Kamala Sarup: Peace Through Democracy & Developmen

If we see in 2002, the Nepal economy contracted 0.6%, posting its worst performance in 2 decades as domestic security problems hit the important tourism sector and an irregular monsoon hurt agricultural production. With the slowdown squeezing government finances, the amount of funds spent on development fell 40% below the 2002 target. Higher literacy and health standards were the most crucial factors in enhancing labour productivity which in turn went to facilitate significant import substitution and export promotion. Several significant changes have taken place in Nepal since 1990 but much of it has been guided by displaced concerns and misplaced priorities.

Since 1996 investments in productive sectors are low, population growth is high and the private sector is not flourishing satisfactory, the problem of unemployment has further been compounded. worse, the economic slowdown has resulted in the closing down of several industries and has rendered thousands more jobless. The carpet and garment sectors are also laid off employees. So are other service sectors like hotels and airlines, to name a few. Once the elections are over, politicians simply try and forget the tall promises they made. The government says it is trying its best to curb unemployment, but the results are yet to be seen. Solving the unemployment problem is not possible without the active support of the government.

Government owned Domestic and Small Industries Office has been operating some small-scale employment activities, which is not so satisfied and achievable. .

If you read a recent study on "Socio-economic condition of Nepali migrants in Delhi and NCR" commissioned by the South Asia Study Centre, Jawahar Lal Nehru University, said a significant number of poor and unskilled workers from Nepal have migrated to India and are working as security guards or restaurant workers. In addition, the number of youths is higher in the rural areas, in small-scale-farming households, and in low cost areas where the incidence of poverty is the highest.

Even today, price situation saw moderate rise, revenue collection, foreign aid and developmental spending fell. Political instability, public expenditure management, and weak monitoring should be addressed to attract foreign aid to carry out the development activities in Nepal.

Poverty remains a serious concern. Growth has become more lop-sided, and mal-distribution, always notorious in hierarchical Nepal, has worsened. Agriculture, central to people's survival, has stagnated. And the structure of industry has become more skewed. As the economy registers an artificial boom, Nepal's savings and investment rates decrease by three percentage.

We need to think how the contraction in public expenditure and the consequent reduction in aggregate demand could not but adversely affect employment in the unorganised sector, whether non-agricultural rural employment or urban informal sector employment in Nepal.

Now, let me just say something fairly briefly about policy assessment and poverty impact assessment in particular. If we declare for reduction in poverty, which we do, of course, we ought to be able to assess ex ante and ex post the impact of our policies on poverty. We must be very careful, of course, to do that in a long-term, dynamic way as well as short-term. You cannot, for example, look at the impact of education on poverty and income distribution by just looking at what happens over the next couple of years. The impact of education on poverty and income distribution obviously has a very long gestation period. So that's just one of the problems. Corruption, today endemic in Nepal and the country's pressing problems. The violence must end forever so government's priority will be to improve the economic situation and control corruption.

Yes, after Democracy, we have seen quite a bit on private consumption, but the emphasis also needs to be put on what are the adjustment implications on the provision of public goods, particularly public health, nutrition, education, because these not only have immediate effects on consumption, but they have long-term effects on the poor. And the reaction of the public sector to the crisis can make the crisis worse from the point of view of the poor. The reaction of the public sector to the crisis can actually make the situation a little bit more manageable.

So the point I want to make is that most people in Nepal are at risk in one way or another. But we don't see any sign, oddly enough, of this missing political alliance in Nepal between the poor and this huge vulnerable group of non-rich.

The continued deterioration of the status of youth in Nepal, who face growing levels of unemployment, poverty, armed conflict, epidemic diseases, functional illiteracy and substance abuse - among other social and economic challenges. Unemployment has severely damaging effects on young people. They suffer low self-esteem, exclusion from mainstream society and impoverishment. There are thausends unemployed youth in Kathmandu alone. In Pokhara, Biratnagar, theunemployment rate has reached epidemic proportions, while in Jhapa and in Kathmandu some qualified young men and women go out looking out for jobs every year.

According to figures, there are 1.5 million youths in the country who are totally unemployed. This is a terrible problem. As the state fails to chalk out proper strategies to provide jobs, the problem is gaining urgency day by day. In fact, the government is creating a breeding ground for terrorists by not being able to rope in these unemployed and vulnerable section of youths.

The three main issues keeping the Maoists war on the boil are unemployment, underdevelopment and corruption. Due to political uncertainty, hardly any socio-economic reforms have been undertaken though the government has plans. Urban youths have a very difficult time breaking into professional jobs, including the business and NGO sectors, so many choose unemployment or join the Maoists. The economic divide between the urban and rural areas of Nepal is enormous. Rural people still live the same way they have for hundreds of years and maintain traditional attitudes.

In fact, unemployment rates are generally higher for the more educated than those who are less educated, and unemployment is mainly an urban phenomenon. underemployment is widespread among youth in the agricultural sectors too. Despite their potential, they only work during the planting and harvesting season. Rural poverty, rising unemployment and rampant corruption are seen as some of the contributing factors to the insurgency. Even, how falling educational standards along with high incidence of unemployment have prepared the breeding grounds of conflict.

Even our education system makes individuals dependent on job rather than making them problem solvers or enterprising. Similarly, the current budget has put special emphasis on mitigating the unemployment problem by conducting employment and self-employment programmes. However, the success of the programme depends largely on the joint efforts of the government, NGOs and private sector. Tourism could provide jobs to hundreds of thousands of youths if it takes off.

because of the escalating violence that 33 VDCs out of 44 in the district, so far, have not taken the budget from the district development committee. The incidence of poverty has remained high in Nepal. The year passing us by has been both a difficult and eventful one for Nepal. Substantial infrastructure investments, combined with community development and livelihood enhancement, are required to improve rural incomes and welfare. A specific effort must be made to provide the poorest groups with income-earning opportunities.

First of all, peace has to be established to make any development work successful in Nepal. Second, a stable government is needed which can create employment opportunities for poor and alike the economic recovery of Nepal will depend on improved security because it is based upon assumptions of the restoration of law and order. Addressing the underlying causes of the insurgency widespread rural poverty and the failure to spread the benefits of development more widely is critical for Nepal's development.

It is true, Nepal has great hydroelectric potential whose development can be justified only if a high proportion of the power generation is transmitted to its power-starved neighbors. Nepal should also try to promote the exports of certain agricultural items by expanding their production base.

Tourism could be Nepal's leading export with an enormous scope for further development. Similarly, Nepal should also aggressively promote the exports of handicrafts in addition to preserving expanding its two largest merchandise exports, carpets and garments.

Nepal should also try to revive some of its traditional exports such as jute products, which have greatly declined in importance in recent years. Taking a conflict sensitive approach to development programming may also increase the effectiveness of development assistance. One of the critical obstacles to Nepal's ability to implement development strategies is the lack of adequate financial and human resources.

Even, economic growth has long been emphasized as the core element of Nepal's development strategy. Despite substantial efforts to build development infrastructure to stimulate economic growth, the country is still engulfed in a vicious cycle of poverty, underdevelopment and environmental degradation. I only can tell you that good governance can play an important role in mobilizing people for setting local development priorities, planning, coordinating and ensuring effective implementation of development activities in line with popular aspirations. Social mobilization, by bringing women and men together in self-governing institutions, enhances participation for more effective local exercise of authority and responsibility.

The poor still number over thousands in Nepal. Under the bubble phenomenon, the dissonance between the country's real economy and its financial sector has scaled dizzy heights. Growth has become more lop-sided, and mal-distribution, always notorious in hierarchical Nepal, has worsened. Agriculture, central to people's survival, has stagnated. And the structure of industry has become more skewed. As the economy registers an artificial boom, Nepal's savings and investment rates decrease by three percentage points and the government's profligacy reaches new peaks.

Even today government did not spend on agricultural programs, and rural employment and anti-poverty schemes, as well as health, drinking water supply, education and sanitation are also getting less attention. Income growth in the rural areas, where 70% of people live, has sharply declined. Real wages of rural workers has also decreased. Infant mortality rates are rising. But luxury consumption is booming within the upper crust. The finance minister failed to tax the rich. The government money has not gone into modernization, workers' retraining or the infrastructure, but into unproductive government consumption. The infrastructure is in an advanced state of decay.

Even Government has pledged millions of dollars to tackle poverty. Given the fiscal crises in Nepali economy and the economic slowdown, the expectations from this year's budget were very high. The health sector also had a lot of expectations from this budget, especially the private health sector and private insurance. While all expectations were perhaps not addressed, the budget has given the health sector a fair share of attention.

The reform measures that predominantly affect them are reduction of fiscal deficit, reduction of subsidies, devaluation of rupee, export orientation and reduction of agricultural credit. The price rise in food-grains owing to the cuts in the food and fertiliser subsidies and consequent adjustments have particularly been harsh. Now, let me just say something fairly briefly about policy assessment and poverty impact assessment in particular. If we declare for reduction in poverty, which we do, of course, we ought to be able to assess ex ante and ex post the impact of our policies on poverty. We must be very careful, of course, to do that in a long-term, dynamic way as well as short-term. You cannot, for example, look at the impact of education on poverty and income distribution by just looking at what happens over the next couple of years. The impact of education on poverty and income distribution obviously has a very long gestation period. So that's just one of the problems.

We have seen quite a bit on private consumption, but the emphasis also needs to be put on what are the adjustment implications on the provision of public goods, particularly public health, nutrition, education, because these not only have immediate effects on consumption, but they have long-term effects on the poor. And the reaction of the public sector to the crisis can make the crisis worse from the point of view of the poor. The reaction of the public sector to the crisis can actually make the situation a little bit more manageable.

Lack of easy access to rural financing, poor delivery system of modern agricultural technologies, poor quality of agriculture inputs mainly fertilizer and lack of effective institution to facilitate agricultural marketing are some of the major causes for the low competitiveness of women farmers. On the other hand inadequate rural roads and insufficient electrification as other bottlenecks that has resulted in the increase in the cost of production of the Asianagro-products. Governments in the region should establish guidelines for credit allocation. More rural financial institutions are needed to be mobilized. Special funds should be designated for loans, sometimes at subsidized interest rates.

How the higher level of social consumption with relatively better distribution of incomes and wealth vastly widened the demand of those economies and facilitated more broad based development. At the same time, there is need to review these programmes, sharpen their focus, improve their delivery system and involve the poor in their implementation.

The Nepalese government could, like other S. Asian countries, e.g., India, devote money (= financial capital) to technical education, like programming, which is labor-intensive, and requiring little capital equipment, and export that knowledge, but that requires spending lots of money providing technical educations. However, Nepal does not seem to have sufficient money to improve the technical competence of its people either internally or by sending them to foreign schools in sufficient numbers to make a difference economically to the entire country.

Nepal does have sufficient money to start down the road towards economic improvement. It would be a major contribution to the study of this problem if some Nepalese scholars would make a cash flow analysis of the Nepalese economy to determine with some precision where Nepal's money comes from and where it goes. That analysis might suggest some social transformations that would accumulate it in sufficient quantities to spend on improving its technology. A cash flow analysis of Nepal's economy might be a start to determine whether or not Nepal is able to move up the economic ladder or remain on the lower rungs.

"The communist "social transformation" would get Nepal nowhere, in my opinion, because (1) dictatorships spend a disproportionate amount of money on those who rule and (2) the rich capitalist-democratic countries would not be supportive of their undemocratic reforms". How to contribute to social transformation, it is helpful to have an idea of how fundamental social change can come about? What role do social movements or organizations play? What about protest, education, public policy, personal growth, alternative institutions, reform?

(Kamala Sarup is editor to http://peacejournalism.com/ )

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