Set long-term vision to transform economy
KATHMANDU, May 8:
At a time when the finance minister has been generating support for second-tier economic reform, the country sorely lacks long-term economic vision to guide sectoral result-oriented strategies and reform measures.
Since assuming office at the Ministry of Finance (MoF) for the sixth time as Finance Minister three months ago, Ram Sharan Mahat has announced that the government will initiate second-tier economic reform, which will be a sequel to the economic reforms of the 1990’s.
SECOND-TIER REFORM TO VIBRATE ECONOMIC GROWTH
The reform agenda set by Mahat will be introduced through the Fiscal Policy of 2014/15. Adequate reform can create a wide platform for the private sector, cooperatives and non-governmental organizations (NGOs) to grow, according to Mahat.
“The country experienced a high growth rate after liberal economic policies were introduced,” Mahat argues. Second-tier reforms will work to foster more potentials blocked by different hurdles and attract investment.
“The government is initiating reforms to get rid of the structural hurdles in the economy, enhance institutional capacity of implementing agencies, and to make proper amendments to the laws and policies,” he says.
Structural reforms address a wide range of issues like low productivity, low employment generation, high inflation, labor relations, and infrastructure impediments. Reforms will be more focused on removing constraints to growth and vibrate the economy to a high growth rate.
Similarly, institutional and process reforms will address capacity enhancement of regulatory bodies and implementing agencies, and process reforms related to laws and policies, according to Finance Secretary Yub Raj Bhusal.
Economists say that economic reforms alone without long-term economic vision will not be able to fulfill the people’s demand for develop.
Nepal has been going through modest growth from more than two decades.
Nepal and India initiated reforms at the same time in 1991. But Nepal was stuck on a long process of political transition and a decade-long conflict, and fell back.
Based on the latest purchasing power parity data recently published by the World Bank, China and India are the second and third largest economies, with projections that China may outpace the US as the largest economy by the end of 2014. Nepal, standing between the economic giants, has to set a long-term development vision and focus all its efforts to achieve its development target.
LONG TERM VISION ALONG WITH ECONOMIC REFORM
Economic reform alone is not sufficient for the country to move forward. The government has to set a result-oriented long-term development vision, along with economic reform.
The government vision to graduate the country to a Developed Nation status by 2022 is not realistic and development plans have not been formulated accordingly.
The United Nations Committee for Development Policy (UNCDP) has said that Nepal has to meet all the criteria set for the Developed Nation status by 2018, and then it will review the country’s status by 2021, and decide whether to graduate it or not.
The threshold of per capita income is set at US$ 1,500 to graduate as a developed country. To increase per capita, the country needs more investment.
The country needs investment to the tune of Rs 427.73 billion (at constant prices) for the year 2013/14, which will reach Rs 1,722.52 billion for 2021/22 assuming that the need for investment requirement grows at the rate of 19 percent per annum, according to the National Planning Commission (NPC).
The government is now formulating a budget but NPC has prepared only an approach paper of a three-year plan.
The full-fledged document of the plan hasn’t been formulated yet. There is not appropriate co-ordination between the three-year interim plan and the annual budget. “The government should not move on an ad-hoc basis and should promptly set an economic vision to transform the country,” said Rameshwore Khanal, former finance secretary, says.
The government has to set long-term goals, then policies, plans and programs should be formulated accordingly.
All the efforts of the government, as well as the private sector and development partners, should focus on the way to get the results.
The government development projects and expenditure are operated in silos; there is very little coordination among development interventions, generating very little synergy and multiplier effect that would ideally come from development projects, according to Khanal.
Earlier MoF had initiated building of a long-term vision and that was mentioned in the budget too. But the government failed to develop the long-term economic vision so far.
A few months ago, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) invited former Malaysian Prime Minister Mahathir Mohamad as a keynote speaker to an economic summit here to listen to the vision behind Malaysia’s development. Mahathir emphasized on the long-term development vision.
“If we prepare the vision first, then we can focus all the effort in executing it -- all the ministries will prepare action-plans accordingly,” said Krishna Hari Baskota, secretary at the Office of the Prime Minister and Council of Ministers (OPMCM).
TRANSPARENCY OF BUDGET AND ALIGNMENT WITH PERIODIC PLANS
The government is mystified about even public spending; projects are not distributed in the planned way as per the basis of inclusive development policy.
Nepal is poor in budget transparency, according to a survey conducted by Open Budget Survey, which shows that the public are not aware of the budget-making process.
Aligning the annual programs incorporated in the budget with the interim plan is fundamental for achieving development goals. Proper coordination with the interim plans and strategic actions should be taken to achieve high growth and poverty reduction.
Source: Republica
