I am not an economist. When a young economist in Kathmandu recently argued that the only way ahead for Nepal is following the same tried and tested path of mass scale industrialization graduating slowly to service industry based economy, I kept quiet. What he meant was that if Nepal has to progress—the Nepali debate literally translated would come out as 'if Nepal has to be built'—we need to put a lot of money into manufacturing, wait for at least some decades and then graduate to a service based economy. 'There is no shortcut. Period!' He was trying to sound profound in his made up American accent.
'That is no great idea. Not imaginative at all,' I thought. 'With whatever little economics I understand, I can tell it is a regressive approach to future. A slow and tiring path to a certain failure! Our future, in your hands my dear economist, is in jeopardy!'
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Although I kept quiet, I was tense. Something is not right. A part of me was already rebelling. If drawing parallels from history of great powers from 200 years back is the only way to look for solutions of our problems, then there certainly is no shortcut.
But in such matters, history proves, solutions which actually work always defy the conventional logic. And initially, they seem too audacious, too challenging and too out of reach. It is only in retrospect, after the nations have pulled it through, that connecting dots becomes too obvious.
Probably going by the same logic as my conditioned economist friend, some pro-development power centers including young politicians see large scale infrastructure development as the only solution. Four-lane fast track roads to the capital from the nearest Indian border town is being propagated as the one touch solution for 'building' Nepal. It will initiate an industrialization and tourism drive, they say. I see it as a manifestation of the rent seeking mentality practiced by Kathmandu from ancient times by taxing the trade between India and Tibet. The concept is simply outdated.
This 'Fast-Track' will be constructed if the government gives a guarantee of minimum traffic per day to the interested company. Even at the outset, this looks against simple market logic. If the company is not sure of the traffic, probably we don't need it or we are over-doing it. But mathematics may be that simple, politics is not.
I am also not an anti-development activist. Infrastructure development is the key to human development. It has been proved through empirical evidence in many places including India and China that large scale infrastructure enhancement leads to upsurge in manufacturing which leads to job growth eventually lifting many out of poverty. To be honest, I also feel infrastructure has that inherent quality of creating new opportunities which were unthinkable without it being in the first place. But learning lessons in fractions from success stories elsewhere never works out well. Failed SEZ project in many places is one example.
The starting point has to be an overall 'umbrella strategy' for the nation to achieve well defined objectives which the major political forces in the country agree upon in principle. The development discourse, and at the larger level the 'building Nepal' discourse, has to make a move in that direction. And the 'Aid Agencies', an important participant in Nepal's development activities, have to be directed with necessary government policies and rulings to aid the nation toward that.
To begin with, there are some fundamental peculiarities of Nepal which cannot be ignored. First, it is an economy with an overbearing remittance culture. I say culture because I want to pull away the connotation out of strictly economic mathematics into a larger meaning. Cost of labor in Nepal is the highest in South Asia. The deep seeded two centuries old lahure culture, effects of globalization and internal conflict in the last decade of the 20th century and a bulging young population have made the circumstances unique. More due to psycho-social and political reasons and less because of purely economic factors, the same people who work in trying conditions as laborers in other countries are not interested in similar work back home.
The result is an environment unsuited for large scale manufacturing drive in Nepal. Cost of labor and work discipline issues are not the only detrimental factors. The regional context is also unfavorable. The scale and momentum of large manufacturing economies like India and China certainly do not help creating suitable conditions for upstarts in Nepal. The competition is simply brutal and the government will not be able to provide a security net in the foreseeable future.
As a result, any unplanned pushover towards infrastructure development, mainly roads from our neighbors, without a 'grand strategy' for the nation, will only become an easy way to flood the country with foreign goods. This will not only snub out small scale manufacturing attempts, it will also create harsher conditions for prolonged dependency of the nation.
But the question remains: What, then, is the solution?
Gurcharan Das, a noted Indian columnist, recently remarked in a column that the "E-commerce revolution might result in India skipping the supermarket stage, jumping from the Kirana store to online retailing, much in the way many Indians skipped landlines and moved to cellphones." Much in the same way majority of Nepalis also have skipped the landlines and moved to cellphones and mobile internet.
At the macro level, can we pull off a revolution of this sort to move to a knowledge-skill-remittance based economy in future by skipping the arduous and unpromising manufacturing route? It is a question worth pondering. And if the answer is in affirmative, even in fractions, the focus of infrastructure building immediately shifts toward that end. IT education infrastructure, human resource development and technology enabled learning apparatus in every school of the country then become the real 'Fast-Track' to a better future, much cheaper with a wider and inclusive impact.
In a rough calculation of a million rupees per school, with approximately 29,000 government schools, the cost is minimal looking at the advantages it will accrue. A staggered phase wise plan over a decade, clubbing in aid agencies for selected packages and facilitating domestic and international volunteers for teaching/training can further ease out the financial impact.
The idea of pushing for a knowledge-skill based economy is audacious given the present condition of our nation. But dire situations demand imaginative thinking and bold actions. I am convinced this is our only chance.
dinkar.nepal@yahoo.com
