Nepal: The Economic Dimension of Security and Good Governance

Nepal experienced worsening arm conflict since 1996 to 2006 mainly on account of poverty and inequaility. This not only claimed more public expenditure for security  purposes both for the army and the police, it also resulted in deterioration of the economy as manifested in the  contraction of both government  and private sector activities and services, especially in the remote and rural areas. This conflict has caused the loss of about 13000 human lives and billions Rupees worth of physical capital. Moreover, there are indirect economic costs such as a lower level of domestic investment, which retards future economic growth. Therefore, conflict has great economic implication. There are several researches to find the costs of conflict. However, there has not been a study about what are the strategies to be undertaken to address the threats of conflicts and develop New Nepal .The objective of this paper is to shed some lights on public security and economic dimension in Nepal with special attention on the major strategies to improve the macroeconomic performance of the  Nepalese economy.

Introduction

Political and economic phenomena are always interlinked to each other. Security has greater implications on the economic facet of a country. Security problem i.e. conflicts emerge mainly from the poverty and inequality, difficulties in convergence, poor governance, social exclusion and centralized control of state power by elites.

As the disparities in income increase in the world or countries, so does poverty. Poverty is directly linked to conflict. The current international fight against terrorism and its root causes has focused attention, amongst many other causes, on the potential for weak states to provide profits from illegal trade and sanctuary to terrorist and criminal gangs. It appears that there is a trend for civil wars to breed the conditions that make fresh conflict likely. Once a country falls into violence, its people tend to focus on immediate survival, rather than on the longer term. Savings, investment and wealth creation decline. A cycle of poverty, instability and violence occurs. Poverty and inequality thus are directly or indirectly associated with conflict and conflict makes the country weak. In a weak country, it is very difficult to operate strong administrative, legal, financial and economic activities that facilitate and protect citizen. In this context, the major security challenge is to prevent weak states from becoming 'failed states', which nourish and enrich the terrorists and organized crime (Economic Commission for Europe 2002). Therefore, today policy makers need to pay their attention carefully that economic and political phenomena are very sensitive and closely linked to each other. The economic growth of the country would be strong, speedy and sustainable if it is accompanied with the resolution of conflicts i.e. strengthening of the security situation but not with excessive militarization of the country. Improving the position of the poor, launching policies that can reduce poverty, strengthening states, improving their capacity and strictly following the rule of law are some of the major approaches to enhance security and spur the economic activities in the country.

Good governance

Improving governance is a pressing issue for Nepal. This will have significant implications for improving delivery of economic and social services and for effective aid utilization. Weak institutional capacity, weak enforcement of laws and regulations designed to promote private investment, corruption and lack of vision; predictability, transparency and participation in government policy and strategy erode investors’ confidence and impede private sector initiatives. There are several other loopholes that reflect the lack of good governance in Nepal. Excess customs exemption without reliable and adequate evidence, no adjustment in account statement of line ministries and the Financial Comptroller General’s Office, excessive amount of  Beruju   (Rs 10 billion in 2006/07), inadequate tax audit, no preparation of account statement and no timely audit of public enterprises, excessive quasi-fiscal activities, excessive amount  ( more than 10 percent of previous year's revenue) of government securities held by the NRB in its holding, a remarkable amount of non-budgetary expenditure are the major irregularities, published in the 45th report of the Office of the Auditor's General, Nepal. Therefore there should be tangible and trustworthy measures aimed at improving governance in all fronts. In terms of good governance, key priorities include eradicating corruption, making the civil service more efficient and effective, reforming public enterprises, promoting decentralization, tapping local knowledge, promoting greater transparency and accountability in public service delivery and building capacity. Moreover, opportunities to assist poor women, the rural population are another priority. Restructuring and developing the infrastructure is another priority.

2008/09 budget has made several provisions to give the sense of good governance to the general public after the political change in the country. According to this, all the  government agencies will adhere to and execute with high priority  the dimensions of good governance such as  respect for the people’s voice and upholding the sense of responsibility, maintaining political stability and violence less society, effective government, qualitative regulation, rule of law and corruption control. Regulatory role of civil society and mass media will be further broadened. An Administrative Restructuring Commission will be formed within mid-December 2008, to make civil service accountable to the public, capable, fair, and transparent according to the federal system. It will be made mandatory to include the ideal sentence “Civil Service for the Public” in each and every activities of the civil service. The pay scale of all classes of the government employees has been increased by Rs 2 thousand per month from 17 September, 2008 .To enhance the effectiveness of the service delivery of civil service, effective implementation of Civil Service Act, strictly following the employees’ code of conduct, simplification of working system, modification on work performance evaluation guidelines, grievance handling and service recipients’ satisfaction survey will be conducted. To provide easy health service access to the civil servants and their families, civil servants’ hospital constructed by the assistance of the Chinese government will be brought into operation.

Improvements in the judiciary will be accentuated giving emphasis on the policy of respecting free judiciary, rule of law and human rights, and to make justice accessible to all; quick, prompt, and easily available to all. Anti –corruption campaign will be launched with support of civil society, NGOs and general public. Possible corruption on public procurement will be controlled and procurement monitoring system will be made effective. To control the collusion and hooliganism at the time of submission of tender, an arrangement will be made to submit tenders through electronic means. The newly launched Procurement Act will be implemented effectively. Moreover the operation of line ministries will be made transparent through the publication of periodic evaluation reports.

(Excerpts Only: Paper presented by the authors at a NEFAS-FES seminar on 26 December, 2008)

Posted on : 2008-12-30 19:39:46

Comments (1)