And why wouldn’t any business house do that? After all, CCRC had achieved in two years what others hadn’t achieved in years. They had given us the best education and knowledge. And for us brothers, it was a wonderful feeling studying in the same class with the best young minds of Nepal who, we thought, would shape the future of Nepal. That was 2003.
It is 2010 now.
And more than 70 percent of my fellow students have left Nepal.
What is common to all of them?
“The fact that none of them have any plans of returning to Nepal within the next five to ten years and those who are still in Nepal are trying to flee the country desperately”.
Nepal’s problems are mainly due to the existing inhuman law and order situation, roaring retail inflation, unfavorable business conditions, acute shortage of infrastructure, widening trade deficits, inefficient fiscal policies, improper direct and indirect tax structure, absence of financial stability and development watchdog councils, political bureaucracy in the regulations of banking, insurance, power, textile and telecommunication sectors, weak bilateral trade relations and, of course, power-hungry, inefficient and illiterate politicians.
An economy cannot thrive for long in such a scenario. Zimbabwe went through all of this before inflation soared by 1.4 million times and the situation got so bad that a billion worth of Zimbabwe currency could only buy two eggs or a roll of toilet paper. It also broke another record; it was the only place on earth where money in the denominations of 1,000 and 500 would be found in the streets and absolutely no one, not even a beggar, would pick them as they were totally useless. The Zimbabwe Government had to print a billion dollar note later.
Nepal today is showing some of those symptoms. As of today, Nepal has a black economy of 39 percent. This is a terrible figure given the miniature size of its economy and the fact that much bigger economies such as India and China have it at 24 percent and 14 percent respectively. Their governments have already implemented effective steps to bring it down. Within five years the Indian government is committed to bringing the rate down to 8 percent, a rate enjoyed by the US now. The problems are far too many. Nepal’s GDP per capita income of US$1,049 and Human Development Index of 144 are one of the lowest in the world.
Government needs to announce substantially strong and pragmatic reform measures that maintain perfect clarity of thought and resounding purpose. Presently, much of our policy work is done in piecemeal fashion with each sector and each reform treated separately without considering from the point of view of the country as a whole.
Enough said about the problems. We can choose to follow either of the two roads in the days ahead: The one followed by Zimbabwe, just discussed above, or the one chosen by our southern neighbor India.
Again, if we go 20 years back in time, we will find India was almost facing the same problems as Nepal is facing now. India showed same symptoms then as Nepal is showing now. India was on the verge of bankruptcy in the 1990’s—what saved her was the fiscal policies, disinvestment measures, liberalization and globalization measures put in effect by the then Finance Minister of India Dr Manmohan Singh in 1991.
And 20 years down the line, now in every major speech, US President Barack Obama keeps referring to India as the next superpower in the making and keeps urging his education reformists to garner and produce effective students who can counter and compete with the students of India and China. Not surprisingly then, a World Bank study in 2008 highlighted that with current inclusive growth rate and with trillions of dollars in foreign reserves, China will be the superpower of the world by 2030 and it will take India only 10 more years to catch up, i.e. while China will retain the numero uno spot, India will join the second rank in 2040 followed by Brazil some years later.
What brought about this change was the effective implementation of fiscal policies. Reforms and policies can make or break a nation. The people in the government enjoy great power in every part of the world but in third-world developing economies, these government officials tend to forget their sense of responsibility unlike their counterparts in bigger economies.
What the Nepali government needs to do now is announce substantially strong and very pragmatic reform measures that include, among others, policies toward inclusive growth, political stability, a good law and order system and reforms promoting proper infrastructure in a way as to maintain perfect clarity of thought and resounding purpose. Presently, much of our policy work is done in piecemeal fashion with each sector and each reform treated separately without considering it from the point of view of the country as a whole. And since these measures have cascading economic effects, employment generation, inflation, growth and increase in the standard of living are automatically taken care of.
So long as effective reforms are not implemented in Nepal, the current situation of rising ‘brain drain’ will worsen greatly only to haunt the economy further. If only the government would be bold enough to bring in substantial reforms instead of just implementing feel-good policies and being members of Atomic Nuclear bodies, all the displaced Nepali communities could return to Nepal and work together for shaping the future of new Nepal.
(Writer, a Chartered Accountant, works for Deloitte Haskins & Sells in Mumbai, India.)
apaudel@deloitte.com
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