The ten years of armed conflict in Nepal is one of the most unique in the world, with special features related to culture, cast, creed, socio-economy, politics and external influences. Today all our politicians aspire to be leaders. The belief that “I can command only when I learn to obey” is lacking. We get easily influenced by our neighbors and give them the authority to do so. Unless we can empower ourselves and feel that we can make a difference without external influence, no revolution would make us sovereign. [break]
Our current approach to conflict management is outdated. Since the end of armed conflict, our focus has been political reforms. Modern approach to conflict management has economics at the forefront. Experts on conflict management like Paul Collier argue that the role of external peacekeepers and robust economic growth are more critical than political reforms in preventing a return to conflict. A legitimate, sensible and stable government with clear goals is considered the perquisite in this. We have already had five unstable governments in the last seven years, with no clear focus, each toppled in succession without any positive marks. The legality of the recent non-political government headed by Chief Justice is questionable and has invited wide criticism in political and non-political spheres.
The government should have had strong grip over expenditure and revenue sources through policy reforms, but this is not happening. On revenue collection, the government has set a milestone but on the expenditure part it has not been able to spend even its regular expenditure. This has severely affected the economic cycle. The government has failed to act against state-owned enterprises and other production houses involved in various malpractices. One of the surprising aspects of the post armed conflict era has been the unprecedented and unhygienic growth of banks and financial institutions, promoted by individuals of all classes and backgrounds. This is unlike the universal practice of companies promoting BFIs. This has allowed unprofessional people to get into the banking system and paralyze the whole financial sector. Excessive and unscientific investment in unproductive sectors by BFIs have added environmental hazards and increased economic unrest. Financial institutions established only a decade ago are on the verge of collapse and even the so-called healthy institutions are not portraying their real financial health as they fear loss of credibility.
With these unresolved issue and uncertainty over macroeconomic indicators, our GDP growth rate of 4-5 percent is one of the lowest in contemporary times if we compare it with our peers. Collier argues that GDP reduces by 2 percent on yearly basis during the conflict period and grows at 1 percent more than the average of pre-conflict era in the post-conflict period. As we are still in conflict period we have already reduced our economy by around 34 percent and do not know how long this downsizing will continue. Similarly, Disability Affected Life Years of the people rises each year and affects economic growth. In our context such disability affected numbers are not yet identified and true cost to the economy not yet studied.
There are some noteworthy facts in terms of sectoral contribution to GDP. Agriculture still is the backbone of the Nepali economy with a whopping 35 percent contribution. There is not much deviation if we compare the contribution in good times, indicating rampant disguised unemployment in this sector. The contribution of remittance is on the rise indicating that number of displaced families is on the rise. Remittances now contribute around US $3.5 billion a year to Nepal’s annual income, up from just US $50 million in mid-1990s, and equivalent to almost a quarter of our GDP.
Sadly, both these sectors have low productivity with high uncertainty. Industrial sector with low investment, sales, productivity and unprofessional management are nowhere near international standards and contribute a modest 15 percent to overall GDP. Structural rigidities, power shortage, poor economic infrastructure and labor disputes have been a hindrance to this sector. Nepal registered a BOP surplus of US $18.2 million in the first seven months of 2013, attributed largely to the growth of remittance and improvement in service account. Eight years after Nepal’s accession to the WTO the country’s trade deficit has increased four-fold and the share of export in the GDP has decreased to 5 percent from 10 percent. These pose a big challenge to planners and policymakers who advocate for open trade policy. Sharp rise in prices of food and beverages and non food services is expected to push overall inflation to 10.5 in 2013/14 and push a large number of middle class families to lower rungs of the economic ladder.
Low high-school pass out rate of around 41 percent, poor health sector, excessive adulteration of daily essentials are the other indicators of our deteriorating Human Index and fragile economy. These are the byproducts of conflict and should be given more priority than political reforms.
If Nepal is to solve the present political impasse and end the conflict, the immediate focus should be addressing economic concerns and rebuilding the economy. The government should strengthen its role as the facilitator of growth and involve private sector in each and every effort geared towards enhancing growth and productivity. The private sector should come up with detailed sector and firm level data at all levels of the economy with regard to production, sales, unit costs, exports, imports, unit values, employment, etc. These firm level data at the regional and the national level would be useful in analyzing the regional and national dynamics of the economy, helping policy makers, new entrants in the business and researchers too. Today, in the absence of this basic information our growth modules, plans and policies have been haphazardly moving ahead.
Imbedded in this would be our cultural and social assets with its unique dynamism. The recent revolution in Nepal has defined its social and cultural fabric as the basic constraint to growth and has called for thorough transformation. Bernardez and Kaufman have rightly said that social capital that encompasses relational, organizational and institutional assets and resource are critical for wealth creation and social wellbeing. We are in a rebuilding process, and this is the right time to reframe our development approach and give new twist to our old efforts and practices. All stakeholders should be involved in strategic planning that focuses policies on the survival, self-sufficiency, and quality of life for all people with economic, social, cultural and environmental sustainability as its keystones.
The author is a student of Conflict management and Mediation at Tel Aviv University, Israel
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