Opportunities Ahead

Posted by: Rudra Pandey

As the country is making progress towards reaching an all-party agreement that may lead to a peaceful political settlement building up on the April uprising, it is not too early to think about the various opportunities that loom in Nepal’s horizon that the forthcoming government will have to choose from. Finding the right opportunities and opting for them will help us prosper in the next 10-15 years. Any opportunity we opt for should be tied to the comparative advantage we have as a small nation (but not too small by the number of people we have) in the planet. Our comparative advantage lies in cheap labor, beautiful mountains, massive water resources, and the indomitable spirit of our people. Also, we can’t be shooting for too many competing opportunities.

Question would be “who identifies the opportunities and goals for a nation?” I think it is the national government that creates platform for zillions of opportunities for the private entrepreneurs and then the entrepreneurs play on the platform and propel the nation towards prosperity. I am going to talk about basic stuffs that the government (I mean the people’s government which I hope will be formed within the next two years) needs to do to allow entrepreneurs to succeed. If we have a government which can engineer (note – there is a difference between providing and engineering) availability of basic stuffs like education and health care, we as a nation can head uphill. It won’t be easy because when the going gets easy, we could be going downhill.

Law and Order – the first and foremost

The government must establish law and order as a fundamental aspect of a legally standing sovereign nation. We have been fighting for years to be assured that no one is above the law. If a rule of law that that treats every citizen in the nation equally is not assured even after the establishment of a people’s government, every other thing that the government says or does amounts to nothing. Things will start falling through the crack and people will lose faith again. Frustrations will increase if the rule of law is not guaranteed. It will drive more people to politics and politics will be the only business we will be doing for the next 100 years, as has been the case for the last 200 years. Lack of a rule of law will make people angry and they will join politics looking for opposition against the ruling entities.

Question arises – how would the post-constituent assembly government go about establishing the rule of law? It is a very difficult job and it is beyond the scope of this article to explore it in detail. There could be several other people already thinking about this as we have a lot of people smarter than me focusing in this area. Also, “rule of law” is a relative measure. There is no nation in the world where there is an absolute “rule of law”. We need to opt for perfection, let us not be disappointed if we do not get one. We have to work for years to get there. We will be fine as long as we have a good start and our government is committed to get better everyday. In the past, we started with lofty beautiful dreams and things started to get worse right from the next minute every new government was formed – it did not matter whether it was royal or non-royal government.

Some of the basic stuffs we can expect in a country where rule of law is assured are:

– Recognizing criminals – for example tax defaulters are criminals
– Persecuting criminals – penalized if found guilty without exception
– No one is above the law – not even gods

If we had rule of law, King Gyanendra, his father and his son would not have been able to do what they did. They all would have been criminals and would have been prosecuted. Same is the case with Girija, Prachanda and Deuba. They all committed crimes in some fashion or the other. Let us forget and let us have a fresh start. Enough politics done, time to grow.

Infra-Structure Development

The government is the richest single entity of any nation. But we can not ignore the fact that the amount of wealth people possess jointly is much larger than what the government has. The government has just the piece of a pie collected from people through different types of tax. The government’s money is people’s money and they should remember that every minute. In the past, the King, Girija, Deuba and Madhav Nepal thought differently and ignored the people.

What should the tax money be used for? Human resource is the most basic asset we need to build the nation. If we do not have this, we do not have anything. How do we build human resources? Do we build roads and highways first, or focus on hydroelectricity; school building first or hospital building first? Hundreds of economists around the world are debating this issue and the United Nations and World Bank have spent billions of dollars sending many consultants around the world. I have my own opinion on this which may or may not match with what others have to say. I am just writing this out of intuition as I do not have time to read academic literature at this point of my career. Academics go by numbers and literature reviews and I like intuition which definitely comes out of my real world experiences.

I think the government should focus on providing basic education and healthcare and let private parties do the rest. The kinds of mistake the Nepalese government did in the past forming national construction, transport, food supplies and airlines agencies should not be repeated. The government should be in the business of creating business, not in the business of doing business which can be better done by private parties. If private parties in the nation are not good enough, it is time to invite private parties from other parts of the world. Let the local compete the global. The times when a government could favor local business are gone as the world is becoming smaller due to globalization, ushering in a culture of “helping each other mode” and “focus on the stuff you know mode” between nations. For example, a day may come where no car will be built in America or the entire western world – China, India, Brazil could be the places building all the vehicles for the world. What I am saying here is that the government should focus on building things that guarantee basic education and health. This may include keeping cities, towns and villages clean, providing clean drinking water, reducing pollution, saving forests, conserving national parks and making education up to grade eight mandatory. Do these things right and let private institutions (local or global) do the other infra-structure hardening jobs. This is simple and simple things always work and I always say to my friends that money is in simple ideas.

I do not believe that the government ought to do more than fulfill these two major functions. If readers/bloggers disagree with what I have written above, please give me feedback. I am willing to learn form you all. One of you, if not me, will be leading the nation one day and my suggestion to you is to keep it simple: law and order and infra-structure development support via basic education and health. If you as a leader focus on these simple stuffs and allow tax money to flow to the right projects, you will build the nation and turn yourself into a national hero. We have not had one for a long time.

Opportunities Ahead was last modified: September 12th, 2013 by Rudra Pandey

Blog Comments

  1. lpk

    AFTER Prime Minister becomes the undeclared Supreme Power of the State in Nepal, this topic needs to be discussed again for betterment of Nepalese as Road Ahead. We need private business promotion and private participation to reap the benefits of a human being.

  2. Ishwar Khatiwada

    In my opinion, we should begin our discourse with an extent of the government’s involvement in economic development. Are we for directive government that define path of economic development or for government that focus on spreading opportunity for people, or laissez-faire government? I also choose the second type of government system as it unleashes entrepreneurial zeal of the people. There are numerous examples of developing countries like ours where too much government involvement in every sector has thwarted prosperity of the country. Allow me to compare three typical government systems in India, China and Hong Kong. These countries are characterized by much government control, total government control and total laissez-faire, respectively.

    After the independence, India opted socialist policy for economic development. Forty years of extreme government control under socialism impoverished India. The development goal realized under socialism was less development, more inefficient bureaucracy, and unrelenting poverty. Since the early 1990s, the government of India is loosening grip on its controlled enterprises and as a result, India is on the path to economic prosperity.

    When it comes to government’s role in economic development, one can raise counter arguments on India’s antithesis- China where government controls almost everything, but has the fastest economic growth. However, China’s fundamental economic problems are overshadowed by its much talked about successful manufacturing sector. There are many disturbing study repots on China’s economic front undertaken by prominent western investment banks operating in China. Let me throw some disturbing statistics on China. China’s state banks are failure on the ground that non-performing banks costs China 30% of GDP in bailouts. The private sector in China accounts for only 30% of the economy versus nearly 89% in the U.S. and more than 92% in socialist India. In addition, in order to maintain higher economic growth, the Chinese government has often misguided investments. One report cites that median rate of return on asset of state enterprises, which are miserably unprofitable, was meager 1.5% in 2003, a peak year of China’s economy boom. Majority of these enterprises have more debts than assets. So is the widening inequality between urban and rural population. So pervasive are corruption and rural poverty in China. The one and the only Chinese Communist Party in command and control make both economic and non-economic decisions for Chinese people. After all, what good is economic growth at the cost of democracy?

    At the other extreme is Hong Kong- completely free of any government control. Hong Kong was dirt-poor Island before the World War II. Since it adopted laissez-faire policy after the World War II, its prosperity soared and Hong Kong became the epitome of economic success story under the laissez-faire system. The government of Hog Kong provided fair ground for private enterprises and Hong Kong prosper.

    So, what lessons can we draw from this? One important lesson is that the government should act as “enabler” not provider of every means. We need government’s involvement in maintaining law and order, investing in public goods, honoring property rights, developing adequate legal system, and creating enabling environment where our people will have both opportunity and access to education, health care and other social safety net.

    On the infrastructure front, I posted a long article in this web site last moth that focused extensively on the importance government’s role in our country in investing in physical infrastructure. Government involvement is desirable in building physical infrastructure where private parties’ involvement is non-existent. Equally important is the social infrastructure such as education, health etc. that set foundation for development in our country. This is the sector where public and private partnership is possible.

    Commenting on comparative advantages of Nepal, I can only offer my conjectures. Besides tourism and hydroelectric power, our comparative advantage rests on developing skilled labor force. The latter can be achieved by investing and reforming our failed public primary, secondary and tertiary education system. Besides service sector, which requires skilled labor force in the modern globalized economy, we can have comparative advantage in skilled-manufacturing sector. This should be a long-term goal. This is because China and India already have surplus of labor in non-skilled manufacturing sector. Our nation is surrounded by two giant nations with more than 2 billion people who are attaining the ranks of middle class. Our country can be a strategic place economically given the unlimited opportunities existing around us. We should also know that development dynamics of Nepal is very different from those of India and China. Still, we start with the basics as any other developing nations.

    On a different note, we should find a way to instill entrepreneurial spirit in our people. It is truly needed. Let me throw an example here. Few months ago, I had an opportunity to meet with one of the most senior and prominent engineer of Nepal. He has traveled extensively in 72 districts of Nepal on his job. He gave me an example of one village where electricity was connected thirty years ago, and so was the road. What he observed over the years on his numerous visits to this village was astonishing. The villagers’ economic condition did not change in 30 years. What can possibly explain this? There was no income generating activities in the village. Why is so? According to him, people lack entrepreneurial spirit – a plausible statement.

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