Nepal’s 22 Party Coalition Budget 2009/10

First and foremost one must congratulate the Finance Minister, Surendra Pandey, for the self-confident, suave and articulate manner in which he made his two hour presentation of the coalition government’s Budget. It was a duty very well executed. Of course, conspicuous by the absence was the largest single party, the Maoists; and, well, not quite sure if the 24^th party was also boycotting the occasion. Even more conspicuous was the unexpected walkout by the captains of industry and commerce for their downgrading in the order of protocol which they felt, quite rightly, to be rather insulting. After all, they pay the bulk of the taxes. Don’t they?

Another remarkable admission was his statement to the effect that, in his short stint as Finance Minister, he has learnt that it was not the lack of financial and human resources that retarded our economic growth and social development but our inability to implement policies and promises. If President Obama were here in Nepal he would have told our politicians, like he did so candidly in Ghana to all of Africa, that lack of good governance is the biggest reason for the poverty and underdevelopment of developing nations. And by implication, politics and political leadership are a part of the problem. The silence of this Budget on economic, financial, labour and administrative reforms is almost deafening. No mention has been made of the kind of legislation that the government intends to bring to Parliament for promulgation with an appeal to do their duty as CA members elected by the sovereign people.

One would have seriously hoped that for a government that wishes to fight cartels and syndicates the pending draft Competition and Regulation Act 2005 would be getting first priority. And with the very welcome, highest priority to Education one would have hoped that the draft Deemed University Act 2005 would get promulgated too. Had the draft Private Trust Act 2005, which seeks to provide space for Nepali philanthropy to thrive in all sectors and also for the spirit of social entrepreneurship to flourish to thereby meet the needs of the informal sector very significantly, been also brought to the Parliament it would have made a monumental change for an attitude of the national self help and self reliance through indigenous endeavours. 

Overall, this is a Leninist rather than a Maoist budget. Therefore, it may be described as the UML Budget of 2009-10 for their ideology has prevailed over all the 23 other erstwhile coalition partners. We hardly heard the mantra of economic, financial, labour and administrative reforms so dear to the Congress and the likes of RJP and the two RPPs since the 1990s. How good governance and better execution of plans can be attained without all round reforms is a great mystery, particularly in a society so comprehensively embedded in its ‘feudal mindset’.

This Budget does give continuity to the Maoist budget of 2008-09 but what makes it Leninist is that Dr Baburam Bhattarai adhered to Marx when he frequently said that communism could only be a reality after we progress through capitalism and then socialism. The UML, like Lenin, thinks capitalism is neither necessary nor sufficient, and the quicker you bury it the better.

If we heard the Finance Minster refer to the ‘market mechanism’ it was only to underscore the point  that markets create inequality -- never that markets are a force for efficiency and effectiveness in resource allocation between competing ends. Public enterprises are to be revived and the emergent concept of Public Private Partnerships was nearly taboo. Just to illustrate, he did say that some roads would be built by the Nepal Army, and also the concerned ministry, as the private sector was reluctant to enter the fray in road building.

Where he enthusiastically supports PPP is in the sphere of tax collection through the private sector’s participation in the proposed Revenue Board whose terms of reference is left unknown. Really and truly, what the private sector needs to actively participate, as a first priority, is in investment mobilization and employment creation--not revenue mobilization. He could argue that the Board of Investment (BOI) to be headed by the Prime Minister is for precisely the latter purpose. Well, one always thought that with the license-raj being abolished generally the BOI was only to decide on FDI and/or very large domestic private sector projects that required a ‘one window’ process of decision-taking to deal with the complexities of inter-ministerial coordination speedily and smoothly.

Much of the Budget’s policy content was already out in the market a few days before as usually is the case in Nepal. Wonder who leaks it all? Nevertheless, one can not be sure of the veracity of the leaks unless one hears from the horse’s mouth, so to say.

So people wondered as they stared into the TV:

(a) How much bigger than the Maoist budget of last year?

(b) How populist can it get?

(c) How much continuity to the Maoist budget?

(d) How long was the budget aimed at? Let’s recall that Dr Baburam Bhattarai’s budget kept his eye on a timeline of 10 and 20 years respectively.

Let’s just summarily say that this Budget breaks all records be they on Total Outlay ( Rs 285.93b); Total Revenue (Rs 161.73b); Total Fiscal Deficit (Rs.46.34b); Total Foreign Aid (Rs 78.51). The Budget is susceptible to high risk of failure with severe consequences on macroeconomic, political and social stability that could arise if the external and internal environmental factors deteriorate further. Non-implementation of promises will have a severe backlash at the time of elections.

This is a historic budget that sets new benchmarks for populism. One may even describe it as populist par excellence. One does not think it has more than 2011—or two years-- in mind when the next general elections will have to be held. There is vote banking aplenty with no one being left out of bits and pieces to be had from the Treasury: that ranges babies to the very elderly; from the disabled to unemployed educated youth. Actually, if any one group was not yet included it was the third gender comprising gays, lesbians and hijras.

It was an exercise in Social Welfare where all social classes—other than the Third Gender were included such as Janjatis, Dalits, Teraians, Madhesis, Muslims, Karnali Region and Women. Yes, included in such a way not quite knowing to what extent this welfare largesse will be extended to benefit the minorities once, twice, three or more times while ethnics from the larger majority have to guess what benefit awaits them from this budget. Clearly, this approach to Social Welfare Budgeting needs to backed up by sounder socio- economic planning and programming to know who gets what and how much from the State to be able to rationally asses the social impact in terms of location, access, equity and justice rendered by the budget.

He would definitely benefit from a visit by Nobel Laureat, Professor Muhammed Yunus of Bangladesh as to how he has  successfully developing women technicians and technologists to set up around 10,000 solar panels each month as well as using ICT to empower rural women. Access to such technologies through many Poly Technical Institutes proposed in the public and private sector would greatly emancipate and empower the vast number of Dalits of Nepal to function in the new Nepal as technicians, technologist and entrepreneurs. Similarly, he should invite our own Dr Mahabir Pun, Magsaysay Awardee, to come up with his visionary National ICT Programme to create ‘Smart Villages’ to be funded by the government in public-partnership with Rotary District 3292 Nepal and other like-minded civil society organizations like  Lions Club, Jaycees etc.  

If the V-shaped global recession becomes W-shaped as expected by Nouriel Roubini forget foreign aid to that extent. Yes, they will me much commitment but very little dispersal. Most conspicuous is the absence of any reference to Economic Diplomacy at a time of globalization in distress for the need to deepen as well as diversify our aid, trade, investment, tourism and remittance markets. What could be the further impact on deficit financing if the oil prices rose up again due to set backs in Iraq and Iran? What if the monsoons failed in much of Nepal and North and North East India? What if the Law and Order and Internal Security parameters do not turn out as anticipated? What if Markets collapse leading to huge Capital Flight and the Mafia take over? Can such a weak State weather the storm, especially when there is no National Government in sight?

We have experienced where the attempted leap-frog Budget of the Maoists have brought us at --- 3.9% GDP with more than 13% inflation, massive unemployment and food insecurity. In real terms this peace Budget was a veritable failure. The ‘peace dividend’ is as elusive as the Yeti. Now that UML Budget tries to outdo the Maoists in populism there really is no for the 22 Party Coalition to be engaged in Contingency Planning to grapple with the worst case scenario of economic collapse keeping foremost the solemn goal of National Security and Democracy.

The government might consider social mobilization of community based organizations (cbos), traditional based organizations (tvos) and locally-based social entrepreneurs as alternative institutions for development – other than central bureaucrats; local bodies, public enterprises, cooperatives and  political parties. On may even go a step further to introduce sophisticated, pilferage-proof Smart Identity Cards of the poor, deprived, discriminated and disabled households to be in a position to receive direct central grants, for various purposes, from the Finance Ministry as their welfare entitlements rather than have to go through the many layers of  intermediaries and be prone to leakage and wastage.

Posted on : 2009-07-14 15:43:50

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