Having left for the US in 1992, each trip to Nepal is anticipated with excitement. The gallis in which I ran, the chaurs on which I sweated cricket matches, the schools in which I studied, a longing desire to see these places once again somehow remedies the painfully long flight. As the saying goes, a land in which one is born is second to none, not even heaven. The touchdown point at Tribuvan international airport, then works at its best to dust off the excitement. The 'Je Pani Chalcha' modus operandi makes itself clearly evident right when I enter the immigration hall and carries throughout.
Once in Kathmandu, the excitement further erodes when I turn on the water faucet to see it supplying vacuum more than water. The erosion continues when I turn on the light switch only to be reminded of the power cuts at the expense of the resilient residents. The stench on the streets of decaying garbage, the abundance of dirt and debris – the list goes on. The so-called restoration of 'multi-party democracy' that was achieved in 1990 seems to have done no good. In the last eighteen years since the restoration, the country appears to have taken eighteen large steps backwards. For instance, throughout my childhood in Nepal, I do not recall experiencing load shedding similar in length to the one that is seen now. I do not recall lines in front of petrol stations, long enough to cause massive traffic gridlock for miles.
A corporation that epitomizes Nepal's downfall very well is the Nepal Airlines (Previously known as the Royal Nepal Airlines). The gross mismanagement of the corporation, which once had its network expanded to various cities in as far as Europe, has brought it to the brink of extinction. We might recall that when the airline sacrificed goats in hopes of survival, the news became a laughing stock material in the global arena. Nepal as a country has gone through similar downward spiral of sorts. The previous leaders of the country have done an excellent job in leading the backward march, making Nepal a laughing stock in the global arena. Travel anywhere in the world with a Nepali passport, and the point becomes clear.
Those of us that are aware of the new found middle-class prosperity in India and China must have heard of the term 'emerging economies'. Rather than put each of Nepal's feet on the back of China and India towards the race of prosperity, we seem to have completely missed the signal that the race in fact had even started. Our senior citizen politicians appeared oblivious to the leveled playing field that globalization bestowed upon us.
Although the present not so legitimate (rejected by janta) government claims that the Maoist government did not fulfill any of the promises that were made when in opposition, one must remember that revolution does not happen overnight. Blaming all the deficiencies on the Maoist government would be misdirected contention. One must remember that it takes years to accumulate the magnitude of deficiencies that Nepal is currently faced with, and the Maoist government was at the helm for hardly a year. Yes it is true that promises did outweigh the results during the Maoists' short stint in power, however, the efforts that they undertook suggested at least some level of business and commercial acumen in possession of those running the government, unlike in the past, and unfortunately the present.
In coming up with a plan to generate 10,000 MW of power in the next ten years, the Maoist government recognized uninterrupted GDP growth of the country as its top priority. It understood that the tremendous hydro power potential in Nepal can help boost the country’s GDP, but that the hydro power can only be extracted if the necessary capital from international investors can be entertained. The hydropower potential in Nepal makes entering the country a valuable proposition for foreign investors either in the form of FDI (foreign direct investment) or FII (foreign institutional investment), given the export potential of hydropower to neighboring countries such as India and China. Hydropower resources in the country are estimated to have a theoretical potential of 83,000 MW[1] out of which 43,000 MW is expected to be technically and economically feasible.[2] The required capital to extract this potential is beyond the nation’s capacity and therefore requires foreign investment. For instance, to generate each additional 1000 MW of electricity through hydropower requires approximately USD 1 billion worth of investment at a minimum. For Nepal, this level of investment is difficult to envision[3] without the help of foreign capital investment. The Maoist leadership recognized this and as a result aligned the objective of its foreign visits to encourage hydro power development in Nepal.
The Maoist government’s recent efforts and the subsequent success in collecting tax revenues have to be commended. In spite of the fact that additional revenues were not invested adequately, credit needs to given where it is due. What needs to be understood is that, because of inadequate tax revenue realization in the past, the government has been running on a budget deficit, and in order to meet the deficit, it either has been borrowing or printing more money.[4] The classical economic theory suggests that continuous printing of more money increases money supply in the economy and therefore increases inflationary pressures on prices. One of the reasons why inflation is out of control in Nepal therefore is precisely because of low tax revenue realization. As citizens, we want the government to build the country, but at the same time, also don’t want to pay taxes to help them build it. People in Nepal need to get over this wish and realize that payment of taxes are an integral part of the economy and cannot be avoided.
It was encouraging to hear the Maoist leader express concern over the increasing trend of brain drain in the country[5]. In doing so, the Maoist leadership recognized that no economic development is possible without the necessary intellectual capital, regardless of how much one accumulates the financial capital.
I do not recall the governments in the past speaking about economic development, much less doing something about it. At least the Maoist government spoke about it, and the points they have raised are validated by various economic theories. Transitions take time, and as such, it would be best that miracles are not expected overnight. Unfortunately, while Nepal's citizens have shown their uncanny ability to be patient while suffering hardship, the ones hungry for power have none of it, and jump at an iota of chance to grab it whenever possible, resulting in as frequent a change in government as some people change their underwear.
[1] The total hydropower capacity need of Nepal for 100 percent electrification is currently about 1200 MW
[2] If the price of fossil fuels continue to rise, the economically feasible hydro power in Nepal will increase further
[3] Nepal’s GDP in year 2007 was approximately USD 10.2 billion
[4] The revenue raised by the printing of money is called seigniorage. The term comes from seigneur, the French word for “feudal lord”. In the middle ages, the lord had the exclusive right on his manor to coin money. Today this right belongs to the central government, and it is one source of revenue.
[5] Kantipur February 20, 2009
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