Conflicts among the political parties are on the rise and strikes, lockouts, obstruction of transport system, and extortion by criminal groups have become major hindrances in achieving growth. A typical example is the blockade of highway linking Kathmandu to Birgunj for 19 days over a period of two months between mid-October and mid-December, 2009, completely disrupting the supply of petroleum products and other essential supplies to Kathmandu valley. This, on the one hand, is disrupting the supply chain frequently while eroding the investment climate on the other. This is also gradually eating up the business environment of the country. There are even speculations of capital flight through informal channels, which are largely not accounted for.
The clouds of uncertainties are hovering over the Nepali political and economic arena. Various discourses have opened up on ethnicity, language, empowerment of the marginalized people, integration of the Maoist army, and carving out federal states. Academicians, civil society, opinion leaders, saints and clerics are pulling their strings for fulfilling their aspirations. But the larger national interests are being undermined in an effort to fulfill the petty interests of individual groups. This, of course, is leading to further complications and the country is heading towards a trap of protracted cycle of disarray and conflict.
The economic agenda of the country is being shadowed by the growing political risk and uncertainties. It is obvious that political freedom available to all citizens cannot sustain until it is backed by economic freedom and an increase in the income level of the common people. Economic liberty is distinct from political or civil liberty. The latter means how much free people are to participate in the political process on an equitable basis, liberties of protection against unreasonable searches, access to fair trials and rights of free assembly and expression while the former is basically about securing rights to property, freedom to engage in voluntary transaction inside and outside a nation’s borders, freedom from governmental control of the terms on which individuals transact and freedom from governmental expropriation of properties.
Nepal is facing several difficulties and constraints in aligning itself in the international economic and trade processes and utilizing the opportunities emanating from globalization of its economy.
Ayal and Kawas, professors from University of Illinois, Chicago, have indicated six indicators of economic freedom: Stable monetary environment, minimized role of government enterprises, rare real negative interest rates, small difference between the official and black market exchange rates, large size of trade sector and freedom of citizens to transact with foreigners.
The Nepali history of economic freedom is closely associated with political freedom. The political changes bought about in 1990 that re-established the multi-party system has changed the direction of economic setting from a closed economy towards a more open and liberalized economic system. Policy changes in various sectors of economy – liberalization of financial sector, new industrial and foreign investment policy, trade policy, labor policy, openness of transport sector and civil aviation – have enabled people to travel toward achieving economic freedom. Privatization of public enterprises was also taken up as a major step towards liberalization of the Nepali economy. However, these policy shifts could not be backed by improvement in governance, which is equally important to push the agenda of liberalization. Transparency, accountability, rule of law and predictability are important elements that contribute to good governance and the absence of these in the public administration creates chaos and defeats the very objectives and efficacy of economic freedom.
The performance of the Nepali economy, when judged from the parameters of good governance and economic freedom, portrays a dismal picture. A study carried out by the Fraser Institute in 2008 shows that Nepal ranks 128 out of 141 countries in terms of economic freedom with the summary rating of indicators at 5.4 out of 10. India ranks 77 with an indicator level of 6.6, Bangladesh 108 (5.9), Sri Lanka 103 (6.1), Pakistan 104 (6.1) and China 93 (6.3) out of 141 countries. This implies that in Nepal there is a lot of work to be done to make the people sovereign in economic terms.
Empirical studies have shown that prosperity, equity and economic development of a country is dependent on the level of economic freedom enjoyed by the people. As a least developed country, Nepal needs to pursue the path of high economic growth for increasing the income level of the poor masses, improving the status of nutrition, housing and sanitation, health and education and reducing infant mortality and maternal mortality as envisioned in the Millennium Development Goals. The linkages between economic freedom and social development can be positive and mutually reinforcing if right policies are adopted and the level of governance is improved.
The dismal picture of economic development is mainly attributed to the nasty political scenario and rising differences among the major political parties. Increased economic activities and employment to a large number of unemployed youth through healthy growth of investment and export trade is necessary for stabilizing politics and society. This would require forging a common understanding and commitments among all political parties and interest groups on not disrupting the economic process for the common wellbeing of the people.
Unwarranted activities like strikes, lockouts, labor unrest and transportation blockades need to be put aside for the larger economic interest of the country. Economic blockades should not be taken as a means to achieve political goals. Nepal is facing several difficulties and constraints in aligning itself in the international economic and trade processes and utilizing the opportunities emanating from globalization of its economy. Thus, there is a need for developing common understanding and making collective efforts in order to provide greater economic freedom to the Nepali people and society, which in turn will fuel the process of political freedom and stability.
(Writer is Commerce Secretary.)
puruojha@gmail.com
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