To force rulers to plan for the long-term, Nepal should establish an Economic Council as a national futures think tank
MADHUKAR SJB RANA
Finance Minister Shankar P Koirala’s 2013-14 budget presented on Sunday was a commendable effort of the technocratic leadership to depoliticise the process in a desperate attempt to bring the economy back on track.
Not only was this the first full budget, and first to come in time for the last few years, he also opted to put the UNCTAD agenda as the budget’s mid-term goal. Now, let’s hope the US and the EU can push the World Bank, ADB, IMF and IFC to mobilise the grants, loans and FDI needed to have Nepal graduate from its LDC status by 2020.
It remains to be seen if Nepal Rastra Bank Governor Yubaraj Khatiwada will act in support. He will be challenged to maintain the targeted inflation rate of 8.5 per cent, and also to keep the interest rate low in the wake of the historic balance of trade deficit which is now 86 per cent of this year's budget. Khatiwada will have a lot of juggling to do to try to balance this with the need to hold on to the fixed rupee exchange with India. He may have to resort to 'moral suasion' to influence the private sector and, failing which, micro manage banks and financial institutions, which is not really what he should be doing.
The majority have welcomed the budget except Maoist-oriented economists who feel that an interim government has usurped the legitimate role of a to-be duly elected government when, and if, that happens. But if the Khil Raj Regmi government fails to execute the budget properly, it will leave a historical legacy of horrendous inflation coupled with economic regression should capital expenditure falter as it did in the last three years. Spending is up by a whopping 40 per cent compared to last year, and this is risky. It may be overcome if the government resorts to the 4Ps (People-Public-Private Partnership) for project formulation and execution. The technocrat government will then have left a lasting legacy for people's participation in development, leaving immense scope for a bottom-up development.
It will be difficult, but the 5.5 per cent GDP growth target can be met if the private sector partners and consults continuously with government. It can even be surpassed if the Finance Minister Shankar Koirala can monitor implementation forcefully and extract results from the bureaucracy, government and private sector. Given the 18 per cent civil service pay rise, he has a right to demand better performance and productivity from them.
Another vital institutional innovation that Chairman Regmi should consider is to set up an independent Economic Council to institutionalise economic democracy through consensus building between the political parties for sustainable development and safeguarding the national interest. An Economic Council as a national futures think tank could be provided the status of a constitutional body by the CA whose mission should be to contribute to political and economic national consensus for the greatest good of the greatest number and serve the national interest.
It should be empowered with intellectual, human and financial capital to do basic research and plan, program and design policies for a timeline of 10-20 years. Hopefully, the political and social elite will then be prompted to think long-term in the global and regional contexts.
Priority must be given to planning for basin-wide water resources development, urban renewal, transportation and supply chains, energy, education, social security, disaster management, information and telecommunications, innovation, research and development, national regional and sub-regional integration, livestock and agriculture and projecting Nepal’s cultural identity.
Lastly, the Economic Council should have independent, non-party professionals as well as qualified professional nominated by each of the political parties with at least 10 per cent of the popular votes. No party member may head the Council nor serve on its staff to preserve it entity as a neutral, non-aligned think tank.
Madhukar Rana is former Finance Minister and professor at the South Asian Institute of Management