cement and steel) acquisition. The government should privatize initiatives starting from planning to construction monitoring and quality control. The government needs consulting help even in preparing the project appraisal and in performing feasibility study. Based on sound appraisal and feasibility reports, money can be borrowed. Once the loan is assured, the government should then gather RFI (Request for Information) from vendors and RFP (Request for Proposal) should be requested based on the RFIs. A tiny government body can manage vendors and the complete project work can be privatized to provide opportunities to local businesses to mature.

Let us get back to the numbers in the context of highways. Let the market determine how to design the production function in building the highway. The production function would include labor and capital: f(K,L). The proportion of labor and capital in the function would be determined by the cost of labor and capital. In our context, labor is pretty cheap and construction contractors would try to use labor heavily when and where possible. This will definitely guarantee huge employment opportunities for low skilled labor. It may however not translate to direct employment of a million people.

The number of people to be employed remains a looming question. I do not have a straightforward answer to that as it also depends upon the project pace, duration and fairness in the contract award, assignment, monitoring and control. If proper attention is not paid, massive irregularities may erupt and it may end up making a few politicians and bad contractors rich instead of employing millions as planned. To avoid these scenarios, many semi-government agencies (we hear of national highway authorities even in developed countries like the U.K and the U.S.) should be instituted and given immense authority to regulate contracts and contractors. Privatization brings efficiency and I still think spending $1.68 billion annually can generate direct employment to one million people and can change the face of our country if we can do this repeatedly for 10 years. It totals to about $20 billion in 10 years even after considering market inflationary factors.

Just today the Wall Street Journal reported that Warren Buffett, the second richest man in the planet, is donating over $30 billion dollars to the Gates Foundation over the span of the next several years. This shows what a person can do when he/she has the will and determination. We are talking about a nation of 27 million people. We can turn this nation around. We need a clear vision, a positive attitude and a dream driven by optimism. Only those who try can succeed. Let us try. We can do this – employ one million jobless Nepali citizens.