Inability to draft constitution to hit economic activities

KATHMANDU:

The worst fear of Nepalis finally turned into reality today, as the elected representatives failed to deliver a new constitution within the January 22 deadline.

This incapability has deeply embarrassed the business community, which was hoping for the end of prolonged political paralysis with the promulgation of the constitution.

“The latest political development is likely to bring a damaging drift, as there is no certainty on when the new constitution would be drafted. This will create instability and uncertainty in the country, nullifying gains made in the recent past and dealing a severe blow to the business sector and the economy,” Senior Vice President of the Federation of Nepalese Chambers of Commerce and Industry, Pashupati Murarka, told The Himalayan Times.

Signs of improvement were becoming evident in the economy following the Constituent Assembly election held in November 2013, which installed an elected government.

One of those signs was revision or drafting of around 40 Acts, Bills, policies or regulations, mainly aimed at improving the country’s business climate, drawing domestic and foreign investment, creating jobs and ushering in economic changes.

This shake-up had signalled government’s seriousness in introducing policy reforms, which had taken a backseat since the 1990s.

And this was gradually building investor confidence.

Also, deals signed recently in the energy sector, especially the power trade agreement with India and pacts to build two hydroelectric projects worth over Rs 200 billion, were keenly observed by foreign investors. This was raising chances of Nepal being placed in the map of potential investment destinations.

But there are fears that the country may not be able to capitalise much on these gains, as there is huge competition among countries in South Asia and Southeast Asia to attract foreign direct investment. “And Nepal’s failure to promulgate, or even draft, the constitution has eroded the country’s competitiveness,” Murarka said.

Earlier, Nisha Biswal, assistant secretary of the state for South and Central Asian Affairs, United States Department of State, had told THT that conclusion of the constitution drafting process and launch of a broader set of economic reforms would only enable Nepal to compete with others in attracting investment.

Prior to that, European Union Ambassador to Nepal, Rensje Teerink, had spoken on the same line with THT. She had said many foreigners were willing to invest in Nepal but were waiting for some political stability, which could be achieved through promulgation of the constitution.

“But thanks to our politicians, who are more focused on scoring points rather than fulfilling commitment made to the people, we do not have a constitution today,” Vice President of the Confederation of Nepalese Industries, Hari Bhakta Sharma, said.

Businessmen like Sharma are deeply dissatisfied with the latest political development, as this is the second time the Constituent Assembly (CA) has failed to draft a constitution — a document based on which all laws of the country are framed.

“Besides, the deadline for promulgation of the constitution was not extended by people, but by politicians themselves,” Sharma said, adding, “Today’s failure has portrayed Nepali leaders as people who are least bothered about fulfilling people’s aspirations.”

While inability to deliver the constitution within the deadline is being considered as a major setback for economic development, there are fears that deepening dispute between ruling and opposition parties would increase frequency of protest programmes, creating more uncertainty.

“This will lower the degree of predictability and prompt development partners to adopt caution while making aid commitments. This will also discourage domestic investors from expanding businesses, which will affect job creation process,” Senior Economist Bishwambher Pyakurel said.

Also, spectre of political implosion will badly hit the tourism sector — which has seen investment commitment of billions of rupees, especially in hotels — reduce the government’s capital spending and create pressure on consumer prices, making goods and services costlier for people.

“Together, these effects will hit the economic growth, which will be detrimental for a country aspiring to graduate to the league of developing countries by 2022.”

Source: THT