Examining the adoption of governance reforms in Nepal: Success or failure in the post-liberalisation era (1990-2015)?
Ram Prasad Ghimire
A thesis submitted for the degree of
Doctor of Philosophy of The Australian National University
Declaration
I declare that this thesis is the product of my own research. It does not contain any material which has been accepted for any other degree or diploma, or any copy or paraphrase of another person’s material except where due acknowledgement is given.
Ram Prasad Ghimire 26th July 2017
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Acknowledgement
I wish to acknowledge the invaluable contributions of numerous individuals and institutions during my PhD candidature. I extend my deep sense of respect and gratitude to them though I cannot name all here.
First, I would like to express my sincere gratitude to Professor John Wanna, the Chair of my supervisory panel, for the intellectual guidance, expert advice and continuous encouragement throughout the PhD process. I thank him for all generous supports and mentoring during my hard times. I also take this opportunity to extend my sincere gratitude to Professor Keith Dowding who chaired my research panel in the first year and later provided scholarly guidance and inspiration for academic advancement as a supervisor. I am also grateful to my external advisor Dr. Dinesh Pant for his insightful comments and constructive feedbacks.
I would also like to thank Dr. Andrew Banfield, Head of School, ANU College of Arts and Social Sciences, faculty and staff of the School of Politics and International relations for academic insights and management support throughout my research candidature. I am also thankful to all ANZSOG faculty and staff at the ANU for providing an excellent academic environment and management support at Crawford.
I also take this opportunity to extend my sincere gratitude to the Australian Government for awarding Australian Development Scholarship to pursue PhD research in this wonderful multi-cultural society. I am also grateful to the Government of Nepal for the consent, encouragement and an extended leave to pursue higher studies in a competitive international academic environment without which I would not have been able to conduct this research. I am also thankful to the Department of Foreign Affairs and Trade, Australia and the very helpful Australia Awards Team at the ANU for all the support they readily provided to me throughout my research period.
I acknowledge the assistance and contributions from my key informants, interviewees, focus group discussants, participants of the questionnaire surveys and local administrative assistants who provided a solid foundation to my research. I cannot name them all here but I will reach them in person when I am back to Nepal. I am also indebted to all scholars whose work provided valuable insights to my research. I also thank Dr. Govind Tamang, Anita Acharya and ANU Alumna Dipak BK for their help in transcribing and translating the in-depth interviews and data entry of the questionnaire surveys.
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My colleagues in the ANZSOG foyer: Tanja Porter, John Hawkins, Isi Unikowski, Stephen Darlington, Mansur Chisni, Maria Taflaga, Tom King and Val Barrett to name a few, who echoed the foyer with academic debates and provided cheerful supports during the long arduous process of PhD research. I also extend my sincere thanks to Sam Vincent for assistance in copy- editing.
Coming to my Nepali colleagues, special thanks to Puspa Sharma, Thaneshwar Bhusal and Pawan Parajuli for their constructive comments, valuable feedbacks and technical support that helped enrich my thesis. Thanks are also due to Savitri Gurung, Mandip Rai, Dr. Ramesh Sunam, Dr.Kamalesh Adhikari, Dr. Keshab Gautam and Dr. Binod Chapagain for sharing their knowledge, idea and experience during my early phase of research. I am also thankful to Alok and Bibhisha Adhikari for their inputs and support to my research and, making my stay in Australia pleasant and memorable.
Last but not the least, in acknowledging the exemplary contributions of my family I am almost deplete of words, believing that no word has been coined to exactly represent their self-less, enthusiastic and unflinching support throughout my life. My mother and father, who always inspired, encouraged and guided me in my personal development, growth and enrichment, continually re-kindled the life-force in me until tragically they passed away while I was working on my research in Australia far away from them. I express my deep sense of respect, gratitude and veneration to them; they will remain my source of inspiration for ever. I am also grateful to my brothers, sisters and the entire extended family members for their love, encouragement and support. I am also thankful to my mother in law, Sharada Aryal, who came here to encourage me and support my research. I believe, no formal statements can do justice to my wife Puspa’s unconditional love, spontaneous support to my research while pursuing her online courses and efficiently managing the home affairs. Our young sons Shreyans and Ayush who accompanied us for the four years in Australia demonstrated an amazing degree of wisdom and tolerance for their age, especially as much of my time was devoted to the thesis and away from them. I salute their patience and understanding. I thank them, though I know it is grossly inadequate.
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Abstract
Governance reforms face serious implementation challenges across the entire globe, but are particularly difficult for developing countries. Yet this problem is a relatively less well studied area of implementation research both at the global level and, in developing countries such as Nepal. This research project examines the key factors that contributed to, or inhibited, the implementation of governance reforms in post-liberalised Nepal (1990 - 2015) in three key areas: the downsizing of the civil service (often labelled as ‘rightsizing’), the privatisation of public enterprises, and various anti-corruption reforms applying across the public service.
To this end, an analytical framework was designed based on an extensive review and analysis of the existing literature on political economy, state-society relations, political regimes, theory of policy transfer, framework for policy success or failure and the making and implementation of policy reforms. The framework allowed for an in-depth analysis of the interests, incentives, motives, power and the behaviour of the key policy actors and stakeholders. Questionnaire surveys and focus group discussions on the case studies, and 100 in-depth elite interviews focusing political and bureaucratic elites with first-hand knowledge and experience of the policy reforms, provide an evidential basis for the findings.
The main findings of this thesis demonstrate that Nepal’s governance reforms were largely not effective in the areas investigated. The three cases reveal common problems in the conceptual understanding and the translation of reform objectives into action by the main implementers. The absence of high level genuine commitment to reform on the part of political and bureaucratic leaders, the lack of evidence-based policy-making and hasty commencement without considering reform readiness were among the key factors inhibiting governance reforms in the post-liberalisation era, thus preventing them from achieving their reform objectives.
Some inhibiting factors applied more specifically to individual cases. The key issue for the rightsizing reforms was due to policy distortion by the senior civil servants; privatisation suffered from partial implementation; whereas the anti-corruption reforms lacked societal pressure and effective accountability enforcement mechanisms to get those policies effectively implemented. Hence, the rightsizing reform agenda became primarily a case of implementation failure, whereas the other two cases constituted a
iv failure to implement. These findings demonstrate the need for in-depth analysis of individual cases to fully grasp the intricate politics of governance reforms in aid- recipient developing countries like Nepal.
This thesis contributes to the existing body of knowledge on the politics of the agenda- setting process and implementation of governance reforms as a dynamic political process through the analysis of a comprehensive political economy framework. It also contributes to the policy transfer literature by expanding the existing policy transfer framework. Similarly, albeit in a small scale, it also contributes to the policy success or failure literature by positing a dynamic perspective to the evaluation of success or failure of governance reforms that combines the criteria-based assessment with ‘thick interpretations’ of reform outcomes. The research findings have important implications to other similar developing countries to improve the implementation of governance reforms.
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Table of Contents
Declaration...... i
Acknowledgement ...... ii
Abstract ...... iv
Table of Contents ...... vi
List of figures ...... xi
List of tables...... xii
List of acronyms ...... xiv
Chapter 1 Introduction ...... 1
1.1 Background to the study ...... 1
1.2 Conceptualising governance reforms ...... 2
1.3 Research questions ...... 3
1.4 Research methodology ...... 4
1.4.1 Research design...... 4
1.4.2 Analytical framework ...... 5
1.4.3 Selection of the case studies ...... 6
1.4.4 Fieldwork ...... 7
1.4.5 Data analysis and interpretation ...... 10
1.4.6 Ethical considerations ...... 11
1.5 Significance of the research ...... 12
1.6 Outline of the thesis ...... 12
Chapter 2 Explaining the politics and processes of governance reforms...... 15
2.1 Political economy approach to governance reforms ...... 15
2.1.1 Conceptualising political economy analysis ...... 15
2.1.2 Political economy analysis and governance reforms ...... 16
2.2 State-society relations and policy reforms ...... 19
2.2.1 State-centric versus society-centric approaches ...... 19
2.2.2 Implications for policy reform ...... 20
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2.3 Political regime and governance reforms ...... 21
2.3.1 Political regime and space for reforms ...... 21
2.3.2 Political-bureaucratic interface and governance reforms ...... 24
2.4 Adoption of governance reforms ...... 26
2.4.1 Agenda setting ...... 26
2.4.2 Policy decision-making ...... 29
2.4.3 Policy transfer andgovernance reforms ...... 30
2.5 Implementing policy reforms ...... 34
2.5.1 Implementation literature: An overview ...... 34
2.5.2 Linear and interactive models ...... 39
2.5.3 Institution, idea, interest and incentives ...... 40
2.6 Evaluating reforms: What works and what does not ...... 43
2.6.1 Understanding evaluation of policy reforms ...... 43
2.6.2 Success or failure of reforms? ...... 45
2.7. Introducing the three case studies in this thesis: Relevant literatures and conceptual clarification ...... 48
2.7.1 Clarifying the concept of public sector ‘rightsizing’ ...... 48
2.7.2 Clarifying the concept of privatisation ...... 52
2.7.3 Clarifying the concept of corruption and anti-corruption reforms...... 58
2.8 Conclusion: Drawing together the analytical framework for the research ...... 62
Chapter 3 Trends and trajectories of governance reforms in Nepal ...... 65
3.1 Unfolding Nepal’s political history ...... 65
3.1.1 A glimpse of ancient and medieval Nepali politics (before 1769) ...... 65
3.1.2 Formation of the Nepali state to democratic transition (1769-1960) ...... 66
3.1.3 Illusive steps to party-less democracy (1961-1990) ...... 69
3.1.4 Constitutional monarchy to democratic republic (1991-2016) ...... 72
3.2 Nepalese public administration: a historical perspective ...... 76
3.2.1 Feudal and family administration before 1951 ...... 76
3.2.2 The seedbed of a modern civil service (1951-1960)...... 78
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3.2.3 Neutral administration committed to Panchayat regime (1961-1990) ...... 80
3.2.4 Administrative organization to governance reforms (1991-2016) ...... 82
3.3 Connecting political change with the reform trajectories ...... 88
3.3.1 A snapshot view of political change and the reform trajectories ...... 88
3.3.2 Political development, societal culture and administrative tradition ...... 91
3.4 Summary ...... 93
Chapter 4 Nepalese perspectives on the dynamics of governance reforms ...... 95
4.1 Political context and regime dynamics in Nepal ...... 95
4.2 State-society relations and cultural context...... 97
4.3 State-donor dynamics and its impact on reform initiatives ...... 99
4.4 Actors, interests and incentives ...... 101
4.4.1 Political leaders ...... 101
4.4.2 Public servants ...... 102
4.4.3 Development partners ...... 104
4.4.4 Trade unions ...... 105
4.4.5 Civil society ...... 106
4.4.6 Private sector ...... 106
4.4.7 Academic community ...... 107
4.4.8 Media ...... 108
4.5 Political-administrative institutions leading and coordinating reforms ...... 109
4.5.1 Office of the Prime Minister and Council of Ministers (OPMCM) ...... 109
4.5.2 National Planning Commission (NPC) ...... 110
4.5.3 Ministry of Finance (MoF) ...... 111
4.5.4 Ministry of General Administration (MoGA) ...... 112
4.6 Major oversight agencies and accountability enforcement mechanism ...... 112
4.6.1 Parliamentary committees ...... 112
4.6.2 Commission for the Investigation of Abuse of Authority (CIAA) ...... 114
4.6.3 Office of the Auditor General (OAG) ...... 115
4.7 Summary ...... 116 viii
Chapter 5 Rationalising government staffing size through cut-back management ...... 119
5.1 Contextualizing rightsizing in the Nepalese civil service ...... 119
5.2 Adoption of rightsizing policies in the post-liberalisation era (1990-2016) ...... 125
5.3 Dynamics of rightsizing in Nepalese perspectives ...... 132
5.3.1 Institutional framework for civil service restructuring ...... 132
5.3.2 Actors, idea, interests and incentives ...... 135
5.4. Implementation of rightsizing policies in the post-liberalisation era ...... 137
5.4.1 Implementation status ...... 137
5.4.2 Implementation analysis ...... 140
5.5 Implications for the reform objectives ...... 147
5.6 Conclusion ...... 152
Chapter 6 Privatisation of public enterprises ...... 155
6.1 Contextualising privatisation in Nepalese perspectives ...... 155
6.2 Adoption of privatisation policies in the post-liberalisation era ...... 162
6.3 The politics of privatisation ...... 173
6.3.1 Institutional frameworks ...... 173
6.3.2 Actors, interests and incentives ...... 178
6.4 Implementation of privatisation policies in the post-liberalisation era ...... 182
6.4.1 Implementation status ...... 182
6.4.2 Implementation analysis ...... 187
6.5 Implications for the reform objectives ...... 196
6.6 Conclusion ...... 202
Chapter 7 Anti-corruption reforms in the public service ...... 205
7.1 Contextualising anti-corruption reforms in Nepal ...... 205
7.2 Adoption of anti-corruption policies in the post-liberalisation era ...... 209
7.3 Dynamics of anti-corruption reforms in Nepalese perspectives ...... 218
7.3.1 Institutional frameworks for anti-corruption reforms ...... 218
7.3.2 Actors, idea, interest and incentives ...... 222
7.4 Implementation of anti-corruption reforms ...... 224 ix
7.4.1 Implementation of policy initiatives ...... 224
7.4.2 Institutional performance ...... 226
7.4.3 Implementation analysis ...... 232
7.5 Implications and outcomes of the reform objectives ...... 238
7.6 Conclusion ...... 244
Chapter 8 Research findings and discussion ...... 247
8.1 Synthesis of the key research findings ...... 247
8.2 Implications in relation to the research questions ...... 250
8.2.1 Where and how did the various reform agendas originate? ...... 251
8.2.2 To what extent were the reform policies adopted as government policy and implemented? ...... 252
8.2.3 How did the key policy actors actually interact with each other in the making and implementation of governance reforms? ...... 254
8.2.4 What were the outcomes in terms of the reform objectives? ...... 257
8.3 Discussions: Fitting findings to a broader context ...... 259
Chapter 9 Conclusion and implications ...... 265
9.1 Overarching conclusions ...... 265
9.2 Implications of the research to other similar developing countries ...... 270
9.3 Significance of the research ...... 272
9.3.1 Academic contribution ...... 272
9.3.2 Contribution to policy and practice ...... 274
9.4 Suggestions for further research ...... 275
References ...... 276
Annex 1A: Survey questionnaire on civil service rightsizing ...... 309
Annex 1B: Survey questionnaire on privatization ...... 321
Annex 1C: Survey questionnaire on anti-corruption reforms ...... 333
Annex 2: List of interviewees ...... 344
Annex 3: List of FGD participants ...... 348
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List of figures
Figure 2.1 A policy transfer continuum ...... 33 Figure 2.2 Methodological framework of privatisation ...... 56 Figure 2.3 Analytical framework ...... 64 Figure 3.1 Pathway to democratic republic ...... 90 Figure 6.1 Government investment in public enterprises ...... 199 Figure 7.1 Number of technical audits by NVC ...... 228 Figure 7.2 Case registration and resolution by Special Court ...... 231 Figure 7.3 Adjudication of corruption cases by the Supreme Court ...... 231 Figure 7.4 Corruption perception index for Nepal ...... 240 Figure 8.1 Reform readiness ...... 261
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List of tables
Table 1.1 List of interviewees ...... 9 Table 2.1 Types of political regimes ...... 22 Table 2.2 Characteristics of patronage and neopatrimonialism ...... 23 Table 2.3 Political-bureaucratic relations in different types of state ...... 24 Table 2.4 Alternative ways of drawing a lesson ...... 31 Table 2.5 Top-down and bottom-up approaches to policy implementation ..... 35 Table 2.6 A typology of informal institutions ...... 43 Table 2.7 Dimensions of policy success ...... 46 Table 3.1 Public sector governance reform approach and trajectory in Nepal 91 Table 5.1 Growth of civil service from 1951 to 1991 ...... 120 Table 5.2 Drivers of civil service rightsizing policy ...... 122 Table 5.3 Civil service rightsizing policies in periodic plans...... 126 Table 5.4 Civil service rightsizing policies in annual budget speeches ...... 128 Table 5.5 Implementation of civil service rightsizing policy ...... 140 Table 5.6 Impact of civil service rightsizing ...... 147 Table 5.7 Growth of civil service after 1990 ...... 150 Table 5.8 Structure of civil service positions in 1991 and 2015 ...... 150 Table 6.1 Growth of public enterprises in Nepal before 1990 ...... 156 Table 6.2 Drivers of public enterprise privatisation ...... 158 Table 6.3: Periodic plans on privatisation and public enterprise reforms ...... 162 Table 6.4: Budget Speech on privatisation and public enterprise reforms ..... 165 Table 6.5 Details of enterprises privatized during 1990-1995 ...... 183 Table 6.6 Details of enterprises privatized during 1996-2000 ...... 184 Table 6.7 Details of enterprises privatized during 2001-2005 ...... 185 Table 6.8 Details of enterprises privatized during 2006-2015 ...... 186 Table 6.9 Implementation of privatisation policy ...... 189 Table 6.10 Impact of privatisation ...... 197 Table 6.11 Government investment in public enterprises ...... 198 Table 6.12 Government liabilities of privatized public enterprises ...... 200 Table 7.1 Drivers of anti-corruption reforms ...... 207 Table 7.2 Periodic plans on anti-corruption reforms ...... 211 Table 7.3 Budget speeches on anti-corruption reforms ...... 213
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Table 7.4 Anti-corruption and oversight agencies in Nepal ...... 219 Table 7.5 Number of complaints received and resolved by NVC ...... 227 Table 7.6 Number of complaints received and resolved by CIAA ...... 228 Table 7.7 Number of prosecution and departmental action by CIAA ...... 230 Table 7.8 Implementation of anti-corruption reforms...... 232 Table 7.9 Impact of anti-corruption reforms ...... 239 Table 7.10 Most problematic factors for doing business in Nepal ...... 241 Table 8.1 Elite perceptions of the implementation of governance reforms .... 248 Table 8.2 Worldwide governance indicators for Nepal ...... 250
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List of acronyms
AADC Administrative Authority Decentralisation Commission ANZSOG Australia and New Zealand School of Government ARC Administrative Reform Commission ARMC Administrative Reform Monitoring Committee CA Constituent Assembly CCD Corporation Coordination Division CCRC Corruption Control Recommendation Committee CEO Chief Executive Officer CIAA Commission for the Investigation of Abuse of Authority CPA Comprehensive Peace Agreement CPAA Commission for the Prevention of Abuse of Authority CRCSE Council of Retired Civil Service Employees CRRC Corporation Reform Recommendation Committee DFID Department for International Development DMLI Department of Money Laundering Investigation FGD Focus Group Discussion FNCCI Federation of Nepalese Chamber of Commerce and Industry FRT Financial Reform Taskforce GCR Global Competitiveness Report GDP Gross Domestic Product GRP Governance Reform Programme HLPM High Level Political Mechanism IFIs International Financial Institutions IMF International Monetary Fund MoF Ministry of Finance MoGA Ministry of General Administration NC Nepali Congress NGO Non-Governmental Organisation NPC National Planning Commission NPM New Public Management NVC National Vigilance Centre OAG Office of the Auditor General ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OPMCM Office of the Prime Minister and Council of Ministers PCDB Public Corporation Directorate Board PERC Public Expenditure Review Commission PSMP Public Sector Management Programme Sida Swedish International Development Cooperation Agency SoEs State owned Enterprises SPA Seven Party Alliance UNCAC United Nations Convention Against Corruption UNDAF United Nations Development Assistance Framework UNDP United Nations Development Programme UNMIN United Mission to Nepal USAID United States Agency for International Development
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Chapter 1 Introduction
This chapter introduces the thesis by providing some background to the project, setting out how we might conceptualise governance reforms, before introducing the research questions. It then introduces the research design and methodologies used in the thesis, justifying the use of a mix-method research design and case study approach. It subsequently provides an overview of the analytical framework used in answering the research questions. The introductory chapter then describes the forms of empirical evidence collated and the data collected. It also discusses the ethical considerations that guided the research, demonstrating how research ethics and integrity were upheld. Finally, it highlights the significance of research indicating potential contributions to the existing body of knowledge along with the implications for policy and practice, before providing an overview of the structure of the thesis. 1.1 Background to the study
Many authoritative sources have argued that effective and sustained governance reform is critical to Nepal in achieving the overarching goal of broad-based economic growth and poverty reduction which is inclusive and equitable. To this end, Nepal formally adopted broader governance reforms at the beginning of the new millennium (see Chapter 3). Various government policies and reports of major international development partners acknowledge the fact that the lack of efficiency, the low level of predictability, the absence of transparency and poor accountability in key government institutions were all major impediments to achieving sustained development in the country (ADB 2001, 2010a; NPC 1997, 2010). In addressing this perennial problem of effective public sector governance, a large number of administrative and governance reform initiatives were announced by the Nepalese government over more than six decades. However, Nepal’s public sector is still characterised by low levels of efficiency and effectiveness in delivering public services. The implementation of many major reform measures has tended to be poor and some were never implemented (CSVTF 2007).
Against this backdrop, my research focuses on the formulation and implementation of governance reform policies in Nepal from the 1990s. It analyses the extent of implementation to explore what factors and key actors were critical for the successful implementation of governance reforms in aid-recipient developing countries like Nepal. Based on the broader political economy framework developed in Chapter 2 and, with the help of a political economy lens, it delves into the complex, multi-dimensional and dynamic process of formulating reform initiatives and the politics of implementation with special focus on the period after the restoration of parliamentary democracy in 1990 which coincides with the post-liberalisation era. The research examines how the theory and practice of reform efforts converge in a real world situation like Nepal through an extensive review of policy documents, reports of both state and
1 non-state actors, including the development partners along with the information and opinions from key informants, elite interviewees, focus group discussants, policy experts and other participants with different professional backgrounds.
1.2 Conceptualising governance reforms
Historically, public sector reform in Nepal was mostly confined to the internal management of the public bureaucracy until broader governance issues were incorporated into the agenda in the late 1980s. This is when major international financial institutions such as the World Bank and the IMF promoted good governance as an important component of development management (Caiden and Su 2007; OECD 2001). Poor governance was frequently attributed as one of the main causes of underdevelopment and persistent poverty in developing countries (Kaufmann et al. 2009; World Bank 1989, 2000c). These bodies argued that only by improving the inefficient and under-performing governance of developing countries was it possible to unlock the developmental potential of these nations – a notion that also tended to appeal not only to foreign aid donors but also the citizenry throughout the developing world.
International financial institutions, including major aid donors, regularly promoted the good governance agenda in aid dependent developing countries, mainly in the 1990s and continuing into the new millennium. However, scholars began to contest the universalist templates and ‘one size fits all’ agendas of good governance for not being sufficiently cognisant of contextual and cultural sensitivities (Ahmad and Wani 2012; Batley and Larbi 2004; Bowornwathana and Wescott 2008; Cheung 2005; Kim 2009; Randall 2011). Prescriptive and highly technocratic ‘best practice’ reforms were also challenged for placing excessive emphasis on ‘off-the-shelf’ reforms which were meant to be implemented in standardised ways without much customisation of the reform agendas (Andrews 2012; Bertelli 2012; Grindle 1999, 2011b; Lakshman 2003; Rodrik 2003; Thissen and Walker 2013; Tolentino 2010a, b).
However, despite the growing popularity and appeal of the term ‘good governance’, governance reforms often lacked conceptual clarity as the generic concept could be viewed from different perspectives (Grindle 2017). Economists tended to emphasise formal institutions, operational efficiency and democratic participation (Rose‐Ackerman 2017). Normative perspectives sought to balance contextual and universal principles emphasising norms, values and principles in the governing approaches and governance systems. Interactive approaches, on the other hand, viewed governance as a dynamic process of reform (Kooiman and Jentoft 2009). Political perspectives tended to range much broader to incorporate the state and non-state actors, the making and implementation of both political and administrative decisions, state-society relations, state-donor dynamics and the role of both formal and informal institutions in the making and implementation of governance reforms (Grindle 2017).
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There also emerged different forms or models of ‘good governance’, such as sound governance, multi-level governance, new governance, shared governance, interactive governance, holistic governance, hybrid governance, network governance (to name a few), and the proliferation of literature viewing governance reforms as different processes such as linear approaches, interactive approaches, normative approaches and holistic approaches (Farazmand 2013; Hupe and Meijs 2000; Kooiman and Jentoft 2009; Pierre and Peters 2000; Rhodes 1997). All these factors complicated the concept of governance and governance reforms.
While recognising the fact that different approaches and perspectives have their own merits depending on the context and other situational variables, my research is more guided by the interactive approach and political perspective of governance reforms where a multitude of interests, values, incentives and inter-relationships among the key reform actors interact with each other at multiple points of the process of making and implementing governance reforms (Grindle 2017; Hyden 2001; Kettl 2002; Peters and Pierre 1998).
1.3 Research questions
The main research question guiding my research is:
What were the key factors that contributed to or inhibited the adoption of governance reform policies in Nepal in the post-liberalisation era (1990-2015) and to what extent were the reform objectives achieved?
The following research sub-questions were designed to provide more in-depth answers to the overarching research question.
(1) Where and how did the various reform agendas originate? (2) To what extent were the reform policies adopted as government policy and implemented? (3) How did the key policy actors interact with each other in the making and implementation of governance reforms? and (4) What were the outcomes in terms of the reform objectives?
These set of research questions enable me to investigate the appropriateness and effectiveness of Nepal’s trajectory of government reform from 1990 to 2015.
To answer the first research sub-question that seeks to identify the main drivers of governance reforms, I examined various reform commission reports, government policy documents, agreements with bilateral and multilateral donors, and their reports. These resources were a significant source of empirical evidence about the developing agendas. Questionnaire surveys and focus group discussions on relevant research cases and extensive elite interviews with
3 individuals involved in the reform processes also substantiated and reinforced the arguments. I answer the second research sub-question through a thorough review and analysis of periodic plans and annual budget speeches from 1990 to 2015, along with other sectoral policy documents. I conducted an implementation analysis with the help of the government’s policy documents and progress reports, questionnaire surveys, focus group discussions and the elite interviews. The third research sub-question evaluates the role of the key policy actors during the reform processes through extensive elite interviews conducted with those most closely involved or keen observers of the reforms. Government policy documents and periodic reports along with the relevant reports of the major development partners substantiate the findings from the questionnaire surveys and the focus group discussions. Finally, I compared the reform objectives with the actual outcomes by examining the policy documents and evaluation reports of the period 1990-2015. Discussions and ‘thick description’ interpretations substantiate the key arguments.
1.4 Research methodology
1.4.1 Research design
Given the relatively comprehensive and highly contextual nature of the main research question and sub-questions, my research adopts epistemological pluralism, employing a mixed-method research design. This approach allows for the use of different types of evidential data simultaneously focused on the nature of the research questions. It also provides an opportunity to minimise methodological limitations and bias of a single research method and enhances the robustness of research through data triangulation (Creswell and Clark 2007; Creswell et al. 2003; Denzin 2012; Teddlie and Tashakkori 2008). The mixed-method research design is more pragmatic and enriches the value of the research (Creswell and Plano Clark 2011; McKim 2017). Quantitative and qualitative methods complement each other to validate the research findings with greater confidence (Archibald et al. 2015; Bowen et al. 2017; Bryman 2012; Creswell and Clark 2007; Luyt 2012).
The quantitative-qualitative dichotomy and ontological debates about whether scholars should take specific positions on a particular research method is in many ways negated or made less relevant by the adoption and extensive use of a mixed methods approach. Scholars argue that such research methods are not necessarily tied to any specific epistemological or ontological position (Della Porta and Keating 2008; Goertz and Mahoney 2013; Halperin and Heath 2012; Raadschelders 2011; Riccucci 2010). However, each of the research methods offers some unique value and, thus one method is better suited to specific research problems and datasets than others. Therefore, adopting one method should not be interpreted as refuting others. Rather,
4 as Stoker and Marsh (2010) argue, interaction with a variety of approaches and methods should be encouraged to enrich political science research and methods.
I use mixed-method research design in line with the interactive approach and political perspective to governance reforms that capture the highly dynamic nature of governance reforms. In the meantime, it also helps minimise perceptual bias of the interviewees, which may arise in the politically divisive Nepalese society.
The research for this thesis adopts a case study approach, taking three broad areas of governance reform. The case studies include attempts to downsize the civil service (usually known as ‘rightsizing’ in Nepal), the privatisation of public enterprises and various attempts to minimise corruption (anti-corruption reforms). The case study method is fruitful in allowing the researcher to carry out an in-depth inquiry and analysis of real-world governance issues that are often complex and nested in a myriad of other problems. The close-up and in-depth empirical studies can add value to enhance generalisability of the research findings (Stewart 2012; Yin 2013). Case study methods are increasingly popular in governance-related research for a detailed in-depth study on specific areas of governance reforms. Scholars have widely used multi-case methods in governance research, which allow comparison across different research areas of research themes (Stewart 2012, 2014).
1.4.2 Analytical framework
Based on an extensive review and analysis of the existing literature on political economy, state- society relations and political regime theory and its implications for the adoption and implementation of governance reforms, I have designed a broader political economy framework that presents governance reform as a dynamic process (see Chapter 2). Built on multiple theories related to the politics of governance reforms, the framework posits that the dynamic interplay among the state and non-state actors, along with a number of coalitions and networks, shapes the reform process.
The analytical framework allows for an in-depth analysis of the interests, incentives, motives, power and the behaviour of the key policy actors and stakeholders. In each of the case studies I discuss the particular configuration of these interests, incentives, motives, power structures and behaviours. I was able to assess these factors, discuss their impact in the reform agendas and consider the implications of them to the adoption and implementation of the governance reforms over two decades in Nepal. Conceptually comprehensive, methodologically systematic and theoretically powerful, the framework unveils and unravels the politics of making and implementation of governance reforms by analysing the interdisciplinary and complex governance issues in aid recipient developing countries like Nepal.
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1.4.3 Selection of the case studies
As Grindle (2017) argues, the adoption and performance of governance reforms may differ across different sectors or themes. Reforms may work well, better in one sector than in others. Factors contributing or inhibiting implementation of governance reforms may differ across the research areas. The multi-method case studies are found to be useful in investigating those factors that contribute towards or inhibit the adoption of governance reforms across different sectors (Stewart 2014). Therefore I have adopted a multi-method approach incorporating three key areas of governance reform enthusiastically adopted in the post-liberalisation era, which coincides with the restoration of parliamentary democracy in 1990.
First, the reorganisation and restructuring of the civil service remained an important administrative reform agenda from the commencement of the Nepalese civil service after it was established following the downfall of the Rana family oligarchy in 1951. In the early 1990s, it was the single-most important administrative reform agenda in the country. All the reports and recommendations of the various administrative reform commissions/inquiries since the 1950s highlighted the need for civil service rightsizing as an important reform agenda. Another important reason for choosing civil service rightsizing was its contemporaneousness across developing nations in South Asia and beyond. Almost all the South Asian countries adopted civil service downsizing policies from the late 1980s to the early 1990s, and the issue still remains an important reform agenda in these countries. For all these reasons, I chose civil service rightsizing as an important case study of my research. The case was also selected considering its crucial role in the adoption and implementation of governance reforms in Nepal.
Second, there was a strong wave of economic liberalisation and privatisation throughout the developing world in the late 1980s and early 1990s. In Nepal, the first democratically elected government after the restoration of multi-party democracy in 1990 accorded a high priority to the economic liberalisation and privatisation agenda. Privatisation was among the topmost priorities of the government. The development partners also encouraged the government to privatise the state-owned enterprises (SOEs), which quickly became a huge political issue in the country. Privatisation remained among the most prominent policy priorities of the major development partners to extend foreign assistance for about two decades. It was often specified in conditionality-based funding for aid and development. Despite a series of efforts to reform the SOEs and introduce privatisation, the adoption of privatisation and improved performance of the SOEs was not found to be encouraging. Even today the underperforming SOEs have created a huge liability for the government. For all these reasons, I chose privatisation as a case study of my research.
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Thirdly, corruption has persistently been a critical issue of public sector governance for the last 20 years. The government has implemented a series of anti-corruption reforms to fight against corruption since the late 1990s. With a policy of ‘zero tolerance’, anti-corruption reforms remain among the top priorities of government policies and programmes. Dozens of anti- corruption institutions are engaged in fighting against the contagious disease. However, governance indicators hardly show any improvements in Nepal. Moreover, the media continues to report corruption scandals in the post-liberalisation era and even more frequently in recent times. There is a little doubt that corruption is rampant in the country. Corruption and anti- corruption reforms continue to remain a topical issue even today. Therefore, I chose it as one of the three case studies of my research.
As I was interested in examining the adoption and implementation of broader governance reforms, I chose three of the most prominent areas of governance reforms in the post- liberalisation era to be the case studies for my research. Furthermore, all three cases are closely interconnected with each other. Privatisation can be an important strategy of public sector downsizing to rightsize the government. For instance, governments often opt for outsourcing when they implement public sector downsizing policies. Similarly, public institutions are often restructured and downsized before they are privatised. Both the civil service rightsizing and privatisation of public enterprises are believed to reduce the opportunity for corruption in the public sector. For this reason too, I chose the combination of these case studies for my research. The case studies also offer comparison across three key areas of public sector governance reforms.
1.4.4 Fieldwork
I conducted field work for my research in Nepal from April to September 2014 with short follow-up visits in March and July 2015. As my research focused on governance reforms at the central level of government, my fieldwork was primarily based in Kathmandu, with occasional visits to the headquarters of the five development regions to distribute some questionnaires and interview individuals with considerable experience in central governance reforms. My fieldwork consisted of three broad research stages: (i) preliminary research activities, (ii) actual data collection and data review and (iii) follow-ups, checking recorded responses or asking for further clarification. I selected my case studies while undertaking the required coursework for my research. I prepared a list of key informants for my research before I prepared the specific evidence-gathering instruments to be collected in the field work. I designed three sets of questionnaires, interview questions and focus group discussions, with participant information sheets, invitation letters, and consent forms along a time-bound research plan before commencing the fieldwork. I had series of meetings to finalise the questionnaires and guidelines for elite interviews and focus group discussion. I piloted the interviews by preparing a short list
7 of interviewees, targeted participants for the questionnaire surveys and focus group discussions in consultation with the key informants for my research. I also conducted a piloting study for my questionnaire survey before actually starting data collection.
I started the data collection process by distributing three sets of questionnaires based on the area of interest of the participants. Elite interviews, observations of various government offices and collection and review of policy documents and relevant literature, along with various reports of both the government and non-government sectors, were carried out side by side during the fieldwork. Initially based on the identification of key actors by their close involvement in the reform process, later elite interviewees were identified by using a ‘snowball’ sampling technique benefitting from the suggestions of key informants. I conducted focus group discussions on each of the three key research areas in the latter part of my fieldwork.
I collected both primary and secondary data for my research. During the six-month field work I collected extensive primary data from various official sources, including extensive government publications and official government policy statements. I also examined the various official commentaries on the periodic plans, budget speeches and the sectoral policies for the last 26 years. In addition, the reform commission reports since 1951 were thoroughly reviewed. Primary data also included unpublished records such as the minutes of the reform commission meetings and various unofficial draft reports submitted to the reform commissions. Historical documents such as the first legal codes against corruption were collected from the archival records to substantiate the historical analysis of governance reforms.
Primary material was also collected from focus group discussions, elite interviews and questionnaire surveys. Focus group discussions were organised in each of the key research areas: civil service rightsizing, privatisation of public enterprises and anti-corruption reforms including six, ten and seven participants respectively. Focus group discussion is widely used in qualitative research to provide different perspectives on social reality (Morgan 1996; Solano 1988). It helps investigate the intense feelings and passions about individual opinion and tacit knowledge on the key research themes through two-way communication (Johnson 2014; Ryan et al. 2014).
Policy elites and acknowledged experts can provide their first-hand knowledge and experiences about governance reforms. However, they may display a personal bias based on partisan politics or other cognitive problems (Acocella 2012). Questionnaire surveys can help to minimise subjective feelings and personal bias, and validate individual qualitative observations through datacollected from sampling. They also offer an opportunity for data source triangulation. The questionnaire surveys can be compared to other research findings across different case studies. Of the total 600 questionnaires (two hundred in each of the research areas), 245 responses were
8 received, a response rate of 41 percent. I conducted one hundred in-depth interviews, including with political and bureaucratic executives and leaders from civil society, civil service trade unions and the private sector and the participants from media, academia and foreign aid agencies. Table 1.1 below categorise the elite interviews.
Table 1.1 List of interviewees Participant Category Number of participants Politics: 22 Ministers 9 Members of Parliament 4 Political appointees (executives) 9 Bureaucracy: 37 Chief Secretary 2 Secretary 18 Others 17 Private sector 4 Foreign aid agencies 4 Media 7 Academia 6 Trade union 5 Civil Society 15 Total 100
I chose elite interview as it provided an opportunity to probe expert opinion and gather first hand experiences of the key policy actors involved in the reform process (Burnham et al. 2008, p.231). The interactive open-ended interviews also provided an opportunity to the respondents to recollect and reflect on the key issues of reforms as well as provide insights from their proximate personal experiences (Folkestad 2008). The in-depth interviews with the policy elites provided an avenue to generate authentic data by capturing the real-life experiences of the interactions among the key policy actors during the reform process (Turner et al. 2017).
My elite interviews focused on political and bureaucratic elites as they have intimate first-hand knowledge and experiences with the reform policy process. They can tell what actually happened while formulating governance reform policies; who initiated it, who facilitated or resisted and how it got through the policy process. They can provide deeper insights into the reform process. Leaders form civil society, the civil service trade union movement and the private sector – along with representatives from the media, academics and foreign aid agencies – were included to incorporate varieties of perspectives in governance reforms.
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To provide a more complete account I also collected the available secondary literature, including media reports from investigative journalists, academic commentaries from local and international scholars, and other publications in the public domain.
1.4.5 Data analysis and interpretation
I used both quantitative and qualitative data in my research. I organised and analysed the quantitative data collected from the questionnaire surveys by using IBM SPSS Statistics 22 software in line with my research sub-questions. At first the data was coded to fit in the software. Several tables were generated to answer my research sub-questions. The responses to the semi-structured short questions and an open-ended long question were clustered, creating different themes for further analysis.
The audio records of focus group discussions and elite interviews were first coded and then transcribed verbatim in the Nepali language. All the transcribed files were translated into English. The views, perceptions and opinions of the respondents were summarised and clustered in line with the key research themes. Important extracts were grouped for further analysis.
Qualitative data was summarised in the field notes while it was being collected. Preliminary analysis of the field notes guided further data collection. Field notes also helped avoid the recall error. It also helped clarify the relevant concepts and minimise any possible confusions while the respondents were still in close contact. Key points and issues raised by the focus group discussants and elite interviewees were clustered to present it as evidence for further analysis. Overall, qualitative data was analysed along the lines of the qualitative data analysis process as suggested by Miles et al. (2014, pp.12-16) which involves data condensation, data display and conclusion-drawing or verification.
Secondary data has beenpresented in the thesis in tables, charts and figures. Content analysis examined coherence and consistency within and among the policy documents. Policies and programmes related to the case studies were summarised in the tables, allowing me to analyse the intensity of government commitments to reforms over the last 26 years. Policy statements were critically analysed to examine the implementability analysis. Global indicators such as the Corruption Perception Index and the Worldwide Governance Indicators were presented to analyse the trend of major governance indicators, make comparisons with similar countries and provide macro perspectives on governance and governability.
Tables and figures generated from quantitative data were reorganised to answer the research sub-questions. Simple mathematical operations such as percentage, means and frequency were used to analyse the quantitative data generated by using the SPSS software. Quantitative data provided evidence of general perceptions and general trends, mostly answering the ‘what’ and
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‘where’ questions, which can be further elaborated, explained and interpreted to give the meanings to these answers. Text and context, perception and perspectives and ideas and experience were compared with the hard data of policy documents and evaluation reports to verify and validate the results. Data, information and perspectives were compared across the case studies to discuss the confirming or contradicting trends. Using different types of data and multiple source of information, the research provided ample opportunities for methodological as well as data source triangulation which enhanced confidence over the research findings. Finally, conclusions were drawn linking the explanation and interpretations to the theoretical construct, analytical framework and the research sub-questions.
1.4.6 Ethical considerations
Compliance of research integrity and the codes of conduct along with the principles of research enhances trustworthiness, recognition and value of research (Bryman 1988; McNabb 2010; Yin 2013). I was fully aware of the fundamental issues pertaining to research ethics and integrity such as research misconduct, plagiarism, conflict of interest, human research ethics and ethical considerations in data management before I started field work for my research.
There were no known physical or psychological risks or hazards involved in the data collection process as the research was primarily based in the capital city Kathmandu and all the participants were well-educated and empowered elites. I was also fully aware of the social, political and cultural context of the research area along with the local sensitivities. However, there still remain ethical issues in the collection, storage, dissemination and use of the data during and after the research is completed.
I started data collection only after having written or oral consents from the participants. Terms and conditions of participation were clearly spelt out in the consent form that I distributed to all the potential research participants. I briefed and explained the participation information sheet during the interviews and focus group discussions.
Access to all the data and materials, including the audio recordings, transcriptions and other confidential documents was fully controlled by myself as a primary investigator. Confidentiality of the participants’ identity, along with the primary data, was guaranteed as per the ANU Code of Research Conduct, along with the prevailing laws and ANU guidelines. I paid due attention to ensure maximum security of all data at all stages of my research. Personal details were detached from the data sheet on the same day data was collected by assigning separate unique codes to all the participants. Participants’ personal details were never disclosed without their prior consent. As a primary investigator of this research, I have paid due attention to avoid, minimise and manage potential risks and hazards while conducting fieldwork, storing and handling data, analysing and interpreting the data and information and reporting the results and
11 findings. Due attention was also paid to minimise personal bias by using multiple sources of data, clarifying the issues with the respondents and meticulously handling the contradictory view points and information.
1.5 Significance of the research
Governance reform is a relatively under-studied area of research in Nepal. Implementation research on governance reforms, especially from the broader political economy perspective, is almost non-existent. At the global level too, very few implementation studies focus on governance reforms (Heinrich et al. 2004; Saetren 2005a) which justifies the rationale of my research. This is the first historically informed comprehensive research on governance reforms in Nepal.
My research is built on a solid foundation of a large number of important theories on the political economy of policy reforms, policy implementation, political regime, state-society relations, political-bureaucratic interface, state-donor dynamics, policy transfer and the evaluation of public sector reforms. A theoretically powerful and methodologically robust analytical framework has been developed by summarising, synthesising and extending several theories mentioned above. As a theoretically informed empirical study on the adoption and implementation of governance reforms, my research makes an important academic contribution to the existing body of knowledge.
Studies have shown a positive correlation between public sector governance and the development outcomes in developing countries (Kaufmann et al. 2009; Sen 2014; World Bank 1989, 2017). The concept of governance itself emerged from expert-produced premises that improved governance would unlock the development potential of less-developed countries. Arguably, research on governance reforms has practical value for development management. As the research unfolded, the dynamic political process of the making and implementation of governance reforms in an aid-dependant developing country became apparent. And though the Nepalese trajectory is deeply flawed and not one of unqualified success, other, similar countries can also learn from the research. The research provides illuminating insights into the policy makers and practitioners in aid-dependent developing countries with a thorough analysis of the reform dynamics along with the contributing and inhibiting factors of public sector governance reforms.
1.6 Outline of the thesis
This thesis has been structured into nine chapters, including this introductory chapter. Chapter 2 conducts an extensive review of the relevant literature to build an analytical framework for this research. Theories on political regimes, state-society relations, agenda-setting, policy transfer,
12 decision making, policy implementation and evaluation and the framework for policy success and failures are critically examined.
Chapter 3 provides a critical review of Nepal’s political history and administrative reform trajectories from historical perspectives. It explores the contours of traditional societal cultures, the tortuous pathway of political development and the persistence of administrative traditions, and investigates the implications of these contextual factors to the implementation of governance reforms.
Chapter 4 contextualises the governance reform dynamics in Nepalese perspectives, briefly analysing political development, regime characteristics, state-society relations and the state- donor dynamics. This chapter also describes the roles of the key reform actors in the reform process by analysing their ideas, interests and incentives to engage in the reform process.
Chapter 5, 6 and 7 provide the substantive empirical chapters that present three case studies on civil service rightsizing, privatisation of public enterprises and anti-corruption reforms. Chapter 5 critically examines the adoption of the rightsizing policies in Nepal in the post-liberalisation era. This chapter clarifies the concept of civil service rightsizing adopted by the various governments over the nominated period. It carries out implementation analysis of the civil service rightsizing with the help of a questionnaire survey, a focus group discussion and large number of interviews with the political and bureaucratic elites, along with the secondary data. Finally, it examines whether civil service rightsizing was achieved.
Chapter 6 examines the adoption and implementation of privatisation policy from political perspectives with the help of both primary and secondary data. It elaborates on how privatisation became a major political issue in the post-liberalisation era. It conducts implementation analysis with the help of a questionnaire survey, in-depth elite interviews, a focus group discussion and the review of policy documents and various relevant reports. The privatisation outcome has been examined with the help of both primary and secondary data.
Chapter 7 provides empirical analysis of anti-corruption reforms in the post-liberalisation era with the help of the illuminating narratives of elite interviewees, focus group discussants and the respondents of a questionnaire survey. After a thorough analysis of the anti-corruption reforms, this chapter examines the extent to which anti-corruption reforms contributed or inhibited in improving public service delivery and controlling corruption in the country.
Chapter 8 importantly synthesises the key research findings across the case studies. This chapter provides detailed answers to all the research questions and sub-questions to provide a broad picture of governance reforms in the post-liberalisation era. The findings are discussed in light of the analytical framework developed in chapter 2. After verifying the research findings with
13 methodological and data source triangulation, this chapter provides implications to the broader context of governance reforms. This chapter introduces the notion of a ‘Goffmanian frontality’ to critically analyse the ownership and commitment of political and bureaucratic elites to the policy reforms; where a form of play-acting takes place with foreign donors and international bodies which has implications for the genuineness of reform commitments from the state actors.
Finally, Chapter 9 presents the overarching conclusion of the research. It connects the implications of the research findings with similar developing nations in South Asia and beyond. The significance of the research, highlighting the academic contribution and the contributions to policy and practice, is presented. This chapter concludes with some suggestions for further research in the area of governance reforms.
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Chapter 2 Explaining the politics and processes of governance reforms
In this chapter I review an extensive literature on the politics of governance reforms across the globe, with special focus on the political economy approach to governance reforms and interactive approach to policy implementation. I argue that the linear technocratic approach alone cannot fully explain the complex and dynamic nature of the real world governance problems. I emphasise the interactive political process of making and implementing governance reforms, where the key policy actors play vital roles in the entire reform process. I also introduce three thematic case studies of this research along with relevant literature and conceptual clarification. Using the theoretical foundation of multiple-stream models of agenda setting, theories of policy transfer, participative policy-making, interactive theories of policy implementation, improvement-oriented evaluation and a framework for policy success or failure and political economy approaches to governance reforms, I draw an analytical framework for my research that focuses on the context, institutions, ideas and actors in the governance reform process. 2.1 Political economy approach to governance reforms
2.1.1 Conceptualising political economy analysis
The concept of political economy is ideologically loaded, value-laden and highly contested. Initially it was conceived as a concept of ‘politics of economics’. However, there were a number of competing interpretations. For example, Adam Smith viewed it from the lenses of individual- centred analysis, whereas Karl Marx had a class-based approach of political economy. Nevertheless modern political economists are less concerned with safeguarding or promoting particular ideology; they are rather interested in maintaining a balance between the individual- centred, society-centred and state-centred approaches to political economy which accept and value the existence and interdependence of polity, economy and society (Clark 1998; Duncan 2010).
Today political economy is defined as “... a branch of social science that studies the relationship between individuals and society and between markets and the state, using a diverse set of tools and methods drawn largely from economics, political science and sociology”1. Similarly, it is “the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time”(Collinson 2003, p.3). A political economy approach is dynamic in nature and broad in scope, encompassing a wide range of actors and networks. It
1 Source: Encyclopaedia Britannica (http://www.britannica.com/topic/political-economy access: 16 June 2016)
15 also has an explanatory power to analyse the real life interactions among different policy actors and stakeholders and its impact on different people (Collinson 2003, p.18).
The evolution of political economy can be broadly divided into three main phases (Edelmann 2009, p.5). The classical political economy (1750s-1850s) focuses on the interrelationships between labour and capital. Neo-classical political economy (1860s-1980s) emphasise the efficient allocation of scarce resources. Similarly, institutional political economy (1990s-) covers institutions, actors, environment and interactions among them.
Political economy analysis can be approached through economic perspectives by using rational choice models or by political science perspectives adopting power-based models. Rational choice approach investigates the conditions under which rational policy actors and stakeholders are willing to cooperate with each other to find a common solution. Institutions are analysed on the basis of beliefs, expectations and behaviour of the key policy actors engaged in maximising their benefits without harming others (Dowding 2011). On the other hand, the power based approach analyses institutions on the basis of power relations in the society where negotiation and bargaining take place, based on the interests and stakes of the key policy actors and stakeholders involved. It reveals how the condition and position of policy actors influence the policy process as well as outcomes (World Bank 2008).
Rational choice and power based models are not mutually exclusive. In reality, individual actors cannot move freely to fulfil their desires or interests; very often they are constrained by power. Similarly, actors generally exercise their power based on the established rules and their interests and, thus they seldom act randomly. Arguably, in a real world situation, no single model can fully explain the complex and nested problem of governance reforms. Therefore, this research employs a broader political economy framework, incorporating important aspects of both the models to explain and interpret governance reforms in Nepal in the post-liberalisation era.
2.1.2 Political economy analysis and governance reforms
Political economy analysis (PEA) is not entirely a new concept to the international development community. The World Bank practiced it in 1949 while carrying out a survey on Colombian government, though not exactly with this name. The 1950 Currie Report discussed a number of political economy issues and furnished recommendations to address political and institutional constraints to development (Desai 2011). However, in the absence of a systematic, consistent and methodologically strong approach, it cannot be regarded as a true political economy analysis.
Initially used by developed countries to analyse domestic political economy, the political economy approach became popular in the developing countries following the failures of linear
16 and prescriptive model of policy reforms such as ‘Washington Consensus’ (Tolentino 2010a). Political economy analysis came into limelight when the ‘epistemic bubble’ of new public management orthodoxy was shaken by its inherent weaknesses such as ‘one size fits all’ universal prescription which did not fit well in many developing countries (Brinkerhoff and Brinkerhoff 2015).
Recently, development agencies have been using political economy tools to improve development effectiveness (Copestake and Williams 2014). Major development partners have developed a number of tools and frameworks for political economy analysis in accordance with the priorities of development cooperation and reporting requirements (Nash et al. 2006; Routley and Hulme 2013). These tools and frameworks focus on different dimensions of political context at macro, meso or micro levels. The macro level includes the country and reform context; the meso level examines implementation focusing on actors and institutions; the micro level assesses impact and outcome of policy reforms. Similarly, political economy analysis can focus on problems at both country and sector levels (Duncan and Williams 2010).
The bilateral and multilateral development agencies have produced an extensive body of literature on political economy approach to policy reforms(Nash et al. 2006). The United Kingdom’s Department for International Development (DFID) focuses on drivers of change and the key governance indicators such as capability, accountability and responsiveness (DFID 2003, 2004, 2006). By 2005, DFID alone conducted driver of change studies for more than 20 countries (Duncan 2010). Similarly, the Swedish International Development Cooperation Agency (Sida) examines power distribution and relations in society; the Netherlands Institute of International Relations’ Strategic Corruption and Governance Analysis (SGACA) framework captures informal behaviour and societal factors such as patronage system in its political economy analysis (Unsworth 2007). The World Bank approach focuses on both problems and policy implementation covering a wide range of issues such as context, arena and process of policy reforms(Fritz and Levy 2014; World Bank 2008). Similarly, Asian Development Bank and International Monetary Fund focus on ‘binding constraints’ of economic growth and poverty reduction in developing countries (Abonyi 2002; ADB 2009b; ADB 2010b; Asian Development Bank 2007, 2009; Hausmann et al. 2006). Despite the differences in focus, all these frameworks recognise the importance of local contexts and institutions for development effectiveness and place an emphasis on ‘good fit’ reforms rather than the best practices (Abonyi et al. 2013; Bunse and Fritz 2012; Duncan 2010; Fritz et al. 2009).
Operationalising political economy analysis is far more complex and sensitive than it is generally perceived for a number of reasons. Firstly, development agencies recruit economists to conduct political economy analysis who are neither interested nor trained to analyse complex political issues. Secondly, they are more concerned with their missions and getting things done
17 than the application of political economy analysis. Similarly, they are also constrained by the concept of country ownership in development management and policy reforms (Unsworth 2009). Consequently, development partners are still entangled with technical interventions rather than operationalising political economy analysis (Hout 2012; Routley and Hulme 2013; Unsworth 2009). The political economy framework as such is also criticised for relying on an oversimplified understanding of the complex interactions between the multitude of actors and stakeholders, their varied interests and motives (Leftwich 2006). Similarly, while talking about engaging in the complex political analysis of aid-recipient countries, development agencies are busy in exerting pressures for faster aid disbursements. With less visible results in more than a decade’s time, political economy analysis is yet to prove its worth in materialising the ‘best’ or ‘good’ fits (Booth 2012; Duncan and Williams 2012; Jones 2015; Unsworth 2009).
Before 1990, development partners, while emphasising the political feasibility of reforms, ignored governance and institutions. Politics was merely taken as an obstacle to development, meaning policies and projects would go well so long as politics did not interfere on internal management issues. Similarly, during the Cold War period, aid performance used to be explained mainly on technical and administrative grounds. However, in the post-Cold War world, development partners began to be more critical of political and governance issues in aid recipient countries (Hout 2012; Routley and Hulme 2013). Gradually political economy analysis emerged as a governance issue emphasising country context and moving from the ‘best practice’ to ‘best fit’ or ‘good fit’ reforms that recognises socio-economic and political context along with the interactions among the key actors and stakeholders of reforms (Grindle 2011a; Levy 2007). The normative views of ‘best-practices’ blueprints has been rejected in place of more practical ‘good-fit’ alternatives to reforms that focus on specific problems and emphasises iterative adaptive learning process of reforms (Andrews et al. 2013; Hausmann et al. 2006; Levy 2015; Unsworth 2009).
There is a general consensus among the major development partners regarding the usefulness of political economy analysis for development effectiveness and governance reforms in developing countries. They recognise the importance of quality interactions among the key actors, stakeholders and institutions for better reform outcomes (Foresti and Wild 2009). However, existing political economy approaches and tools still rely more on economic assumptions and fail to explore real politics. While focusing more on individual self-interest the existing approaches also lack serious consideration of interest, ideas and power relations among the key actors and stakeholders (Hudson and Leftwich 2014). For this reason international development partners are increasingly interested in moving beyond ‘thinking politically’ or ‘politics matter’ to ‘working’ or ‘doing’ politically for meaningful impact of political economy analysis on
18 governance reforms and development outcomes (Acemoglu and Robinson 2013; Foresti and Wild 2009; Laws 2016).
However, unless development agencies ensure greater involvement of partner governments while conducting political economy analysis, the studies are less likely to have a meaningful impact (Fisher and Marquette 2013). Similarly, the bilateral and multilateral development agencies need to reconcile their political economy approaches of emphasising power structures and patrimonial relationships between the government and citizenry, and innovative ‘local modes of problem solving’ respectively. Moreover, political economy analysis should move beyond the technocratic blueprint to capture political economy dynamics with due flexibility and adaptability, along with continuous engagement with the local environment (Copestake and Williams 2014).
2.2 State-society relations and policy reforms
2.2.1 State-centric versus society-centric approaches
The state-society relations can be explained with the help of state and society-centred approaches of social causation (Grindle and Thomas 1989; IDS 2010; Sellers 2011; Stryker 1997). State-centric approaches emphasise state autonomy in the policy process where state actors and institutions can incorporate their interests, values and preferences in policy decisions. On the other hand, society-centric approaches focus on interrelations and interactions among various groups, classes and individuals to pursue their values and preferences in the policy process (Grindle and Thomas 1989).
State-centric models focus on decision makers and organisational context while explaining policy reforms. These models postulate that decisions for policy reforms largely depend on the capacity and motivation of policy elites rather than societal inputs or demands. Similarly, policy outcomes depend on organisational performance where societal actors, groups and coalitions are considered as constraints to the implementation process. State-centric models are broadly divided into rational actor models, a bureaucratic approach and a state interests approach (Grindle and Thomas 1989, p.220).
On the other hand, society-centric approaches put social class and interest groups at the centrality of the policy process. Society-centric models state that decision makers cannot make decisions by their own, but they act in accordance with the interests, preferences and historical as well as cultural legacies of the society. Individuals, groups or classes in society use their power and compete with each other to prevail their interests, values and preferences in the reform process. Of the society-centric approaches, class analytic approaches are based on Marxist interpretations of class conflict and state-society relationships. Pluralist approaches
19 postulate that best policies emerge from competition among large numbers of organised groups to pursue common goals (Grindle and Thomas 1989, p.218). Public choice approaches are also based on the assumption that political society is composed of organised interests but according to public choice theory groups do not necessarily have specific common interests as in the case of pluralist approaches (Grindle and Thomas 1989, pp.218-219).
2.2.2 Implications for policy reform
State-society relations influence the making and implementation of policy reforms. The state’s capacity to design, adopt and implement policy reforms largely depends on public sector capacity and state autonomy to initiate and implement reforms. Similarly, societal space to influence the reform process depends on the characteristics of state and society and the type and quality of relations and interactions between them.
The degree of state autonomy and the extent of societal support determine whether a state is strong or weak. A state with a high degree of both these elements is strong, and vice versa. Similarly, a responsive state has a high degree of societal support and low level of state autonomy. Societal support depends on popular legitimacy of the state. The strong-weak typology of the state is useful in explaining state capacity to design and implement governance reform policies.
The state-centric and society-centric approaches provide valuable insights into the making and implementation of governance reforms in developing countries like Nepal. However, along with the changing role of the state and the growing societal influences on state affairs, the state- society dichotomy has been challenged (Migdal 1988; Sellers 2011; Stryker 1997). There is a growing trend of recognising both formal political institutions and organised social interests in the making and implementation of policy reforms. State-society theories complement rather simply compete with each other. With an increased role for the private sector and civil society including other non-state actors, state and society interact with each other to influence the reform process. In practice, state and societal actors pursue their interests almost simultaneously with the help of power and social capital. As the modern state rarely has absolute power, social mobilisation is also not limitless. Both the state and society play within the limits of the rules of the game dependant on the types of state, regime and government.
Windows of opportunity for policy reforms are open, along with the redefinition of the state- society relations. Social mobilisation makes the state more receptive to change. Transformational change occurs following positive outcomes of state-society interactions for the major changes in state-society dynamics (Stryker 1997). Quality of interactions between the state elites and non-state actors depends on the existing social structure, institutional rules and
20 the legacy and history of politics and society. Similarly, political culture is an important determinant of state-society relations.
Policy implementation is also influenced by the quality of interactions between state and societal actors, as ownership and commitment to reforms largely depend on how they are engaged in the reform process. Similarly, state legitimacy and policy compliance also depend on the type of state and society and their relations. Incentives or disincentives to engage in the reform process is also determined by the state-society dynamics.
To sum up, state and society centric approaches and theories such as the rational-actor model, bureaucratic politics and organisational processes and models (class-analytic, pluralist and public choice) help us to analyse and examine the politics of governance reforms in Nepal through three different thematic case studies: civil service right sizing, privatisation of public enterprise and anti-corruption reforms. In an increasingly globalised scenario, international actors, institutions and agencies have significant influence in the reform process of developing countries –specifically the aid-recipient less developed countries. However, as state-society relations determine to a great extent the roles, rules and behaviour of different policy actors and stakeholders at different points of time, it is crucial in explaining the dynamic process of governance reforms in developing countries.
2.3 Political regime and governance reforms
2.3.1 Political regime and space for reforms
Political regimes are generally categorised as democratic, authoritarian and hybrid. Democratic regimes are based on the rule of law, where political leaders abide themselves by the law made by people’s representatives. Authoritarian regimes may have rules but mainly for the rulers’ convenience and, are not based on popular voice and mandates. Hybrid regimes are often viewed as having a democratic deficit (Erdmann and Engel 2007) where customs and patterns of patrimonialism co-exist with the rational legal institutions. Based on the participation- competition continuum, Bratton and Van de Walle (1994) identified four broad types of political regimes in Africa: exclusionary democracy, inclusionary democracy, exclusionary authoritarianism and inclusive authoritarianism, along with six variants (Bratton and Van de Walle 1994, p.471). Space for policy reforms differs significantly to these regime types and variants. As interests, motives and incentives varies according to the regime, the reform agenda differs significantly. The classification of political regimes based on procedural and behavioural dimensions is useful in explaining and interpreting policy reforms.
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Table 2.1 Types of political regimes Regime Types Number and type Methods of access Rules for making of actors allowed to power publicly binding access to power decisions Democratic Many actors: leaders Regularly held System of checks and of multiple political competitive elections balances parties with popular participation Authoritarian Few actors: leaders Decisions within the Bounded of military and military arbitrariness business elites Totalitarian One actor: leaders of Decisions within the Unbounded single party single party arbitrariness Source: Adapted from Munck (1996). Political interactions and citizen responses are heavily influenced by the existing regime types (Bratton and Van de Walle 1994, p.453). Arguably, performance of policy reforms is contingent upon the type of political regime. In the absence of commitment and ownership of the key policy actors, stakeholders and people at large, policy reforms cannot be successfully implemented. People’s commitment, ownership and willingness to comply reforms largely depend on government’s legitimacy and state-society relations(OECD 2010, p.7). On the other hand, political dynamics are also influenced by previous regimes and historical legacies. Therefore, policy reforms need to consider the impact of political institutions rather than just relying on contingent factors relating to key political actors (Bratton and Van de Walle 1994, p.454).
Competitive elections are necessary for democratic regimes, but these are not sufficient for a fully-fledged functioning democracy. For example, in the early 1990s, more than half of Africa’s 52 governments had competitive elections for president and legislatures (Bratton and Van de Walle 1994, p.453). And yet, many of these governments were not democratic.
Democracy spread throughout the world within a very short span of time during the late 1980s and early 1990s. However, many developing countries found it difficult to retain the widely admired political system because of the inbuilt paradoxes of democracy (Diamond 1990). In the absence of a well-developed political culture and limited capacity to manage the issues like ethnicity and party cleavages, federalism, proportionality, minority rights and power sharing among different groups of people, these countries face a tension between conflict and consensus. There is often contradiction between representativeness and governability. This is mainly due to the undemocratic concessions of power and resources to maintain certain political equations in the governments, as these countries hardly have political ethics and the capacity to manage diverse interest groups efficiently. Effective governance is often compromised while acquiring political consensus or eying the next election. There is also a tendency to exercise ‘hyper-democracy’ in new democracies where powerful elite groups and corporate lobbyists
22 exert excessive pressures on elected governments (Flinders and Wood 2015). In the meantime, an overemphasis on power delegation to the technical experts depoliticising policy making and governance processes has weakened electoral democracy. Similarly, advocates of liberal democracy argue that there should be reasonable constraints on executive power (Flinders and Geddes 2014; Kailitz 2013).
Many of the developing countries have hybrid political regimes where formal rules are nominally democratic but institutional legacy and social interactions are based more on traditional norms, values and practices (Bogaards 2009; OECD 2010). State-society relations are based on personal relations, political patronage and neo-patrimonialism. Therefore, governance reforms in developing countries need to consider patron-client relations and power distribution within the political system in addition to the state-society relations. Patron-client relations are unequal yet reciprocal relations where high-status individuals patronise the lower- status individuals for loyalty, service or political support. This system may beinterpreted as a kind of indigenous good governance (Beekers and van Gool 2012, p.6).
However, the neo-patrimonial system is quite different to the traditional patron-client relationship. The latter redistributes power and resources between the patrons and clients for mutual benefit, whereas the former collects rents from ordinary citizens to share it between the ‘new’ patrons and agents (Beekers and van Gool 2012, p.17; Erdmann and Engel 2007,p.107). Budd (2004,p.2) views neo-patrimonialism simply as a patrimonialism combined with modern bureaucracy. Thus neo-patrimonial politics is just ‘bureaucracy-oriented politics of patronage’ where the bureaucrats provide information to their political masters, develop policies and provide services to the citizen on behalf of them with considerate discretionary power.
Neopatrimonialism is characterised by centralisation of power and bottom-up corruption that makes politics a kind of business for the benefits of political elites and their connections through rent-seeking exchanges as shown in the table below:
Table 2.2 Characteristics of patronage and neopatrimonialism Patronage Neopatrimonialism
Exchange Extraction Moral economy (strong legitimacy) Predatory economy (weak legitimacy) Parochial corruption Big-time corruption State-society clientelism Bureaucratic clientelism Redistribution to the less resourceful Redistribution to those that ‘matter’ politically
Source: Beekers and van Gool (2012, p.17). Neo-patrimonial governance is quite common in developing countries but does not have any connection with a particular political system or form of government (Erdmann and Engel 2007, 23 p.114) where political elites and the ruling class are the winners but ordinary citizens are always losers. Thus the ruling elites in developing countries with limited access orders are not interested in breaking the ‘political disorder’(Brinkerhoff and Goldsmith 2002, p.8; North et al. 2007, p.42). Arguably, political leaders and bureaucratic executives rarely have any incentive or motivation to initiate and implement reforms which often bear personal risks for potential public benefits.
2.3.2 Political-bureaucratic interface and governance reforms
The Political- bureaucratic interface refers to how political and bureaucratic leaders engage in the reform process and how they deal with the opportunities and challenges that come through during the reform process (Dasandi 2014). This includes role differentiation and the level of autonomy bureaucratic leaders enjoy during the reform process.
Political-bureaucratic relations largely depend on state/regime types, though bureaucratic autonomy may differ to the ministries within the same regime where authority delegation is based on ministerial discretion. The following table highlights the general pattern of politics- bureaucratic relations across different types of states:
Table 2.3 Political-bureaucratic relations in different types of state Autonomy of bureaucrats Low High Role differentiation High Other developing ‘Developed’ countries between political leaders countries and senior bureaucrats Low ‘Predatory’ states ‘Developmental’ states Source: Adapted from Dasandi (2014, p. 3). Both role differentiation and autonomy of senior bureaucrats are low in predatory states, whereas developmental states have higher levels of bureaucratic autonomy, even though the role of politics and bureaucracy is somehow blurred. Other developing countries have well-defined roles, but the bureaucrats have a very limited autonomy, indicating the extent to which governance is institutionalised (Huntington 1968). The level of bureaucratic autonomy also indicates the quality of governance. However, autonomy should not be conceived as an isolation from the general public (Fukuyama 2013).
Strong, committed and capable political leadership is crucial to introduce, promote and implement policy reforms. However, a core group of senior bureaucratic leaders with considerate experience, expertise and strategic relations with both the people and political leaders have significant role in designing and implementing policy reforms (Dasandi 2014, p.3). Therefore, political-bureaucratic relations are considered as an important determinant of success or failure of policy reforms. Policy reforms with high level political commitment may also fail if bureaucrats’ interests clash with the idea of reforms.
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A positive interface between the political leaders and senior bureaucrats at the centre is not sufficient to ensure effective implementation at the street level of governance. It requires effective coordination between the centre and field offices (Grindle 2004; Lipsky 1980; Peters and Pierre 2004). However, political figures and senior bureaucrats at the centre can influence the implementation process through leadership and commitment, and by providing incentives, capacitating the field level offices and carrying out regular monitoring and periodic evaluations (Goetz 2009; Grindle 2004; Robinson 2009; Wanna 2007).
Compared to other developing countries, the developmental states’ policy making is more influenced by a small group of senior bureaucrats having close relationships with the political leaders. This is often attributed to be a main reason for their development success (Leftwich 1995). On the other hand, in predatory states, political-bureaucratic relations are largely misused to develop patronage networks and extract personal benefits to the ruling elites (Robinson 2007b; Turner and Hulme 1997; van de Walle 2006).
A large body of literature on policy and institutional reforms in developing countries since the 1980s shows disappointing results (Andrews 2013; IDS 2010; Polidano 2001; Robinson 2007b; Rodrik 2006). The quality of political-bureaucratic interactions is considered a prominent reason for such failures. Similarly, failures are also attributed to the conflicting interests between political authority and senior bureaucrats. Bureaucrats resist implementation and, where they find difficulty in resisting the implementation process, they tend to distort or obfuscate the reform policies (Andrews 2013; Grindle 2004; Wanna 2015). Therefore, policy succeeds only when political-bureaucratic relations are supportive and well-coordinated (Leftwich 1995).
Likewise, political-bureaucratic relations also determine the degree of personalised rules and the dominance of unofficial relationships. Political leaders and senior bureaucrats may co-opt not to introduce or implement deeper reforms that would jeopardise their mutual interests. They may even jointly subvert some transformational reforms. Moreover, bureaucrats may not be genuinely interested in initiating and implementing reforms. Rather, they may be engaged in bribery or extracting rents for their political masters and themselves. Failing to do so may be subject to punishment for ‘uncooperative’ civil servants which may end with losing lucrative positions, affecting career development potentials or transferring to so called low profile positions (Beekers and van Gool 2012,p.16). Staff turnover also affects the implementation process (Cornell 2014). Similarly, incongruities between bureaucratic development and political underdevelopment can also hamper the reform process (Haque 1997).
Reforms require reconciling democratic values with bureaucratic institutions – often a daunting task in developing countries. Bashing bureaucracy in the name of popular democracy and ignoring politics with the self-importance of experience and expertise in public bureaucracy are
25 equally impractical and, are too far from the ground reality (Meier and O'Toole 2006). A state requires both the operational efficiency of its bureaucracy and the democratic legitimacy of its political system to promote and sustain democratic governance, which can be reconciled with a strong, functional and effective interface between the political leaders and senior bureaucrats.
2.4 Adoption of governance reforms
2.4.1 Agenda setting
As Easton (1957) remarked a long time ago, policymaking today is not simply an authoritative allocation of values. It is more than just conversion of popular demands into action policies. Policy is no more a monopoly of the government or the state actors, as it consists of a number of interplays among different actors, stakeholders, institutions and groups having varied interests, beliefs, cultures, motives and power relationships. For this reason policymaking is also seen as fractured process where different actors, stakeholders, institutions, interest groups or coalitions compete with each other to incorporate their ideas, values and interests in the policy agenda and push it through the decision making process (May et al. 2013). Therefore agenda setting is inherently a political process.
Policy agendas are the public problems that draw the attention of a wider public and the policy makers in government (Birkland 2007,p.63). Agenda setting explains how some issues or problems get onto the policy agenda and why only a few issues are considered during the policy process. It occurs through a cognitive process of accessibility. The way issues, problems and solutions are framed, described and defined has direct impact on whether these acquire broader attention in the society or the government. Similarly, the way issues are interpreted or constructed also has an impact on the policy agenda, depending on the access to information and power, the ability to interpret information and advance the issues closer to the decision points (Birkland 2007; Cobb and Elder 1971).
Policymakers engage with the complex, multi-dimensional, and interdependent issues, problems or challenges which are promoted, advocated or backed up by different actors, groups, stakeholders, networks or institutions (Eissler et al. 2014; Grindle 1991). Thus the extent to which policy actors or groups are engaged, how the issues are integrated and articulated and how power is distributed in society, have an important bearing on which issues, problems or solutions are considered by the decision makers. The way actors, interest groups and institutions interact with each other influences the outcomes of the agenda setting process (Birkland 2007; May et al. 2016). In the case of policy reforms, interactions among the actors, groups or networks within the reform leading institutions also determine policy makers’ attention and seriousness towards the issues or potential solutions. Similarly, issue urgency and priority also depends on the extent of interdependencies among the reform leading institutions.
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Some individuals, groups or coalitions have greater ease of access to the policy makers and the policy making process than others. Consequently, they are likely to get their issues or demands placed on the policy agenda (Cobb and Elder 1971, p.908). Access to decision makers has a direct impact on agenda setting. Similarly, decision makers might be more obliged to some individuals or groups than others; in this way, some groups’ demands are more likely to get into the policy agenda than others.
Moreover, access to media and an ability to use media effectively in favour of policy issues or public problems can also have a significant impact in the agenda setting process. Popular media can capture attention of policy makers on salient issues and even exert public pressures to consider some issues or problems during the agenda setting process. Those issues which have wide and sustained media coverage are more likely to be in the reform agenda, whether the driver for reform comes from a matter of public concerns or political issues. However, the media is not necessarily the primary source of information or ideas, as they mostly restate and/or reproduce policy entrepreneurs’ ideas (Van Aelst and Walgrave 2011).
The media can play a significant role in promoting both systemic and institutional policy agendas. Mass media widely disseminates public issues, frames public debates and encourages mass mobilisation on issues it emphasises. It can also project some issues more effectively than others. Similarly, some influential groups use symbols or images to expand or popularise their issues or problems through wider public attention. They can appeal the higher authorities to justify or legitimise their issues or problems. Public perception of issues or problems contributes towards opening a ‘window of opportunity’ for policy change (Birkland 2007). Similarly, changes in policy paradigms and fashionable global ideas can also open the ‘window of opportunity’ in favour of certain policy reforms.
However, persuasive arguments and effective information dissemination alone are not enough for agenda setting. It is power relations that enable or block issues on the policy agenda. Power can highlight and enforce or diffuse policy issues. Blocking power prevents competing issues, problems or potential solutions from reaching decision points. Structural power that makes people powerful or powerless may possess both or any of the coercive and blocking powers (Birkland 2007, pp.65-69).
Contextual factors like ideology of political parties in the government and powerful leaders, changes in government, election timing for national or subnational governments, socio- economic condition, the situation of peace and harmony in societies and the global wave of policy agenda are also critical in designing and determining the policy reforms agenda. Policy actors may confront several complex and nested problems emanating from different contexts. As Grindle and Thomas (1991) argue, contextual factors provide power and policy
27 manoeuvrability to the policy makers. Thus context expands or limits policy alternatives to the decision makers. It also influences the decision makers’ capacity to decide (Grindle and Thomas 1991; Mintzberg 1983). Context helps explain continuity and change of governments’ policy agenda. For example, the speeches delivered by the head of state to the parliament specifically on behalf of the election governments indicate the ‘turning-points’ of the policy agenda (Dowding et al. 2010).
Similarly, regime types, state-society relations and institutional arrangements for policy management have important role in agenda setting process. In a democratic system with pluralistic society, agenda setting is an outcome of competing interactions among different policy actors and stakeholders where rules of the game put such interactions into the logical end. On the other hand, in authoritarian regime and elites-dominated society, elite’s interests and preferences dominate the agenda setting process. In a formal majoritarian democracy with less pluralistic society agenda are set by political and bureaucratic institutions on behalf of the people at large.
The policy agenda may be demand-led (internal) or supply-driven (external) – or both. Policies may originate from popular demand requiring government’s urgent attention where issues may come through different sources like individuals, communities, groups, networks or think-tanks with or without any link with political constituency. Similarly, policies may also originate from external policy systems through donors, international policy actors and other development partners (Howlett et al. 2009; John 2012). And while international institutions and development partners do not have any official positions in the making and implementation of policy reforms, they have an influential role in setting the reform agenda –specifically in aid-recipient developing countries after the 1990s (Koduah et al. 2015). I discuss policy transfer in greater detail in section 2.4.3 of this chapter.
Agenda setting has been approached in a number of ways. The technocratic policy cycle approach views policy making simply as a problem-solving process where governments devise policies to solve the existing problems and, thus agenda setting is virtually a linear process (Colebatch 2005; Howlett et al. 2009). However, problem definition and agenda setting is not that straight forward. This is because problems may be perceived, viewed and interpreted in a number of different ways depending upon cognitive capacity, power relations and personal or organisational values, interests and preferences (Stone 2012).
Unlike the top-down and linear conception of policy making process, critical perspectives take agenda setting as a complex political process where issues and problems are interpreted and filtered to bring on to the policy agenda. Policy actors’ interest and power and people’s space to
28 influence the policy process is vital in agenda setting. In a sense the agenda is not simply set but also built and constructed (Barbehon et al. 2015).
The unidirectional problem-solving model is too simplistic to explain and interpret the complex and difficult-to-predict agenda setting process (Kingdon 2003). Kingdon’s model recognises the existence of a multitude of issues and problems (problem streams), a wide range of options or alternative ways to addressing the issues or problems (policy streams) and quite different political consequences of adopting and implementing the policy alternatives (political streams). His ‘window of opportunity’ explains the role of contextual factors in agenda setting with the help of the streams metaphor for policy change. According to this, opportunity for change is open when one or more of the political, problem, or policy streams are coupled.
Extending Kingdon’s multiple streams approach and combining it with the stage approach as well as the advocacy coalition framework Howlett et al. (2017, p.9) have developed a five- stream framework that explains the entire policy process from agenda setting to policy evaluation through five critical junctures. Literature shows that agenda setting is becoming more complex along with the growing complexity of policy issues and an increase in the number of actors and stakeholders in the policy process.
The concepts and approaches discussed in this section are helpful to answer the research question on where and how the governance reform agenda came from in Nepal after the restoration of multiparty democracy in 1990.
2.4.2 Policy decision-making
Decision making is a dynamic interplay among the policy actors and stakeholders in pursuit of choosing the best alternative from a set of alternatives under consideration. It is all about the decision process and its outcome. It depends on institutional arrangements, actors involved in the decision process, quality of interactions among the policy actors, opportunities and limitations of decision makers and stakeholders and the decision making models. Policy decisions are also influenced by the regime types, historical legacies, state-society relations and the interface with both the domestic and international development partners and relations with other countries and international institutions.
There are a number of theories and models of decision making. I briefly discuss the ones that contribute in developing analytical frameworks for this research. Rational decision making is based on the assumptions that decision makers are rational and capable to choose the best alternative. Rationalists embrace positivist schools of thought and seek to solve societal problems in a ‘scientific’ and ‘rational’ manner (Howlett and Ramesh 1995). Decision makers can precisely define the policy problems and construct clear, specific and measurable goals and
29 objectives. They have access to all information they need, and are capable enough to calculate, compare and analyse the causes and consequences of choosing all the alternatives and finally they chose the best alternative.
On the other hand, built on the limits of rational comprehensive decision making, the more pragmatic incremental decision making accepts the diversity of interests among different policy actors and stakeholders and postulates that policy decision are the product of give and take and mutual consents among a large number of participants that is often sub-optimal rather than the best one. Therefore, most of the policy decisions are incremental and satisfying, involving limited changes in the existing policies (Lindblom 1959).
Participative decision making at its best, allows all the policy actors and stakeholders to participate to the fullest extent before making any policy decisions (Black and Gregersen 1997). However, there are different types of participation such as consultation, coordination, involvement and engagement. All these have different implications in policy decision. Similarly, decision outcomes also depend on the availability and quality of information, capacity of the participants and the quality of deliberations and interactions among the participants.
Skills, values, expertise, experience and strategic position of bureaucratic elites, executive power and decisiveness of political elites as well as political-bureaucratic relations are also important in policy decision-making, specifically in developing countries where policy making is relatively close and less deliberative compared to many developed countries. Societal feedback and pressures are also becoming important in the modern pluralistic society.
2.4.3 Policy transfer andgovernance reforms
The concept of policy convergence, lesson drawing, policy transfer and policy diffusion emerged along with the advancement of comparative policy analysis. While the concept and meaning of convergence was yet to be clearly defined, Bennett (1991, p.125) presented four mechanisms of policy convergence based on the state-centric approach and the levels of state autonomy: emulation, elite networking, harmonisation through international regimes and penetration by external actors.
Initially, lesson drawing and programme transfer were used interchangeably where the driving force was ‘dissatisfaction with the status quo’ (Rose 1991, p.3). However, lesson drawing was clearly differentiated with policy diffusion where diffusion was taken as more coercive ‘technocratic determinism’ and lesson-drawing as voluntary activity (Rose 1991, pp.7-9). Perception of proximity, epistemic community, functional interdependence between
30 governments and intergovernmental institutions were considered as major mechanisms of lesson drawings. Alternative ways of lesson drawings are as follows:
Table 2.4 Alternative ways of drawing a lesson S.N Terminology Definition 1 Copying Adoption of programme as it is 2 Emulation Adoption of programme with adjustment 3 Hybridization Combining two different programmes 4 Synthesis Synthesizing programmes from three or more different places 5 Inspiration Using different programmes as a source of inspiration to develop a new programme Source: Adapted from Rose (1991, p.22).
Building on the concept of ‘policy convergence’ and ‘lesson-drawing’, Dolowitz and Marsh (1996,2000) articulated broader and clearer views on policy transfer and constructed a comprehensive framework answering a range of questions from definitional issues to the constraints and problems of policy transfer. They defined policy transfer as political actions ‘concerned with the process by which knowledge about policies, administrative arrangements, institutions and ideas in one political system (past or present) is used in the development of policies, administrative arrangements, institutions and ideas in another political system/setting’ (Dolowitz and Marsh 2000, p.5). Policy transfer was viewed as an engagement in policy learning that worked well in particular settings along with an analysis whether such programmes will work well in different settings (Ibid., p.8).
On the other hand, policy diffusion is viewed both as a process and outcome where a country’s policy adoption affects another country’s decision (Elkins and Simmons 2005, p.37; Simmons et al. 2006, p.299; Strang 1991, p. 325). Similarly, constructivists emphasise the role of ideas in policy diffusion and argue that influential experts, dominant groups, powerful countries and international institutions define norms that become a matter of policy diffusion for a large number of countries (Dobbin et al. 2007). Nevertheless, there is a general consensus that policy diffusion occurs between the countries or entities that are interconnected and interdependent to each other (Gilardi 2012, p.2).
It is argued that the concept of policy transfer goes back to the lesson drawing, whereas diffusion is linked with the adoption of innovation. Similarly, transfer is seen as an intentional activity acquired through agencies whereas diffusion is more structural than intentional. From a methodological view, policy transfer is dominant in case study based research whereas diffusion is more common in quantitative research (Obinger et al. 2013, p.113). Similarly, policy diffusion is treated as a ‘dichotomous outcome’ of policy convergence whereas policy transfer is often viewed in terms of degree than total convergence (Marsh and Sharman 2009, pp.275-
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278). However, they argue that policy transfer and diffusion have just marginal differences that are mostly based on research traditions than the concept as such(Ibid., p. 280).
Despite the differences policy diffusion and transfer scholars agree to categorise transfer and diffusion processes into four broad causal mechanisms: learning, emulation, competition and coercion (Füglister 2012; Marsh and Sharman 2009; Obinger et al. 2013; Shipan and Volden 2008; Simmons et al. 2006). Learning is all about the quality of information, ideas or insights from the past experiences which can be positive or negative. This helps decision makers reduce risks and uncertainties during the policy process. On the other hand emulation is a tendency to confirm policies, norms or practices of other countries or international communities to belong to the countries, groups or international communities that are influential, powerful and dominant which is also used as an instrument of international legitimacy. It’s a kind of ‘mimicry’ of policies, ideas and practices across the globalised world where countries wants to project themselves as advanced and progressive to the rest of the world (Obinger et al. 2013, p. 114).
Similarly, competition is a strategic move to enhance benefits from interactions with other countries or competitors by adopting and implementing specific policies over other alternatives. On the other hand coercion is the use of power to enforce certain policies or programmes over others. Coercion has negative connotations. However, it can also be used in good faith for positive developments as it has been practiced by the World Bank and International Monitory Fund during financial crisis (Ibid., pp.114-115).
Contemporary public policy cannot be fully explained by socio-economic and political factors at the domestic level as there is a growing tendency to adopt or respond other countries or international institutions’ policies in an increasingly interconnected and interdependent to the globalised world (Ibid., p.112). However, a large number of research on policy transfer and policy diffusion are based on developed countries focusing domestic policy transfer/diffusion. Most of the empirical works ignores developing countries outside the Organization for Economic Cooperation and Development (OECD)(Marsh and Sharman 2009).
For the purpose of this research, I use the concept of international policy transfer, which largely depends on geographical situation and bilateral as well as multilateral relations with the rest of the world. Bilateral and multilateral relations also depend on socio-economic and political condition of a country, ideological standing of political parties in government and influential political leaders, regime types, historical legacies and so many other contextual factors (Obinger et al. 2013, p.115).
Based on the process of policy transfer, it can be voluntary (lesson drawing) or coercive (direct imposition) along with a number of variants between two extremes (see Diagram 2.1 below). Voluntary transfer is inspired by some agents or agencies, whereas coercive transfer is imposed
32 by powerful countries, groups or institutions to less powerful countries or entities. Policy transfer process influences policy outcomes(Dolowitz and Marsh 1998). However, voluntary transfer does not necessarily lead to policy success. Neither the coercive transfer necessarily leads to policy failure. Policy successes or failures depend on so many intervening variables such as quality of transfer process, operational efficiency and leadership quality of transferee (Dolowitz and Marsh 2000).
Figure 2.1 A policy transfer continuum
Source: Author’s construct based on Dolowitz and Marsh (2000, p. 13).
Contextual factors and communicative processes also influence the policy transfer process. Policy transfer is often used as a means to enhance government’s legitimacy. However, in the absence of two way communication it can be distorted and bound to fail (Park et al. 2016). Policy transfer may distort good intentions when policy makers fail to understand its policy thrust. The legacy of top-down control and one way communication process fail to reflect the concerns of stakeholders. Therefore, institutional structure, legacy and path dependence help to explain policy transfer (Benson and Jordan 2011, p. 372; de Jong 2009, p.147; Park et al. 2016, p.7).
Policy transfer in developed countries is mostly based on voluntary lesson-drawing. However, many of the foreign aid recipient developing countries experience coercive policy transfer as aid availability to these countries depends on compliance of conditionalities stipulated in loan or grant agreements (Dolowitz and Marsh 1998, p.45).
Policy transfer research has moved far ahead from the scattered idea of diffusion of innovative ideas, policy conversion and lesson-drawing to become conceptually more clear (Dolowitz and
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Marsh 1996; Dolowitz and Marsh 1998, 2000; Gilardi 2010, 2015; Marsh and Sharman 2009; Stone 1999), methodologically more advanced and balanced (Braun et al. 2007; Dobbin et al. 2007; Peck 2011) and scope-wise broader and topical field of study (Elkins and Simmons 2005; Füglister 2012; Gilardi 2012, 2015; Guisinger and Brune 2014; Meseguer 2005; Schmitt 2011; Simmons et al. 2006; Simmons and Elkins 2004). A wide range of practical issues on policy transfer/diffusion has been addressed since the concept was concretised in the 1990s (Daley and Garand 2005; Fawcett and Marsh 2012; Nicholson-Crotty and Carley 2015; Obinger et al. 2013; Park et al. 2016; Schnell 2014). Policy transfer issues specific to the developing countries have been analysed in depth (Guisinger and Brune 2014; McCarthy‐Jones and Turner 2015) albeit in a very small scale so far. Despite the phenomenal growth of policy transfer/diffusion literature in the new millennium, policy transfer research is ‘still evolving’ and ‘not yet thorough’ (Benson and Jordan 2012) and academic debates are more lively than ever for example, (Benson and Jordan 2011, 2012; Dolowitz and Marsh 2012; Dussauge-Laguna 2012, 2013; Marsh and Evans 2012; McCann and Ward 2012, 2013).
The concept, frameworks and practical insights on policy transfer and policy diffusion derived from an extensive review of literature is useful specifically in analysing the agenda setting process and its implications to the governance reforms in Nepal.
2.5 Implementing policy reforms
2.5.1 Implementation literature: An overview
Implementation has been an important issue from long before the term ‘implementation’ was coined (Hill and Hupe 2009). The rise and fall of the Roman Empire can be interpreted in terms of implementation problems. However, the recorded history of implementation research dates back to 1930s (Saetren 2005b, p. 569). For example, J.C. Charlesworth did his PhD on ‘The Implementation of the Pact of Paris’ in 1933 from the University of Pittsburgh. Similarly, M.H.A. Laatsch wrote his PhD dissertation on ‘The Implementation of Monroe Doctrine’ from the Princeton University in 1942. However, systematic study on policy implementation started only after 1973 when Pressman and Wildavsky published their seminal book entitled ‘Implementation’(Pressman and Wildavsky 1984; Van Meter and Van Horn 1975). Interest on implementation research has not waned ever since 1970s though with different approaches and with varied interests on different sectors and aspects of implementation (Lindquist and Wanna 2015; Saetren 2005a, 2014). Trajectory of implementation research is presented as follows:
Top-down and Bottom-up Approaches
The top-down approach views implementation as a translation of centrally defined policy statements. It is more leader-focused and control oriented. This approach assumes direct causal
34 links between policy objectives and policy outcomes and doesn’t recognise the role of actors and stakeholders in the policy process. On the other hand, the bottom-up approach considers implementation as an act of solving practical problems by ‘street-level’ bureaucrats. It emphasises street-level bureaucrats as the principal actors having discretion even to redefine the policy objectives. The following table presents snapshot view of top-down and bottom-up approaches.
Table 2.5 Top-down and bottom-up approaches to policy implementation Top-down approach Bottom-up approach Implementation Translation of centrally defined Solving locally-defined practical policy statements problems Focus Goals and targets of policy Policy problems Orientation Linear and prescriptive Interactive and flexible Management Hierarchical and centralized Decentralized and participative Legitimate Elected representatives Street-level bureaucrats, other actors actors and stakeholders Major concern Implementation success Problem solving Degree of Tight control from the centre Autonomy to street-level bureaucrats autonomy
Implementation Administrative and sequential Political and non-sequential process Fits with Authoritarian regime and Participatory democracy majoritarian democracy
Determinants of Leadership quality, political Interest and motivation of street-level success commitment, institutional capacity, bureaucrats, incentive structure, resource availability, interagency effective communication, performance coordination, effective monitoring, of delivery units and field staffs, implementation structure, policy quality of interaction among the actors, compliance groups and networks
Major critiques Focusing particular stage of policy Focusing too much on actors’ process, overemphasis on policy incentive structure and motivation, maker’s ability, viewing undermining the role of policy actors implementation merely as an at the centre and overemphasizing administrative process and too complexity and confusion of policy simplistic issues Principal works Van Meter and Van Horn(1975), Bardach(1977), Sabatier and Lipsky(1971, 1980), Elmore(1980), Mazmanian(1979), Nakamura and Hjern and Porter(1981), Hjern(1982), Smallwood(1980), Pressman and Hjern and Hull(1982), Nakamura Wildavsky(1973,1984), Hogwood (1987), Yanow (1993), Matland(1995), andGunn (1984), Mazmanian and deLeon anddeLeon(2002), Sabatier(1989) Barrett(2004) Source: Author’s construct based on literature review. Implementation scholars have synthesised the top-down and bottom-up approaches by rectifying the less practical assumptions advocated by these polar approaches (Elmore 1982; Goggin et al. 1990; Sabatier 1986). They argue that implementation research needs to consider both ‘forward mapping’ of top-down approach and ‘backward mapping’ of bottom-up approach.
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The former emphasises institutional capacity and resource availability, whereas the latter focuses on actors’ incentive structure and motivation to actively engage in the implementation process (Pulzl and Treib 2007, p.95). The hybrid approach also emphasises policy type as an important determinant of policy implementation. This is because policy actor, stakeholder’s interest and motivation vary according to policy type (Lowi 1972).
The top-down and bottom-up dichotomy of policy implementation has lost its currency. Implementation scholars and practioners recognise the importance of both central guidance and local autonomy in the policy process. Similarly, implementation is far more than just a technological fix but primarily a political process. Nor are policy making and implementation two distinct, discrete activities. They are interrelated and interdependent processes.
Three Generations of Implementation Research
Goggin et al. (1990) introduced the concept of three generations of implementation research placing themselves in the third generation. The first generation scholars are close to the top- down approach that emphasise political mandates where implementation is considered just as the translation of policy statements (Barrett 2004; Hill and Hupe 2002; Pressman and Wildavsky 1984). The first generation research focused more on policy failure and thus, had a pessimistic orientation. Researchers in this generation are criticised for being ‘atheoretical, case- specific, noncumulative and overtly pessimistic’(Goggin et al. 1990, p.13). They are also criticised for failing to develop predictable models and not contributing to theory building on implementation research (Schofield 2001).
On the other hand, the second generation literature focused on theory building and prediction of implementation outcomes. It introduced a wide range of implementation variables. Goggin et al. (1990) categorised these variables into three broad categories: policy (form and content), organisation (structure, resource and capability) and people (capability, interest, motives, incentives, networks and behaviour). The second generation approaches are criticised for using too many case studies without having sufficient validity and reliability for replication (Schofield 2001), and for failing to develop testable hypothesis and explanatory theory (Goggin et al. 1990).
The third generation implementation research sought to bridge the gap between the top-down and bottom-up approaches and emphasised more scientific empirical implementation research. While accepting the centrally defined policy reforms, they emphasised negotiation between the street-level bureaucrats and the policy making authorities at the centre to expedite the implementation process (Pulzl and Treib 2007). The third generation researchers claimed to have undertaken a more systematic approach, adopting scientific methodology and a range of research tools like network analysis, content analysis, direct observation, questionnaire survey
36 and regression analysis (Goggin et al. 1990, p.189-194). However, they are also criticised for generalizing the North American cases to other countries having quite different stages of political and economic development and with varied contexts (Pulzl and Treib 2007, p.96).
Implementation Variables
Implementation variables have been an important theme of implementation research, specifically with reference to the policy success or failures (Schofield 2001). The implementation process has been explained in terms of idealised policy, implementation organisation, target group and environmental factors, and several variants under these four major components (Smith 1973, p.15). The implementation model developed by Van Meter and Van Horn (1975, p.463) consists of six implementation variables: standards and objectives, resources, inter-organisational communication and enforcement activities, characteristics of implementing agencies, economic, social, and political conditions and the disposition of implementers.
Nakamura and Smallwood (1980) focus on policy clarity, technical capacity, policy compliance, communication networks, resource adequacy and procedural factors. Similarly, Sabatier and Mazmanian (1980, p.542) present seventeen variables in three main categories: tractability of the problem, ability of statute to structure implementation and non-statutory variables affecting implementation. Grindle (1980) covers a wide range of implementation variables under content and context of public policy. Similarly, Hogwood and Gunn (1984) emphasise nature and type of policy, implementation structure, operational autonomy, resource adequacy and disposition of implementers.
O'Toole (1986, pp. 185-188) presents an extensive list of variables from implementation literature where policy clarity, institutional capacity, actors incentive, motivation and authority and a number of other contextual, environmental, behavioural and technical factors are commonly found. Similarly, Schofield (2001, p.252) explains implementation variables using three broad categories: nature and type of policy, nature and type of organisation and the specific organisational structure. Pitts (2007) emphasises resource adequacy, specificity of reforms, effective communication and organisational support at all levels.
Implementation literature has moved a long way from policy content, organisational structure and other institutional issues to broader political economy factors. Today it focuses more on the politics of implementation rather than just stating political commitment, disposition of implementers, resource availability, implementation process or institutional capacity (World Bank 2008). Researchers include a wide range of top-down, bottom-up or horizontal factors influencing implementation. They include not only the state actors but also a wide range of non- state actors, stakeholders, groups and networks to address the complex and multi-layered
37 problem of policy reforms where contextual dynamism is crucial for the successes or failures of policy reforms (Hill and Hupe 2002, 2009; Howlett et al. 2009; Hupe 2014; John 2012).
Recent Developments
Most of the implementation research before 1990 focused on identification of implementation variablesand institutional capacity rather than covering the whole gamut of implementation process (Schofield and Sausman 2004). Recent literature moves ahead to explain implementation process, leading implementation gap or failures (Hill and Hupe 2002, 2009).
The 1990s was not productive in terms of implementation research. Implementation studies was off the limelight for some time during the heyday of new public management (Barrett 2004). Only a few studies were carried out during that period. For example: (deLeon 1999; Goggin et al. 1990; Hill 1997; Najam 1995; Sabatier 1991; World Bank 1992). However, it revived in the new millennium with a large number of studies on implementation research. For example: (deLeon and deLeon 2002; Hill and Hupe 2002, 2009; Hupe and Sætren 2015; Lindquist and Wanna 2015; O'Toole 2000; O'Toole 2004; Saetren 2005a, 2014; Schofield 2001; Schofield and Sausman 2004).
Public policy as a multi-disciplinary and highly contextual field of study is not a new invention. Scholars like David Easton, Harold Lasswell, David Lerner, Charles Lindblom and Aaron Wildavsky argued long ago that no single theory, model or framework can capture the totality of the complex issues involving power dynamics, social interactions and iterative developments in the policy process (Hill and Hupe 2009, p.9). However, most of the implementation research before 1990 was guided by traditional linear technocratic policy process.
The stage model of policy process and the traditional technocratic policy analysis are often criticised for oversimplifying reality and exerting excessive emphasis on the sequential pattern of a course of actions, system modelling and overlooking the political, behavioural and practical dimension of the policy process (Howlett et al. 2009; Sabatier 2007; Thissen and Walker 2013).
The implementation process in developing countries is more complex and difficult, as policy interactions in these countries are less predictable. Many of the developing countries are characterised as ‘weak states with strong societies’ causing lack of credibility and crisis in governance(Grindle 1980; Migdal 1988). Implementation process has become more dynamic than in the past with a large number of actors and stakeholders havingvaried interests and motives. For this reason, participatory and interactive models are replacing the simplistic hierarchical models(Najam 1995).
Recent literature views implementation as an interaction among the policy actors and stakeholders with varied motives, incentives and power relations. It is an integrated process that
38 includes policy design factors, organisational and inter-organisational implementation behaviour, management issues and behaviour of a large number of actors and stakeholders at different levels(Lindquist and Wanna 2010; Winter 2012, p.258).
Implementation is no more a quick-fix but a continuous learning and capacity enhancement process (Schofield 2001). Although the concept of learning and practical use of implementation research dates long back (Heclo 1974; Majone and Aaron 1984; O'Toole 2000; Sabatier and Jenkins-Smith 1993), it got explicit focus in the new millennium(Dorner et al. 2014; Hill and Hupe 2009; Hupe 2014; Lindquist 2006; May 2012; O'Toole 2004; Pitts 2007; Schofield 2001; Schofield and Sausman 2004; Winter 2012).
There is a growing tendency to view policy reform not only as a political process but also as a social process. Viewed from this perspective, policy making and implementation are interpreted in a number of different ways. Interpretations confer meanings to ambiguous and often conflicting concepts of public issues or problems, policies devised to address such problems and the implementation process (Yanow 2015). Therefore, implementation depends on how policy actors and stakeholders perceive, understand and interpret policy reforms.
Similarly, the policy process can be viewed in terms of ‘governance’ where a wide range of actors and stakeholders participate in the policy process unlike the simplistic hierarchical models of ‘government’ (Hill and Hupe 2014). Informal institutions are also recognised as important determinants of implementation successes or failures. Socio-economic and political context is considered not only during agenda setting but throughout the policy process. Scholars and policy practioners are increasingly interested in behavioural factors rather than confining to the structural and procedural issues of implementation(Fischer 2015).
However, progress on more rigorous and scientific implementation research has been slower and incremental since 1990 compared to 1970s and 1980s (Hupe and Sætren 2015; Saetren 2014). There has been less progress on theory building than methodological advancement. Nevertheless, implementation science has been far more advanced in explaining different facets of policy implementation and connecting theory to the real world practice than ever before (Nilsen 2015).
2.5.2 Linear and interactive models
Despite considerable experience, heaps of research reports and donors’ continuous efforts for improvement, implementation still continues to be a daunting task in many developing countries. Against this backdrop, Thomas and Grindle (1990), while examining the shortcomings and weaknesses of linear model of policy implementation, proposed an interactive model to improve policy reforms.
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The linear implementation model based on policy-implementation dichotomy assumes that once policy is formulated, implementation takes its course with the existing implementation mechanism. Public managers are entrusted to complete ‘the rest’ of the responsibility. The linear model assumes that policy implementation takes place almost spontaneously and most of the time it succeeds. In case implementation fails, it is mainly because of the lack of institutional capacity or due to the lack of political will.
On the other hand, the interactive model postulates that policy implementation is an interactive process where policy changes/reforms create a state of disequilibrium in the society. Policy actors and stakeholders respond and react the situation to arrive at a new equilibrium. Reaction becomes more intense when the effects of reforms are clearer and more visible and thus implementation successes or failures depend on the nature, intensity and quality of interactions among the key policy actors and stakeholders. There is a tension between proponents or supporters of reforms and the individuals, interest groups and coalitions who see reforms as a threat to their interests. Thus reforms may be stalled, distorted or reverted at any point if the resisting forces prevail. Therefore, implementation success depends on how resistance is managed.
Unlike the linear model, the interactive model considers a range of implementation issues such as policy characteristics and arena of conflict. It also includes strategies to sustain reforms (Grindle and Thomas 1991, p.127). However, implementation success does notnecessarily lead to successful policy outcomes, as the interactive process may come up with multiple potential outcomes.
The linear model of policy reform has lost its currency as policy implementation is rarely a spontaneous, technical process. This is because the role of non-state actors, space and influence in the state affairs has increased significantly. The entire policy process has become so complex and interdependent that even the interactive model does not cover a wide range of implementation variables that are crucial for implementation success. Therefore, my research aims to move beyond this model recognising the concept and approach of interactive process to policy reforms.
2.5.3 Institution, idea, interest and incentives
Policy reform is not only a political process but also a social process where various institutions and actors within and outside the government are engaged in defining and redefining policy problems and implementing policy decisions through a series of purposive interactions (Hermans and Thissen 2009, p.807). Institutions not only provide rules of the game (North 1990) but also structure power relations and shape interactions among different policy actors and stakeholders. Institutions also shape actors’ interests and incentives, and provide networks
40 to disseminate ideas which influence the reform process (Hall and Taylor 1996; Ostrom 2011). Therefore institutions, interests and ideas are key drivers of reforms which are reinforced by their networks. Similarly, ideas travel through networks and interests guide actors’ behaviour to initiate policy reforms (Shearer et al. 2016).
Ideas influence the policy process by describing, explaining and interpreting policy problems and devising solutions (Sabatier 2007). However, while emphasising ‘vested interests’ and power of people and groups, the literature on political economy and policy studies posits little attention on the role of ideas in the reform process (Campbell 1998; Rodrik 2014). Contemporary literature on public sector reforms highlights vested interests’ victory over public interests (Patashnik 2003). However, vested interest is not unsurmountable. Vested interest of elites, lobbyists, and rent-seekers can be changed or managed by ideas but there is a little research in this field (Rodrik 2014). Similarly, effective political system coupled with capable reform leaders can diffuse vested interests and make reforms happen in favour of the wider public.
Interest indicates the policy preferences and positions taken by actors in the reform process. Actors’ interest and behaviour is determined by their perceptions, incentives, societal positions, capacities and resource availability (Hall and Taylor 1996). Policy networks can change the power balance by including certain actors and excluding others (Marsh and Smith 2000). Similarly, networks also play a critical role in developing, disseminating and implementing ideas in the policy process(Owen-Smith and Powell 2008).
Policy networks change across the policy reforms, which is mediated by one or more of the institutions, interests and ideas. On the other hand, policy networks influence the reform process. The latter is more evident in developing countries with high aid dependency where aid donors can influence the reform process through effective dissemination of new ideas and bringing in changes to the donor rules leading reconfiguration of existing policy networks which ultimately can contribute policy reforms (Shearer et al. 2016, pp.1-2).
Actors’ interests and behaviour can determine outcomes in reforms processes. However, their interest and behaviour are shaped by institutional factors like power and resource distribution among the policy actors and historical legacies (Hall and Taylor 1996; Shearer et al. 2016). Actors’ ability to influence the reform process depends on their position and power in policy networks, along with their individual capacity, incentives and skills. Therefore, interests, ideas, institutions and their networks are crucial in policy reforms (Shearer et al. 2016; Weible et al. 2012).
Incentives, commonly understood as a desire to obtain rewards and avoid sanctions, provoke actors’ behaviour. However, incentives in the public sector is not that simple and
41 straightforward as public sector involves a large number of principals, multiple agents and varied tasks and also lacks competitive environment (Dixit 2002, 2015). Similarly, impact of incentives differs to groups. For example, competitive pressures can be a good incentive for the private sector. Similarly, market pressures of salary comparison can be an indirect monetary incentive to the public professionals where the private sector has relatively better salary packages. In the same vein, different kinds of incentives can be more effective to public employees at different levels of their career ladder (Boyne and Hood 2010 , p.i178).
Interest groups are generally perceived as entities full of self-interests or vested interests. However, they also channel people’s aspirations and voice to the decision makers (Dür and De Bièvre 2007). Therefore, interest groups do not necessarily obstruct policy reforms. They can support citizen-centric policies and oppose the policies that harm citizenry (Weible et al. 2012). However, excessive activism may undermine legitimacy of democratically elected authority. Their efficacy depends on power distributions among the major interest groups, their networks and access to the decision making authority. Their representation and access to the decision makers and gatekeepers such as political leaders, senior civil servants and the opinion makers who facilitate or constrain their ‘voice’ or ‘exit’ during the reform process (Brinkerhoff and Brinkerhoff 2015). Similarly, interest groups’ influence also varies to the institutions they are affiliated with, their type, resources they possess and the strength of their issues (Dür and De Bièvre 2007).
Understanding the role and functioning of interest groups in politics helps understand not only policy outcomes but also ‘management of policy networks’. However, this is an understudied area of research within political science (Beyers et al. 2008, p.1103). Literature on interest group politics focuses on the group formation process rather than examining interrelations and interactions between the key policy actors such as the government, political parties, trade unions and other interest groups (Beyers et al. 2008, p.1105).
The role of institutions in shaping, enhancing or changing individual motives and incentives is yet to be fully recognized and, this area is understudied field of research (Hopkins 2015). Institutional incentives matter as it encourages individual actors or agencies for new innovations or reforms in the existing policies, process or institutions. Similarly, information access is critical to enhance political participation, which depends upon the availability of information, level of awareness and ability to seek and use it. All these distributional aspects of information are shaped by political and social institutions (Sanfilippo 2016). Therefore, policy reforms should dwell on the interplay among the individual, group or institutional actors at all levels during the policy process in addition to the interests, motives and incentives of individual actors.
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The mainstream literature on political institutions and their role in the policy process focuses on formal institutions (Beyers et al. 2008; Helmke and Levitsky 2004, 2006). However, in many cases informal rules and interactions within and across the informal institutions shape policy actors’ behaviour. For example, informal institutions and norms like clientelism and patrimonialism are more dominant than the formal rules and institutions in many developing countries. Informal rules and interactions are particularly useful in rapport building and reducing differences in policy preferences among the key policy actors even in developed countries. Therefore, failing to consider the ‘informal rules of the game’ means having a ‘risk of missing many of the most important incentives and constraints that underlie political behaviour’ (Helmke and Levitsky 2004, p.725).
Outcomes of interactions between formal and informal institutions depend on the type of informal institutions, in addition to the way these institutions interact with each other. Based on the degree of convergence between formal and informal institutions, along with the dimensions of success of formal institutions, informal institutions can be divided into four broad categories as shown in the table below:
Table 2.6 A typology of informal institutions Outcomes/Effectiveness Effective Formal Institutions Ineffective Formal Institutions
Convergent Complementary Substitutive Divergent Accommodating Competing
Source: Helmke and Levitsky (2006, p. 14). As shown in the table, complementary and accommodating informal institutions make formal institutions functionally more effective, whereas substitutive and competing institutions are dysfunctional institutions. However, in reality institutional effectiveness doesn’t rest just upon the type of informal institutions but also the type of formal institutions. Arguably, participative, democratic and deliberative formal institutions are more functional than the non-participative, authoritative and fixative ones.
To sum up, the policy reform process consists of a series of interactions and interplays among the institutions, ideas, interests and incentives. Conceptual understandings of institution, idea, interest and incentives – along with the contextual dynamism – is helpful in explaining and interpreting governance reforms in a developing country like Nepal.
2.6 Evaluating reforms: What works and what does not
2.6.1 Understanding evaluation of policy reforms
Evaluation is carried out to provide feedback or, for making overall assessment of specific policies, plans, programmes or activities. It is categorised in a number of ways. Internal
43 evaluation is carried out in-house, whereas external evaluation is carried out by the agencies or evaluators outside the organisation. Evaluation can be ex-ante that helps decision makers in making informed decisions, or ongoing for right-tracking policy implementation. Similarly, ex- post evaluation focuses more on performance assessment. It also offers causal analysis of success or failures of policy reforms. On the other hand, meta-evaluation is carried out to review or synthesise pervious evaluation reports (Wollmann 2007).
From research point of view evaluation can be academic or applied. Evaluation carried out by academic institutions or independent scholars focuses more on evaluation methods than outcomes. Researchers are not committed to any person or institutions and thus, are free to derive findings, draw conclusions or furnish recommendations. The independent scholars are concerned with making their research more credible. On the other hand researchers under contractual obligations need to consider expectations of the concerned institution or the funding agency.
Policy evaluation is carried out at four different levels (Fischer 1995). At the first level, achievements are compared with the stated policy objectives using empirical evidence and technical analytic discourse. The second level evaluation assesses relevance of policy goals and objectives with the help of contextual discourse. Similarly, the third level evaluation examines whether the reform goals and objectives are compatible with the existing social reality with the help of system discourse. At the fourth level, goals and objectives are examined in terms of societal values and preferences with the help of ideological discourse which is more interpretive than the previous levels.
Evaluation practice has come through several stages. It focused on controlled experiment and clearly defined objectives during 1960s and early 1970s (Wollmann 2007, pp.396-397). However, the objective-based evaluation has serious limitations as the objectives may be faulty, unrealistic or even corrupt (Stufflebeam and Coryn 2014, p.7). Similarly, focusing too much on specific goal may distort the essence of evaluation when the committed evaluators are interested in selective use of data and interpretation just to create positive impression towards the policies or programmes (Henry 2000). Following the economic crisis of the 1970s, evaluation tilted towards cost-reduction and efficiency enhancement. Since the 1990s, the focus has been shifted from cost reduction to cost effectiveness. Efficiency is important but not at the cost of effectiveness.
Evaluation theory can be broadly divided into accountability-based and social inquiry-based theories (Alkin and Christie 2004, p.13). Scholars have modified the trunk and branches of the theory tree, but the fundamental base is essentially the same (Christie and Alkin 2008). Locating researchers in a specific branch of use, methods or valuing is contestable, as it largely depends
44 on individual perceptions. Similarly, the researchers may fall into more than one category. However, the tree metaphor provides an overview of evaluation research for the previous fifty- plus years, providing us with valuable insights for further research.
Evaluation does not have any worth no matter how elegant method does it adopt unless it is used for some specific purpose. In this connection, evaluation can be categorised into three broad categories: summative, formative and developmental (Patton 2008). Stufflebeam and Coryn (2014) have presented slightly different utilisation-focused evaluations as: improvement- oriented, judgemental, information-oriented and enlightenment-oriented.
Evaluation research continues to focus on improvement-oriented policy evaluation as a process of continuous learning and improvements in the making and implementation public policies along with the tools and techniques required to this end (Fischer 2015; McConnell 2010b; Weimer and Vining 2005).
My research adopts improvement-oriented or formative evaluation to identify and examine contributing or inhibiting factors of governance reforms in Nepal in the post-liberalisation era (1990-2015). As the purpose of this research is not to hold anyone accountable for the successes or failures of governance reforms, judgement-oriented evaluation have very limited use. Similarly, this research does not aim to build a new theory or test any existing theories and thus it doesn’t carry out enlightenment oriented evaluation. It considers the role of contextual factors and circumstances in the reform process. It also examines reform strategies: what worked and what did not. To this end the concept of developmental evaluation is used to some extent, but primarily it is improvement-oriented.
2.6.2 Success or failure of reforms?
Implementation success can be defined in terms of ‘the extent to which a reform is implemented or the extent to which it produces positive results’ (Pollitt and Dan 2011, p.45). However, the concept of success and failure is context-dependent. Contextual factors can affect both implementation process and implementation outcomes. Similarly, chances or situational factors may come up with some unexpected or unforeseen reform outcomes. For this reason, successful implementation does not necessarily ensure reforms success. Similarly, successes or failures also depend on evaluation criteria.
Drawing ideas from conceptual models of public service reform (Boyne 2003) and building on the concept of programmatic and political dimensions of success or failure in public governance (Bovens et al. 2001), Marsh and McConnell (2010) have developed a systemic and comprehensive heuristic framework to measure policy success.
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Table 2.7 Dimensions of policy success Dimensions Indicators
Legality and legitimacy of the policy process Process Extent of support while endorsing the policy Breath of political support and consensus Novelty and originality of idea or policy instruments
Achievement of targets or objectives Programmatic Accomplishment of outcomes Operational efficiency Cost sharing and benefit distribution
Government’s popularity and durability Political Public trust and support to the government
Source: Marsh and McConnell (2010, p. 571).
The policy success framework includes a wide range of indicators in all process, programmatic and political dimensions of policy success. It also includes evidences to verify the results. Recognising the complexity of issues and ambiguities pertaining to success or failure and other measurement issues, the framework states ‘things to consider’ while assessing the policy success such as form of policy success, timeframe, perspectives, benchmarking, availability of quality information, external factors contributing success and focus of overall assessment (Marsh and McConnell 2010, p.580). However, the framework is criticised for lacking a clear distinction between ‘process’ and ‘outcome’ assessments and for giving equal weight to all dimensions (Bovens 2010). Moreover, it does notconsider policy process prior to policy adoption and the politics of policy implementation as it assesses only the implemented policy (Bovens 2010, p.584).
Policy successes or failures are not confined to the level of performance. These are also linked with the reputation of the government or political party in power. Programmatic success is evaluated on the basis of facts and figures of what has been achieved against what was originally expected, including the cost and benefit analysis. Whereas political dimensions of policy evaluation largely depends on how people perceive implementation on the basis of value they confer to the achievements, and their impression of political authority (Bovens and ‘t Hart 1996, 2016).
Policy success can be viewed from dynamic perspectives without confining it to the predefined indicators and provide additional interpretations (Lindquist and Wanna 2015). If the stakeholders are providing regular feedback and are engaged in the implementation process that has to be viewed positively, even if they are yet to achieve the set targets. Similarly, if the actors are able to come up with a shared view and common understanding on policy reforms or, if the
46 opposing agencies, agents or actors are convinced to support the implementation process, it is a positive step towards policy success (Ibid., pp.232-233).
Policy failures can be interpreted as an opportunity to learn for future improvements. Similarly, it can also be used to challenge the existing situation and justify reform proposals (Zittoun 2015). The knowledge base derived from the policy assessments can help policy makers design reform policies that would prevent reoccurrence of failures. Thus failure should not be taken as a deterrence for future experimentation of reforms (Bovens and ‘t Hart 2016). This approach is close to the continuous process of reforms, improvement oriented evaluation and discursive policy analysis that goes beyond just collection of facts and figures, verification of results and causal analysis (Bovens and ‘t Hart 1996; Fischer 1995, 2015).
Policy successes or failures are contestable issues that largely depend on who is evaluating policy reforms and what are the interests and motives behind it (Hupe et al. 2014; Stone 2002; Zittoun 2015). The proponents claim policy reforms a grand success, whereas the opponents criticise it as a sheer failure. In reality, policy outcomes seldom resemble these extremes (McConnell 2010a). The pragmatic approach, regards of policy success, is ‘if it achieves the goals that proponents set out to achieve and attracts no criticism of any significance and/or support is virtually universal’ (McConnell 2010a, p.351). Successes or failures are relative concepts. There are three intermediate categories between policy success and failure in all process, programme and political domains (McConnell 2010a, p.352-256). The resilient success, conflicted success and precarious success indicate the degree of success between complete success and outright failure. Similarly, policy failure can be categorized as tolerable failure, conflicted failure and outright failure (McConnell 2015) to indicate the severity of failure.
Policy success or failure depends on evaluation perspectives. It could be a success from one perspective and failure from others. It does not solely rely on facts and figures; it also depends on perspectives that we adopt, the values we attach to it and the way we interpret it. Similarly, policy reforms may have been successful in one domain and fail in others. It may be successful as a process and programme but may be unpopular and fail on political domain. Methodical differences also make a difference on what constitute policy success or failure. For instance, in positivistic scientific tradition policy outcomes are measured in terms of predefined policy goals and objectives using mostly quantitative tools and techniques (Davidson 2005; Gupta 2010; Nutley et al. 2009). On the other hand, interpretivist, constructivist and discursive methods and frameworks emphasise the role of perception in ‘constructing’ success or failure (Fischer 2003; Stone 2012; Taylor and Balloch 2005).
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There has been a proliferation of success/failure literature in the new millennium both in the area of public policy reforms (Bovens 2010; Bovens and ‘t Hart 2016; Howlett 2012; Howlett et al. 2015; Kay and Boxall 2015; Marsh and McConnell 2010; May 2015; McConnell 2010a, 2011, 2015; Zahariadis and Exadaktylos 2015; Zittoun 2015) and public sector governance reforms (Aberbach and Christensen 2013; Allen 2015; Bonini Baraldi 2014; Bovens et al. 2001; Boyne 2003; Dollar and Svensson 2000; Howlett and Ramesh 2014; Ika et al. 2011; Leonard 2010; Peters 2015; Pritchett et al. 2013; Pritchett et al. 2010; Robinson 2007b; Stame 2010; Turner and Kavanamur 2009; van der Steen et al. 2015). There is a growing trend of recognising both the criteria based assessments and thick interpretation of results while assessing successes or failures of policy/governance reforms. This research adopts the same approach while examining adoption of governance reforms in Nepal.
2.7. Introducing the three case studies in this thesis: Relevant literatures and conceptual clarification
2.7.1 Clarifying the concept of public sector ‘rightsizing’
The size and scope of government globally began to grow after the Great Depression of the 1930s; a trend which became manifestly evident from the 1960s to the 1980s (Bernauer and Koubi 2013; Mueller and Murrell 1986). Theories of government growth as offered by the political science literature can be classified into two broad categories: citizen-over-state theories and state-over-citizen theories(Bernauer and Koubi 2013).
Citizen-over-state theories postulate that a government’s size expands along with the demands and expectations of its citizen. Thus, the expansion of a government’s scope and size is associated with the increase in people’s welfare. However, such expansion does not necessarily provide equal benefits to all citizens; instead it may provide benefits to particular groups of people without harming others. On the other hand, state-over-citizen theories posit that the scope and size of a government increases much more than the demands of its citizens and even perhaps contrary to their interests. Government agencies deviate from citizens’ interests and preferences to cater to the interests of powerful elites including the bureaucracy. They move beyond the boundary of the public interest, simply because they have the power and monopoly to do so. Therefore, the expansion of governmental organisations has less to do with people’s welfare than the by-product of bureaucratic inefficiency, vested interest and or the influence of special interest groups.
I argue that citizen-over-state and state-over-citizen theories alone do not fully capture the politics of government expansion and growth in aid-dependant countries like Nepal. Many developing countries in Asia and sub-Saharan Africa are highly dependent on foreign aid to
48 finance their development activities. Governments in these countries seek to demonstrate their external legitimacy through the amount of foreign aid commitments received, quickly adopting donor-driven policies. The donors are more concerned with quick results and thus they recommend more flexible and autonomous organisations without necessarily worrying about the size of government. This arguably contributes to the massive expansion of national bureaucracies in the long run.
In practice, developing countries adopt new expansionary policies when they agree to do so during negotiations with donors. However, developing countries rarely go beyond what the influential donors propose during the inception meetings as they have limited policy space to manoeuvre. Similarly, they also lack the negotiation capacity to pursue their national interests. Policy elites with an extensive first-hand experience in foreign aid negotiations in Nepal substantiated this argument.2
Public choice models provide powerful explanations for the growth of public bureaucracy. These models suggest that the civil service is less efficient and more expensive than the market by virtue of its in-built structural weaknesses. The bureaucrats exert budget maximising behaviour to fulfil their self-interests (Holcombe 2005; Niskanen 1968, 2003). Political leaders familiar with the state machinery demonstrate similar tendencies and conspire with bureaucrats to maximise budgets for their ministries or constituencies. Accordingly, the government grows more than a country needs. However, Dowding (1995, p.50) argues that the civil service and markets are too dissimilar to compare along operational efficiency as the former faces a number of constraints. Unlike the private sector, the nature of employment in the civil service is usually unwieldy and civil servants have few incentives to enhance operational efficiency. Similarly, Niskanen’s model does not recognise a wide variation among civil servants with varied tasks and, working at different layers of hierarchy (Dunleavy 1991). This model narrowly focuses on budget maximisation, overlooks a number of other important tasks in civil service and does not pay due consideration to the internal dynamics and group politics within public bureaucracy (Dowding 1995, pp.55-61).
Path dependency models, on the other hand, posit that once the size of government grows for some historical reasons like crisis, war, and revolution, it does not return to the previous level (Holcombe 2005). Scholars in this school argue that a government size not only depends on the current condition and situation of a country, but also on the legacy and historical context. That is the reason why governments grew faster than economic growth in the twentieth century.
2 Interviews were taken during my fieldwork in 2014. 49
Controversies over big government as a populist reform agenda spread massively from the 1980s. Decades earlier, Niskanen (1968) predicted that inefficient bloated public bureaucracies would gradually ‘disappear’ and, only a component would remain to review, monitor and regulate the contracting-out agencies. The World Bank began to emphasise on efficiency through institutional development and management reforms in 1983. The Bank emphasised private sector involvement in public management (World Bank 1983).
The structure, size and working procedures of civil services underwent tremendous changes following a ‘global paradigm’ of reforming public management (Hood 1995; Hughes 1998; Massey 1997). A wave of lean and efficient ‘entrepreneurial’ forms of governments were popularised with more reliance on the private sector in response to global competition through ‘reengineering’, ‘reinventing’ and ‘reorganizing’ their business (Osborne and Gaebler 1992; Ouchi 1981). The difficult economic and financial conditions in Western developed countries after the oil crisis of the 1970s was one of the major drivers of these changes(Anderson 2011). Similarly, public pressure for more responsive government, massive development of information and communication technology and the increasing trend of political authorities to exert decisive control over the central government were some other important driving forces (Butcher 2003; Pollitt and Bouckaert 2000).
There is no unanimity even in the developed countries with regard to the optimal size of the government and its impact on overall development of a country (Bergh and Henrekson 2011, 2016; Colombier 2014). Nevertheless, a number of scholars have worked on the optimal size of government in terms of government spending and gross domestic product (Armey 1995; De Witte and Moesen 2010; Pevcin 2004; Sheehey 1993; ul Husnain 2011).
The arguments for civil service downsizing were popularised by Armey (1995) through a curve popularly known as Armey Curve, based on parametric regressions to estimate the optimum size of the government. However, it is challenged on the grounds that it was based on the estimation of particular time series which may not be applicable to other time periods, particularly a period of robust economic growth (De Witte and Moesen 2010). Similarly, this curve does not consider the role of exogenous factors in economic growth. Neither ‘government spending’ nor ‘economic growth’ are so simple as to be presented in an inverse U-shape curve or bell shape normal curve nor in a fix ratio that could be generalized to countries around the world. Since government size is not a static concept, arguably, it is never at optimum. Simple arguments based on complex equations cannot truly represent the dynamic nature of government size.
The studies on the optimal size of government are mostly focused on rich, developed countries. Similarly, different types of revenue and expenditure have different implications for economic
50 growth. The impact of government size on economic growth also depends on the stage of economic development and various socio-economic factors of a country. The government size may also have different impacts on economic growth in the same country at different points of time. Most importantly, these highly aggregative and static economic analyses are less relevant to the dynamic rightsizing reforms in developing countries like Nepal. I argue that government size is not solely determined by economic factors. Rather, it is influenced by a large number of economic, social and political factors.
The term ‘rightsizing’ has been used differently in different contexts. It has been defined by different online dictionaries in a number of different ways. The Business Dictionary defines it as a “process of a corporation reorganizing or restructuring their business by cost-cutting, reduction of workforce, or reorganizing upper-level management”.3 Another online dictionary defines it as “to adjust to an appropriate size”.4 Oxford Dictionaries define it both as an “appropriate or optimum size” and “reduced size”.5 Oxford Learner Dictionary defines rightsizing as “to change the size of a company in order to reduce costs especially by reducing the number of employees”.6 Merriam-Webster defines the term simply as a reduction of a workforce to an optimal size.7 In the literature we often find the term “rightsizing” and “downsizing” being used interchangeably. However, some authors seek to clearly demarcate differences between these terms. For them, downsizing is a reactive process whereas rightsizing is a proactive strategy.8
Eggers (1993) has defined rightsizing as a “mission-driven process of continuous improvement” clearly demarking the line of “short-term fix” of fiscal crisis through downsizing. He compares downsizing with cutback management which focuses on balancing the budget for a short-term. However, rightsizing focuses on a fundamental transformation of government through longer term planning. A ‘new breed’ of public-sector managers question the very existence of an organisation, appropriateness of its existing functions, alternative ways of accomplishing these functions, and ultimately abandon the unnecessary or inappropriate functions in order to rightsize the organisation (Eggers 1993). Rightsizing strategies in the US mostly focused on local governments, meaning they may not be relevant to a centralized civil service of unitary
3http://www.businessdictionary.com/definition/rightsizing.html#ixzz3gEmEvKwM (access: July 18, 2015) 4http://dictionary.reference.com/browse/rightsizing (access: 18 July 2015)
5http://www.oxforddictionaries.com/definition/english/rightsize (access: 18 July 2015)
6http://www.oxforddictionaries.com/definition/learner/rightsize (access: 18 July 2015)
7http://www.merriam-webster.com/dictionary/rightsize (access: 18 July 2015)
8 See more on: http://ambler.com/article-library/rightsizing-vs-downsizing-big-difference/ (access: 18 July 2015)
51 form of government.9 However, I prefer to use Eggers’ concept of rightsizing which may involve downsizing but is not confined to it. I use this concept for at least three reasons. Firstly, Nepal introduced rightsizing policy with a long-term vision to improve its civil service, at least in policy documents, and thus not just to address a short-term fiscal crisis. Secondly, the rightsizing policy came to the fore to respond to the political change and to adopt liberal economic policies. It was not adopted as a quick-fix for existing problems. Similarly, the rightsizing policy was based on multi-prong strategies like functional analysis, organisational restructuring, decentralisation and procedural simplification, and was not confined to downsizing strategies essentially in line with the concept of rightsizing as defined by Eggers.
2.7.2 Clarifying the concept of privatisation
Guided by socio-economic and political objectives and improved service delivery motives, state-owned enterprises (SoE) were expected to contribute for economic infrastructure development, social justice, revenue mobilisation and overall development and growth of a country along with the correction of market failures (Chang 2007; Kresl 2016). There was a phenomenal growth of state-owned enterprises after the Second World War along with the wave of decolonisation and the growing popularity of state planning (Sicherl 1983). The massive growth of SoEs in developing countries during the 1960s, 70s and early 80s is mainly attributed to the pragmatic factors where the developing countries neither had sufficient capital nor the technical or managerial skills to establish a sufficient economic base for overall development. Ideological factors and the colonial legacy also contributed to the growth of SoEs (Cowan 1990, pp.1,2).
However, the state-owned enterprises did not maintain their credibility for long because of their in-built structural weaknesses and poor performance records, along with the increasing popularity of individual freedoms and notions of a minimalist state (Cook and Kirkpatrick 1988). A series of public enterprise reforms since the 1960s did not succeed in improving the performance of SoEs (Ghimire 2004). For this reason, privatisation was conceived in the 1980s as the only way to improve the performance of SoEs. Since then, foreign aid donors and international financial institutions such as the World Bank and the IMF have actively promoted privatisation in developing countries, including the ones in political transition (World Bank 1995; Yarrow 1999).
Scholars have defined privatisation in a number of different ways depending on their purpose and perspectives. Cowan (1990, p.6) defined it in terms of the transfer of functions, activities, or
9 Although Nepal was declared a Federal Democratic Republic on 28 May 2008, in practice she still has a unitary form of government.
52 organisation of public entities to the private sector. Nelson (1996, p.10) viewed privatisation as the divestment of the SoEs. Shirley (1999, p.115) defined, it as ‘the sale of state-owned assets’. Stiglitz (1993, p.181) observed privatisation as the conversion of SoEs into private enterprises along with the transfer of government control to the private sector. Narrowly defined, it is the sale of shares or assets of SoEs to private investors (Herman and Verhoest 2012). However, viewed from the broader perspective, privatisation is not limited to the transfer of ownership of shares or assets to the private sector. It also involves transfer of management, changes in the financing patterns and partnership with different non-state actors (Starr 1988; Whitfield 2006). Therefore, privatisation is a multi-dimensional activity involving different modes of change, such as ownership of SoEs, the financing pattern and the production and provision of public goods and services (Mercille and Murphy 2017, p.1045).
Understanding privatisation as a complex and dynamic political process entails interpretations of the privatisation process from multiple perspectives. Contingency theory views privatisation from a pragmatic perspective. System theory, on the other hand, views privatisation as an integrated process that involves political, social, and economic systems. Similarly, institutional theory focuses on institutional arrangements and the legal frameworks (Carter 2013, pp.113- 116).
Privatisation can be viewed from different perspectives. Neo-liberals argue that state intervention on public sector management limits individual freedom, accountability and initiatives. Thus, privatisation is preferred to promote ‘popular capitalism’. Economists argue that privatisation promotes competition and enterprising culture, which also helps control unnecessary intervention of trade unions in the operation and management of SoEs. Those adopting managerial perspectives emphasise structural reforms along with a close examination of goals and objectives of SoEs. From the financial perspective, privatisation promotes capital markets and increases investment. Viewed from a pragmatic perspective, privatisation can correct state failures, protect property rights, foster principal-agent relations along with the incentive structures and efficiency improvements (Wright and Perrotti 2000).
According to the institutional perspective, privatisation encompasses interactions among different actors, interests and institutions. It can be explained with the help of path dependence, where the privatisation process is constrained by the inbuilt structural weaknesses of reform leading institutions and the status quoist tendency of the key policy actors (Stark 2000). The rational actor models which are popular in explaining and interpreting privatisation suggest that privatisation decisions are made after a thorough cost-benefit analysis and assessment of alternatives (Bacci 1999; Collyer 2003; Domberger and Piggott 1986) These models seek to address a wide range of issues pertaining to the financial, managerial, political and administrative problems of privatisation (Moore 1986). Sociologists, by contrast, see policy
53 problems as social constructions and argue that policy agendas are often selected by the powerful policy elites on the basis of their interests, stakes and incentives in such agendas (Edelman 1987).
Political perspectives, on the other hand, focus on political discourse structured by ideational factors and interactions among the actors and stakeholders, both internal and external. Thisis largely shaped by the political interests, governance systems, power dynamics, state-society relations and regime values (Chamberlain and Jackson 1987; Collyer 2003; Feigenbaum and Henig 1994; Gormley 1994). Often ideology and ideation are used interchangeably. However, these are not the same; ideation involves ideas, values and beliefs whereas ideology goes much further to include economic base, social practices and institutional arrangements of a society (Collyer 2003).
Highlighting the political dimension of privatisation, Pierre (1997) argues that privatisation helps implement a government’s rightsizing policies by redefining the role and scope of the public sector. He also argues that privatisation can help reduce corruption and enhance a government’s popularity. It also helps reshape state-society-market relations by reconfiguring power relations. Guided by the broader political economy framework developed in Chapter 2, my thesis applies the concepts and the theoretical constructs discussed above to explain and interpret the politics of privatisation and public enterprise reforms in Nepal in the post- liberalisation era.
Understanding privatisation also requires conceptual clarity on the process of privatisation, liberalisation and marketisation. Liberalisation is the abolition of monopolies to enter into the market for the production and provision of goods and service. Marketisation, on the other hand, is the reorganisation of production to provide for the provision of public goods and services from both within and outside the government bodies (Herman and Verhoest 2012). Unlike liberalisation, it usually focuses on contract provision from several providers. Marketisation is different to privatisation because it does not necessarily involve total transfer to the private sector. However, all these concepts are mutually reinforcing (Birch and Siemiatycki 2016).
Similar to this definition, privatisation objectives are also presented in different ways. The main objective of privatisation is to enhance competition and efficiency of public enterprises. It usually allows wider participation in the ownership and management of SoEs among the wider public. It provides avenues for technical innovation, a reduction in political intervention, the weakening of trade union influences in the operation and management of SoEs. These are designed to ensure financial discipline in such enterprises (Wiltshire 1987). Scholars claim that privatisation enhances efficiency and reduces overall public sector borrowings. It also helps gain political benefits by providing better employment opportunities to the people (Vickers and
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Yarrow 1988). Privatisation is also expected to reduce operational expenses, enhance government revenue and promote capital market and domestic investment (Lieberman 1993). Developing countries have slightly different objectives with privatisation where both a reduction in the government’s financial and administrative burden is emphasised in addition to the operational and allocative efficiency of the government (Ramanadham 1989). Scholars mostly focus on managerial and fiscal objectives. However, as Bennett (1997) argues, privatisation everywhere has broader implications encompassing political, economic, managerial and fiscal objectives.
Drivers of privatisation have been explained in a number of different ways. Cowan (1990) argues that financial pressures, ideological change and intense donor pressures were the main drivers to popularise privatisation in developing countries. Manzetti (1999) explains privatisation in terms of willingness to privatise, which depends on ideological, pragmatic and populist factors, as well as commercial pressures and opportunities to privatise that largely depend on the country context and other contextual factors of SoEs. Viewing privatisation from a political perspective, (Chomsky 1999) argues that the dominant powers pushed privatisation while promoting their neo-liberal agenda in the developing countries. In some countries such as Chile, United Kingdom, France, Portugal and Norway, privatisation was ideologically or politically driven. However, most developing countries and many of the European countries, adopted privatisation policy because of the pragmatic pressures driven by annual budgets and under pressure from external development partners (Wright and Perrotti 2000). Savas (2000) presents a wide range of issues under five main drivers of privatisation: pragmatic (for better government), economic (less dependence on government), ideological (less government), commercial (more business) and populist (better society).
Citing examples from South Korea, the USA and France, where inefficiency of SoEs was not the major driving factor for privatisation, Stiglitz (2008, pp.ix-xi)emphasised pressure from foreign aid donors, including the international financial institutions (IFIs) such as the World Bank and the IMF, as the prominent factor for the adoption of privatisation policies, not only in developing countries but also in many developed ones. Roland (2008)explains political regimes as the key drivers of privatisation. Right-leaning political regimes adopted privatisation policies with a view to reducing the role and size of the state, whereas the governments of the left were motivated to privatise SoEs to generate additional revenue in order to implement their populist political agendas.
Many South Asian countries adopted privatisation, along with the adoption of economic liberalisation, in the aftermath of the balance of payments crisis in the late 1980s and early 1990s with the hope of addressing weaknesses and bottlenecks of SoEs (Gupta 2008; Sundaram 2008). Based on a study of 77 developing countries for the period between 1988 to 1999 and 41
55 countries between 2000 and 2008, Breen and Doyle (2012, pp.16,17) argues that privatisation policies was designed by the major foreign aid donors including the IFIs. Another study of 20 OECD countries found the ideological standing of the political parties in government and their relative power to influence the policy process as the main drivers of the adoption and implementation of privatisation (Obinger et al. 2014, p.21).
The literature on privatisation tends to use forms, techniques, types and methods of privatisation interchangeably. Kay and Thompson (1986) defined the relationship between the government and the private sector through three methods of privatisation: denationalisation, deregulation and contracting out. Cowan (1990) categorised privatisation as complete divestiture, partial divesture, management transfer and leasing-out. Interestingly, Pirie (1988) presented opposition management as one of the five basic techniques of privatisation. Other techniques included ownership transfer, partial divestiture, management contract and changes in investment.
The United Nations Economic and Social Commission for Asia and the Pacific (1999, p.22) regarded de-bundling of the existing public enterprises and new private investment as privatisation, in addition to the share distribution, sale of public enterprises, management/employee buyout and leasing out of management contracts. Despite a number of privatisation methods such as the transfer of ownership and denationalisation of public enterprises, Sundaram (2008) argued that partial divestiture was the most common method in practice. When the political situation was not conducive political leaders often chose leasing, liquidation and management contracting (Roland 2008). The following comprehensive methodological framework by Mercille and Murphy (2017) defined privatisation in terms of modes and process of privatisation.
Figure 2.2 Methodological framework of privatisation
Source: Mercille and Murphy (2017, p. 1046).
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The privatisation wave from the 1970s to the 1990s was regarded as one of the major economic and financial events of the twentieth century, both in the developed and developing world. However, the wave gradually slowed at the turn of the 21st century. As the Privatization Barometers Report 2013/1410demonstrated, with renewed momentum from 2009, the global privatisation total exceeded US $1.1 trillion, far more than any comparable period since privatisation was started.
The most recent privatisation barometer report 2015/201611showed that governments around the world raised US $319.9 billion through privatisation sales during 2015, which was substantially higher than the previous year. Of the total number of enterprises privatised during 2015, the share distribution accounted for around 95 percent. Recently, China surpassed the record of privatisation in the Western developed countries. In the last two years, China was the largest privatising country in the world. The 2015 privatisation deal for Coal India made India the fifteenth largest privatising country, demonstrating that privatisation is still alive in that country. The Privatization Barometer Reports show that despite the massive privatisation since the 1970s, there are still many public enterprises in Europe and the developing world.
The issues and concerns of privatisation are different in the developed and developing world. The former are interested in privatisation of SoEs to acquire more dynamic, energetic and competent management, whereas developing countries are primarily interested in reducing the financial and administrative burden on government. Developed countries, with well-developed markets, focus on finding an appropriate purchaser for an optimum value of privatisation. However, with much less market development in developing countries, they struggle to find the buyers as the potential buyers are limited in number (Kanesalingam 1991). These countries also lack effective regulatory mechanisms and thus, are concerned with the market capture from powerful neighbouring countries and the developed world (Bjorvatn and Eckel 2011).
Developing countries also face several other challenges associated with political, social and cultural factors. These countries are constrained by relatively narrow economic bases, poorly functioning SoEs and relatively weak institutional frameworks. Consequently, many of them have followed a slow pace of privatisation (Cook and Kirkpatrick 1988). As Okpanachi and Obutte (2015) have argued, in the absence of a well-functioning democracy and the prevalence of a non-performing culture, privatisation in developing countries usually benefits only a few powerful elites.
10 http://www.feem.it/userfiles/attach/20151716304PB_Annual_Report_R2013-2014.pdf access: 8 July 2017 11 https://assets.kpmg.com/content/dam/kpmg/it/pdf/2017/01/ThePBReport2015-2016.pdf access: 8 July 2017 57
2.7.3 Clarifying the concept of corruption and anti-corruption reforms
Corruption12has been defined in a number of different ways. Broadly, it is concerned with a wide range of illegal, illegitimate, dishonest and immoral activities and behaviour. It is the abuse or misuse of power, position and resources for private gain (Brinkerhoff 2000). Rose- Rose-Ackerman (1999, p.75) define corruption as ‘the abuse of public office for private economic gain’. This abuse or misuse of public office or power for private gain is widely used by international institutions such as the World Bank, International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD) and United Nations Development Programme (UNDP). However, the ‘public office’ definition is criticised for placing too much emphasis on public office and economic benefits without due consideration on public interest and the role of the private sector in corruption (Hough 2013). A public interest definition goes beyond the economic gain or benefit to focus on the broader public interest (Alatas 2015; Larmour 2012). While defining corruption as ‘the abuse of entrusted power for private gain’13Transparency International includes the private domain in its definition.
Definitional clarity matters in identifying, measuring and carrying out research on corruption to devise appropriate strategies against it (Banerjee et al. 2012). As Caiden (1997) argues, sometimes it is too narrowly defined, missing so many pertinent, complex and context-specific issues of corruption. Similarly, sometimes it is too broadly defined to make it vague and difficult to measure.
It is argued that corruption can have a universally accepted definition, such as democracy and human rights (Rothstein 2014, p.748). However, despite a general agreement that corruption is a serious problem worldwide, there is hardly any international consensus in defining it. The UN Convention against Corruption does not offer any specific definition of corruption. In many countries, national legislations indicate corruption in terms of a list of corrupt activities rather than defining it (Larmour 2012; Larmour and Wolanin 2001).
One way to conceptualise corruption is to rely on classification. It can be classified as public- private, political-bureaucratic, grand-petty, endemic-sporadic, isolated-systematic and individual-collective (Caiden 2001; World Bank 2000a). Corruption can be collusive or non-
12 Derived from the Latin term ‘corruptus’ which means degradation, deterioration, decay or destroy of any system, objects or human behaviour, corruption denotes different meanings such as “dishonesty and illegal behaviour”( https://www.merriam-webster.com/dictionary/corruption access: 19 February 2017; http://dictionary.cambridge.org/dictionary/english/corruption access: 19 February 2017 and https://www.collinsdictionary.com/dictionary/english/corruption 19 February 2017), “illegitimate or immoral wrongdoing”( http://www.businessdictionary.com/definition/corruption.html access: 19 February 2017) and “fraudulent Conduct”( https://en.oxforddictionaries.com/definition/corruption Access: 19 February 2017). It covers a wide spectrum of behaviour such as bribery, extortion, embezzlement, graft, misappropriation, frauds, favouritism, nepotism, cronyism, influence peddling and conflict of interest (Rose-Ackerman and Palifka 2016). It is a normative, value-laden, contextual and a relative concept (Johnston 2014). 13http://www.transparency.org/what-is-corruption access: 19 February 2017 58 collusive (Dutta and Mishra 2013). It can be centralised or decentralised (Shleifer and Vishny 2002). Corruption can also be classified as demand-side corruption and supply-side corruption (Dixit 2016). Some authors present long lists of corrupt practices, such as: bribery, extortion, misappropriation, creating or exploiting conflicts of interest, and nepotism, clientelism and favouritism (Graycar 2015); and treason, kleptocracy, misappropriation, abuse of power, deceit and fraud, non-performance, bribery and graft, election tampering, tax evasion, acceptance of improper gifts, cronyism and influence peddling (Caiden 1997).
Corruption existed even in ancient civilizations such as Greece, Rome, China and India. It is argued that corruption was one of the contributing factors to break-up these ancient civilizations (Abjorensen 2014, pp.5-6; Alatas 2015, p.63). However, systematic studies of corruption began only in the late twentieth century. In earlier periods, corruption was viewed simply as a transient deviation of human behaviour that would be improved along with the increased level of awareness and education among the general public (Williams 1999).
As corruption was still rising for many years, the international financial institutions (IFIs), specifically the World Bank and IMF, were criticised for being ineffective at enforcing anti- corruption reforms in developing countries. The IFIs were under pressure to impose stringent conditions to their development aid, as their million-dollar anti-corruption programmes were having very little positive impact. On the other hand, they found the implementation of anti- corruption reforms extremely difficult in many developing countries. One IMF chief once remarked: “fighting corruption is as difficult as it is essential.”14Since then, the anti-corruption reform agenda has become an important part of foreign aid to developing countries. The development agencies also commenced several anti-corruption initiatives such as the 1999 OECD Anti-Bribery Convention, Millennium Challenge Account of the US government and the 2003 African Union Convention on Preventing and Combating Corruption and Related Offences and the 2003 UN Convention against Corruption (Transparency International 2004).
The practice of corruption can be explained from a number of different theoretical perspectives. Economic perspectives focus on individual need, greed and incentives guiding individual preferences, choice and behaviour. Corruption is seen as an impulsive action guided by an individual self-interest or temptation to get involved in corruption activities; thus they emphasise policies, rules and regulations and their effective enforcement (Bracking 2007; Caiden et al. 2001). Corruption occurs when an agent breaks rules or acts inconsistently with his or her stated mandates and jeopardise a principal’s stated goals and objectives. The agent has incentives to be corrupt unless the risks of being caught and prosecuted outweighs the benefits accrued from corruption. Corruption is widespread when an agent enjoys a monopoly over
14 Cited from: http://acdemocracy.org/dont-bank-on-corruption/ access: 17 March 2017 59 certain goods and services. Similarly, unfettered discretionary power also tempts a person into corruption. However, when accountability enforcement mechanisms are effective to control discretionary power, they tend to reduce corruption (Klitgaard 1988).
However, I would argue that when corruption is deeply entrenched in society, individual incentives and behaviour cannot explain all-pervasive systematic corruption. As large numbers of people, groups or networks are involved in corruption, individual efforts can hardly address the nested and complex corruption problem which requires collective action (Mungiu-Pippidi 2013; Persson et al. 2013). Kleptocracy, a variant of rational choice theories, explains the symbiotic relations whereby the political leaders and the public servants co-opt for mutual benefits at the cost of public fund or interest (Acemoglu et al. 2004; Khan 1998).
An alternative institutional perspective comes from political scientists who focus on regime, power, public trust and political institutions. For instance, an authoritative regime with a monopoly on power will tend to be more corrupt. Similarly, where political institutions are weak in terms of party strength, political competition, line of accountability, democratic culture and voice and exit mechanism, corruption tends to be more pervasive and intense (Bratton and Van de Walle 1994; Johnston 2005; Yadav 2011). Viewing corruption from a ‘relationship- centred’ approach rather than a ‘rule-centred’ approach,Uhr (2012) emphasised political deliberation to promote self-regulation, societal norms, values and ethics and ‘ethical politics’ to control corruption. Johnston (2014, pp.6-13) argued that the minimalist view of taking government and public officials off the economy and underestimating the value of politics and governance cannot be effective to control corruption.
Social-cultural perspectives trace the roots of corruption to social norms, values and society rather than being implicit in human nature or individual instinct. Individual perception, attitude and behaviour are shaped by the societal values, beliefs, norms and expectations. Thus corruption cannot be eliminated unless social anomalies and problems are addressed (Bracking 2007; De Graaf 2007). Critical sociologists argue that pervasive and systematic corruption is an outcome of economic liberalisation and globalisation (Clammer 2012). Viewed from this perspective, universal policies and strategies can hardly address highly context-specific corruption problems (Larmour 2012).
The institutional perspectives, while recognising the role of formal institutions, policies and rules, go beyond the organisational structure and culture to unveil the role of informal institutions in enduring institutionalised systemic corruption. Corruption generally involves secret transactions between two or more individuals or parties for their mutual benefits and thus formal institutions cannot fully explain the ‘shadowy’ nature of covert corruption (Della Porta and Vannucci 2016; Pillay and Kluvers 2014).
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Different explanations of corruption suggest different control measures. Economic explanations emphasise individual incentives and formal institutions to curb corruption. As incentives are fundamental to understanding corruption, the problem can be addressed only by lowering individual temptation and willingness to be corrupt. Economists argue that despite the cultural and contextual differences, the basic nature or the motivating traits of human beings is similar throughout the world. Viewed from this perspective, corruption becomes pervasive when governments fail to utilise individual self-interest in positive and productive purposes. Therefore, the key issue is how state institutions are mobilised to manage individual self-interest productively (Rose-Ackerman and Palifka 2016).
However, viewing corruption just as an economic problem and limiting it to the public office cannot capture a large part of societal corruption. Technical and economic perspectives are too narrow to capture the all-pervasive, complex and nested problem of corruption. In other words, corruption is not merely an outcome of individual failures but also societal weaknesses, anomalies and failures (Hindess 2012). As Mulgan (2012) has argued, corruption takes place at individual levels; it is primarily a systemic problem related to checks and balances in national governance systems, accountability enforcement mechanisms and the rule of law. Arguably, anti-corruption reforms cannot be effective solely by controlling individual wrongdoings or bad behaviour.
As Nepalese corruption15 exists as a deep-seated systemic problem rather than a simple problem of individual instinct, the principal-agent explanation is too restricted in scope. Corruption may go far beyond the formal institutions and be embedded into informal institutions. For this reason, Persson et al. (2013) have argued that this theoretical mischaracterisation is the main reason for the widespread failure of tackling systematic corruption. However, as Marquette and Peiffer (2015) argued, the collective action framework alone does not provide a complete picture of corruption and thereby anti-corruption reforms. Arguably, the principal-agent framework and collective action framework can be seen to complement each other. Therefore, combining both these perspectives allows for the creation of better lens to understand corruption and anti-corruption reforms.
Recognising the many different perspectives does not necessarily mean refuting competing perspectives, models or theories. One perspective may be more relevant to a particular context than another. All the perspectives discussed above are useful in understanding the multidimensional, multidisciplinary, complex and nested problems in tackling corruption.
15 In Nepal, the Prevention of Corruption Act 2002 presents a long list of corrupt activities ranging from graft, commission, bribery, fraud and embezzlement to disclosure of secrecy, exerting undue pressures and amassing property beyond legitimate means (Section 2).
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Human need, greed, motive or incentive is the epicentre of corruption. However, corruption takes place in organisations, societies and governmental systems which are largely shaped by socio-economic, political and cultural factors. Arguably, the theoretical underpinnings combining frameworks provides a better understanding of corruption and anti-corruption reforms, as corruption involves a dynamic interplay among different actors within certain socio- economic and political contexts. Therefore, I consider corruption within a broader political economy framework as outlined earlier in this chapter, which highlights the context, actors, institutions and process as a way to analyse, explain and interpret the corrupt behaviour.
2.8 Conclusion: Drawing together the analytical framework for the research
Based on the review and analysis of literature on political economy analysis, state society relations and political regime and their implications to the adoption and implementation of governance reforms, I have designed an analytical framework for my research. The diagram below presents governance as a dynamic process that operates within a political, economic and social context of a country. The dynamic interplay among the state and non-state actors along with a number of coalitions and networks shapes the reform process.
The actors and stakeholders with varied interests, motives, expectations and incentives interact with each other in different formal and informal settings in accordance with the institutional norms, rules, standards and practices within the context of state, market and society relations. Political regime, political-bureaucratic interface, state-society relations and state-donor dynamics determine the drivers and space for reforms where ideas are transferred and power is transmitted through the network of actors.
Adoption and implementation of governance reforms depend on the quality of interactions among the actors, networks and institutions in a given context, which depend on management capability, communication strategies, dialogue process and negotiation style. Such interaction influences the reform process, which can be explained with the help of a theoretical construct comprising multiple stream model of policy process, theory of policy transfer, policy-making styles and an interactive approach to policy implementation.
The adoption and implementation of civil service rightsizing, privatisation and anti-corruption reforms have been examined with the help of improvement oriented evaluation where Marsh and McConnell (2010) framework helps explain the success or failures of governance reforms adopted and implemented in Nepal in the post-liberalisation era (1990-2015).
The analytical framework below allows an in-depth analysis of interest, incentives, motives, power and behaviour of the key policy actors and stakeholders and its implications to the
62 adoption and implementation of governance reforms in Nepal. Conceptually comprehensive, methodically systematic and theoretically powerful, the framework unveils and unravels the politics of making and implementation of governance reforms analysing interdisciplinary and complex governance issues in aid recipient developing countries like Nepal.
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Figure 2.3 Analytical framework
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Chapter 3 Trends and trajectories of governance reforms in Nepal
Providing a thorough and critical review of Nepal’s political history, this chapter casts a light on the evolution of the country’s public administration, along with reform trajectories from historical perspectives. It also states the major approaches of public sector governance reforms adopted so far and highlights the key areas of reforms. Connecting political change with the reform trajectories, it analyses political development, societal culture and administrative tradition and its implications for the implementation of governance reforms. In this chapter I argue that political change alone does not guarantee improvements in administrative and social institutions, values and power relations. These require political development, societal engagement and administrative capability. Arguably, political development, societal engagement and administrative capability have significant implications for the implementation of public sector governance reforms in Nepal. These are examined in the thematic case studies in chapter 5,6 and 7 and, while discussing the research findings.
3.1 Unfolding Nepal’s political history
3.1.1 A glimpse of ancient and medieval Nepali politics (before 1769)
Nepal’s ancient and medieval16 polity revolved around the all-powerful kings who were not only placed at the pinnacle of the state power structure, but also comprised the fulcrum of the entire politico-administrative system. With a strong faith in religion, the ruling monarchs used to personify themselves as the representatives of God and the source of all power. Three prominent dynasties were dominant during the ancient and medieval period: the Kirat the Lichhavis and the Malla. The Lichhavi migrated from Vaisali in Northern India, and imbued republican traditions. However, they adopted the monarchical form of government of the earlier Kirat dynasty and assimilated with the local customs, traditions and popular spirit of the local people. Nevertheless they were able to express a spirit of representation believing ‘the administration should be for the good of the people’ (Jha 1970, p.288).
Wisdom, faith, religion and the customary laws based on tradition were the main guiding factors of Kirat rule. The King violating prevailing rules and customary laws based on tradition, socio- cultural values and beliefs would bring ill luck (Chemjong 1961, pp.19-128; Shrestha 2005, p.7). The Lichhavi polity was based on local autonomy and rule of law, with rules even for small vehicles of that time like carriages and carts and the charitable trusts. Historically, the
16 Ancient and medieval Nepal consist of three main dynanisties: Kirat (early sixth century BC-first century AD), Lichhavi (first Century AD-880 AD) and Malla (1200AD-1769 AD) dynasties. There are different opinions with regard to the beginning of the Kirat rule. In the absence of sufficient evidence it is extremely difficult to pinpoint the date that they began their rule. However, many of the well-known Nepalese historians such as Baburam Acharya and Dilli Raman Regmi take early sixth century B.C. as the starting time of their rule. The medieval period starts from the downfall of the Licchavi dynasty in 880 AD and extends to 1769 AD. 65 fame of the Lichhavi kings spread to distant places due to their dedication to the people’s welfare (Bajracharya 1973, pp.113-337). On the other hand the Malla dynasty was more influenced by the delicate political situation and the feeling of competition among neighbours; thus they could hardly use power arbitrarily. Similarly, they had to consider the existing power equation of the courtiers and feudal lords.
Of the three dynasties during the ancient and medieval period, governance was more responsive during the Lichhavi era compared to other two dynasties. However, by and large, politics was confined to the monarchs, courtiers and feudal lords and the common people hardly had any access or say to the state politics.
3.1.2 Formation of the Nepali state to democratic transition (1769-1960)
The modern history of Nepal starts from the conquest of the Kathmandu Valley by Prithvi Narayan Shah in 1768. The ambitious, far-sighted and capable leader of a tiny hill principality, Gorkha started unifying several small principalities and petty states throughout the country now known as Nepal17with the help of a relatively modern, strong, committed and loyal army compared to other neighbouring hill principalities. His successors continued unification with great success. However, the success didn’t last long. Nepal ceded one third of her territory to the British East India Company when the two parties signed the Treaty of Sugauli on December 2 1815, following the defeat of the Gorkhali army in the 1814-1816 Anglo-Nepal war. The British government returned back some of the territory later as a token of their appreciation for Nepal’s military support to the British India Company (Rose and Fisher 1970, pp.17-18). In this way the Treaty of Sugauli fixed the Nepal-India border of modern Nepal.
During the unfettered Shah monarchy, power was concentrated on the monarch, who used to rule the country by peremptory command. Power and authority was vested in the Shah rulers which flowed from them to the Bhardars – the ministers, aids and officials. Executive, legislative and judicial authority was concentrated on the monarch who used to be the final court of appeal for justice in both civil and criminal cases. However, they had a well-developed judicial system inherited from the Newars of Kathmandu Valley, supplemented by their own social and legal code dating back to the rule of Ram Shah (Shaha 1978).
The Shah Kings focused on two objectives: expanding territories and consolidating the conquered territories. The latter part of the highly centralised Shah regime, especially the rule of minor kings and regency, was characterised by intrigues and rival politics among the influencing elites and competing families. This culminated in the ‘Kot’ massacre in the royal
17 Prior to its unification, the Kathmandu Valley was divided into three states: Bhaktapur, Lalitpur and Kantipur. Western Nepal had Baise(22) and Chaubise(24) states ruled by different clans. Similarly, the eastern hill was dominated by the Kirat rulers. The southern plain was also divided into several kingdoms rued by different clans. 66 palace courtyard in 1846: Jung Bahadur Rana (Kunwar), a cunning and ambitious military official, seized power in a bloody coup systematically and efficiently smashing all his rival political factions. In this way he established the hereditary Rana family autocracy that lasted for 104 years. The Ranas kept the monarchy in place, but left it powerless, gradually strengthening the Rana oligarchy (Rose and Fisher 1970). The practice of rule by peremptory command, a characteristic of the Shah period, was continued by the Rana family by delegating and transferring the supreme authority to the hereditary Rana Maharaja-cum-prime ministers.
The dictatorial Rana regime did everything to perpetuate their hereditary oligarchy. They ran the state like a family business. No one could even think of opposing them. They did not allow public schools to run for fear that a resulting educated class would not blindly support them. Some Rana prime ministers tried to open public schools, developed grievance handling mechanisms, introduced the concept of local governance and established courts for judicial reforms. However, none of these reforms were materialised. Political reforms introduced by some of the relatively liberal Rana rulers, albeit on a limited scale, were reversed by subsequent repressive rulers (Shaha 1982).
An anti-Rana movement started in the 1930s, along with the formation of social organisations like Arya Samaj and Charkha Prachar Guthi, as well as the social reform movements Makai Parva, Library Parva and Jayatu Sanskritum. These movements, comprised of the educated minority and influenced by Mahatma Gandhi, played a vital role in creating opposition to the Rana regime. Popular dissatisfaction against the regime received further impetus when the state executed four youths in 1941. There was a growing dissatisfaction and animosity among the Rana family members themselves, who were excluded from the role of succession and even degenerated from the mainstream of the regime. An organised movement against the family oligarchy intensified, along with the establishment of political parties like Praja Parishad and Nepali Congress. The Nepali Congress also launched armed struggles against the regime. The anti-Rana movement culminated when King Tribhuvan abandoned the throne in support of the movement and concluded with a tripartite agreement among the King, Nepali Congress and the Rana Rulers. This was carried out in mediation with the influential Indian leader Jawahar Lal Nehru following the armed revolution launched by Nepali Congress and King Tribhuvan’s exile to India in support to the movement against the Rana regime. Consequently, King Tribhuvan issued a royal proclamation on February 18, 1951, ending the one-hundred-and-four-year-old hereditary Rana oligarchy (Rose and Fisher 1970; Shaha 1982; Shreshtha 1975).
The interim constitution of Nepal promulgated after the advent of democracy with constitutional monarchy was relatively a progressive constitutional document by the standards of the contemporary developing world. The government demonstrated its firm commitment to democratic governance with a provision of popularly elected Constitutional Assembly.
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However, amidst the political fluidity, the subsequent amendments to the Interim Government of Nepal Act 1951 gradually withered the democratic momentum rather than adding to it (Shaha 1982, p.17). The government even tried to confer the highest judicial authority to the Crown – though it could not succeed due to a strong public hue and cry (Rose and Fisher 1970, pp.84- 86).
After his accession to the throne in 1955, the new King Mahendra started active participation in the political process. As a part of his strategy to bring political power into his grip, he started a series of negotiations with the major political parties while forming governments. As the governments could not hold the much awaited Constitutional Assembly election for seven years, the King, upon the recommendation of a constitutional drafting commission, promulgated the 1959 Constitution of the Kingdom of Nepal, under which the monarch regained supreme executive power along with an extensive discretionary and emergency powers. With an expectation of a broader political support from the Western developed countries, he also consulted Sir Ivor Jennings, the renowned constitutional expert, during the constitution making process (Shaha 1982). The King also called Nepal’s first general election in 1959.
The election, held on the basis of direct universal adult suffrage, made Nepali Congress the largest political party with an overwhelming majority of 74 out of 109 seats in the lower house of parliament. However, the first ever elected parliament and government could not last long. With the help of carefully designed emergency powers in the 1959 Constitution and the national army, King Mahendra sacked the first elected government and dissolved the parliament in the name of preserving ‘unity, national integrity and sovereignty’ of the country. After only 19 months, Prime Minister B. P. Koirala and other ministers of the elected government were imprisoned (Shaha 1982, p.18). A large number of civil servants were also dismissed without any opportunity of hearing (Rose and Fisher 1970). The king banned all political parties. Two years later, he introduced the party-less Panchayat system and strengthened the highly authoritarian form of government.
To sum up, Nepal prior to the Rana oligarchy was engaged in unifying the country. The traditional feudal system remained intact during that period. The Rana regime then engaged in fortifying and continuing its family autocracy. Education was completely banned to the ordinary citizen, the country remained closed to the rest of the world and there was no avenue for political awareness and development in the country. In the absence of political culture and mass awareness, parliamentary democracy with a constitutional monarch quickly turned to autocratic absolute monarchy. Consequently, the democratic transition took a pathway to yet another authoritarian rule with the so-called party-less Panchayat democracy. Despite a few changes in rulers and regimes, there was no significant change in power structure and the fundamental characteristics of Nepali society during that period.
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3.1.3 Illusive steps to party-less democracy (1961-1990)
Following the 1960 royal takeover, King Mahendra outlawed political parties, curtailed civil liberties and suppressed press freedom. He argued that parliamentary democracy was not suitable to the condition and context of the country. The popularly elected government was charged with over-concentrating on petty party interests, and undermining national interests. The government was also blamed for the deteriorating law and order situation, promoting corruption and encouraging anti-national elements. However, the allegations were not new, as King Mahendra was not happy with the performance of parliamentary democracy, since he was the Crown Prince (Khadka 1986, p.431).
Protests and rebellions movements organised by the Nepali Congress party, the largest political party, and other strong objections from the political leaders and mainstream press in India, didn’t result in effective pressure being placed on the King. There was no robust resistance from the people at large. A deep and abiding faith in monarchy as an institution was a prominent reason behind this situation. Similarly, the army’s unflinching support, the King’s dominant personality and the political mess of unhealthy competition were prominent reasons among others that allowed the King to execute a relatively smooth takeover. An intra-party power struggle and the rumour of corruption also fuelled frustration among people who had high expectations of the first democratically elected government. Traditional elites and landlords felt threatened by some government initiatives, especially far-reaching structural reforms including land reforms. Royal families and the power elites accustomed with the feudal patron-client culture were uncomfortable with the assertiveness and self-confidence of then Prime Minister and the popular leader of Nepali Congress Party, the largest party with a clear tilt towards democratic socialism. The Sino-India war of 1962 and serious internal political problems within India also favoured the King’s unfettered coup.
As the ‘alien’ parliamentary democracy did not perform well, King Mahendra introduced an ‘indigenous’ party-less Panchayat democracy he argued would suit the condition, context and soil of Nepal. The new political system aimed at preserving the central role of the monarchy in the political process, which was then formalised by the 1962 Constitution of Nepal. The nation itself was defined ‘by the common bond of allegiance to the crown’ (Article 2) and the sovereignty of Nepal was ‘vested in His Majesty’ (Article 20). The King was the source of all powers – executive, legislative and judicial – and he could exercise it unquestionably (Article 20 and 24). He could appoint executives of all the constitutional bodies including the Chief Justice without any consultation with state authorities (Article 69). The monarchy was not only a symbol of national unity for a diverse population but was also said to be the guarantor of the country’s democracy and development.
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The Panchayat system also had appealing aims and objectives. Its ideological aim was to set up a society ‘which is democratic, just, dynamic and free from exploitation’ (Article 19) by promoting the welfare of the people. The constitution also guaranteed a number of fundamental rights such as the right to equality, right to freedom, right against exploitation, right to religion, right to property and right to constitutional remedies (Part 3). However, party politics was strictly forbidden during the Panchayat regime. Political and administrative appointments were thoroughly scrutinised to examine a candidate’s loyalty to the King and the party-less Panchayat system.
Organised into a four-tier structure at village/town, district, zone and national level, the Panchayat system emphasised decentralisation and people’s empowerment at the local level. Village and Town Panchayats, being the base level of Panchayat democracy, had directly elected representatives whereas the middle and national level people’s representatives were elected by indirect voting system. Later the National Panchayat, the apex body of the Panchayat polity, also adopted a direct election system.
With a blending of grass-root representatives and class-based organisations and professional associations having an anti-party character, the King wanted to maintain his supremacy along with some features of electoral democracy. The new ‘grass-root’ democracy was designed to address the issue of incongruence between the western models of democracy, the state of political development and the traditional values and culture of developing countries. Similarly, the Panchayat polity was based on the premise that political parties were an obstacle to development in the Third World. The proponents of the typical Panchayat system used to qualify it as a ‘truly Nepali’ political system. However, scholars argue that the Panchayat system was not a completely new coinage. It reflected the contemporary politics that sought to develop an alternative model of democracy for the Third World. The Panchayat polity borrowed the concept of ‘basic democracy’ from Pakistan, ‘guided democracy’ from Indonesia, ‘class organisations’ from Yugoslavia and Egypt and the concept of Panchali from ancient Kingdoms in India and Nepal (Khadka 1986).
During the thirty years of the Panchayat polity, a number of political reforms were introduced. However, most of the reforms were reactive fixes rather than proactive steps. Land reform was implemented, though with distortions and disappointing results. Special privileges of some aristocratic elites in Western Nepal were abolished. The 1854 legal code was replaced with an improved legal code in 1963. The Panchayat system itself was reformed through three amendments. The Election of the National Panchayat was reformed to be on the basis of adult franchise. The King could appoint the Prime Minister only upon the recommendation of the National Panchayat. The Council of Ministers were made accountable to the legislature. A
70 referendum was held on multi-party democracy or improved Panchayat system. The Panchayat system received a slim majority.
The Panchayat regime provided much needed political stability for Nepal’s socio-economic development. The basic road infrastructures such as the East-West Highway, Kodari Highway, Prithvi Highway and Siddharth Highway were built during this period. The law and order situation appreciably improved though freedom was denied. A number of industrial enterprises were established, mostly in the Terai region. Education and health witnessed substantial expansion. However, there was no visible progress in poverty reduction and improvement in the standard of living of ordinary people. The gap between rich and poor widened. The graduate constituency was abolished as the educated members of National Panchayat were open and vocal against the party-less system.
Panchayat reforms proved inadequate to address the growing aspirations of the people, specifically the fast growing educated class. Unlike the Rana regime, even the ordinary citizens reached the post of Prime Minister. Thousands of representatives were elected by the people. A wide range of people participated in the national polity through class-based organisations. However, the traditional power structure, hierarchy-based state-society relations and socio- economic inequality remained largely intact. Characters were changed but the fundamental characteristics of governance remained more or less the same. Despite the slogan of decentralisation the trend towards recentralisation of power in the monarchy was continued. No window of opportunity was open for transformational change. Consequently, the Panchayat ideology was proven to be naive, impractical and self-serving (Khadka 1986, p.577). The facade of party-less Panchayat democracy was proven to be illusive.
Amidst the growing dissatisfaction among the ordinary people and the rifts between the ardent supporters of the Panchayat system, the outlawed largest political party, Nepali Congress and the United Left Front forged an alliance to fight against the Panchayat system. Other small left- leaning parties including the radical Communists supported the movement. The global wave of democracy at the end of 1980s and early 1990s increased political awareness among the urban populace. It provided wider support to the movement and, raised the hope and confidence of the agitating political parties. In the meantime, the Indian economic blockade of 1989/1990 significantly weakened the Panchayat regime. With the overt support of the major political parties in India and moral support from the western developed countries, the people’s movement of 1990 was intensified until the abolishment of the Panchayat regime on April 8 1990.
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3.1.4 Constitutional monarchy to democratic republic (1991-2016)
Following the successful people’s movement for multiparty democracy, an interim Cabinet headed by Krishna Prasad Bhattarai was formed, including cabinet members from Nepali Congress Party, United Left Front, royal appointees, and independent persons. The Bhattarai cabinet was successful in providing a new democratic constitution in November 1990, guaranteeing fundamental human rights under a parliamentary democracy with a constitutional monarch. The 1991 general election was held in a relatively free and fair manner, in which Nepali Congress Party won clear majority of 205 members of the House of Representatives. Even the far left Nepal Communist Party participated the election in the name of the United People’s Front and won nine seats in the Parliament (Einsiedel et al. 2012, pp.4-8).
The majority government of Nepali Congress Party, headed by Girija Prasad Koirala, stepped down and dissolved the parliament following dissension and infightings within the party. This sowed the seeds for political instability in the country. The mid-term poll held on November 15, 1994 resulted in a minority government led by the Communist Party of Nepal (Unified Marxist- Leninist). The government brought a popular ‘Build Our Own Village’ programme along with a number of social security programmes including allowances to the senior citizens. This minority government was ousted on September 10 1995 through a no-confidence motion in the parliament. Since then the infant democracy witnessed a series of political conspiracies, non- cooperation and political anomalies to form and overthrow governments.
In the meantime, the Maoist violent insurgency formally started on February 13 1996, submitting a 40-point demand to the government. The petition was like an election manifesto of a populist Communist party. It was a tactical move to build legitimacy for their insurgency. Later the Maoists themselves formed a majority government (and were influential in a number of other governments), without fulfilling even a fraction of their demands.
Initially confined to a few mid-western hill districts, the insurgency quickly escalated to a number of other districts with the hit-and-run guerrilla tactics smashing police posts and confiscating weapons. The poorly trained, ill-equipped and demotivated Nepal Police could not resist the self-motivated and dedicated guerrilla attacks. Gradually the insurgency spread throughout the country. The Maoists were said to have received external support from foreign individuals and institutions, however mostly they relied on their own war-making capabilities, capturing weapons by overriding police posts in isolated remote areas and financing themselves through bank robberies, extortion of local businesses (including private boarding schools), a monthly levy on public service employees and the taxation of land in areas under their control. They also mobilised resources through illegal trade and external sources. Mostly their attacks were targeted at relatively well-off people, supporters of other political parties and the people
72 with an image of corruption and exploitation in society. However, they were responsible for several brutal attacks on ordinary people, who they mostly claimed were government spies, without affording them the opportunity of a hearing or fair trial (Chalmers 2010, p.262).
The parliamentary parties inadvertently provided fertile ground for the Maoist insurgency. They did not correct the mistakes committed since the first democratic experiment of 1950s. In fact they repeated the ills that befell Nepal’s first democratic system of governance in the 1950s. The societal characteristics and the dynamics of state-society relations was almost the same. People in positions of power defended and even resisted rather than eliminating the anomalies of the hierarchical society. Neither the politicians nor administration had a strong and functioning accountability enforcement mechanism. The state structure and its operations could not reflect the societal diversity. A large number of deprived and downtrodden people, including ethnic minorities, did not have an opportunity to feel ownership to the country and government. As the political authorities failed to advance people’s needs, expectations and aspirations for inclusion, employment, economic development and good governance, a large number of people were attracted to the Maoists’ slogan of equity, inclusion and justice. For their part, unemployed youth were attracted by a sense of valour to take up arms and have command over a large section of people.
After the restoration of multiparty democracy in 1990, there was an unprecedented increase in popular expectations and aspirations. However, the state’s capacity to fulfil those expectations and aspirations was very limited. Political development was not accompanied by economic development, thereby limiting the government’s capacity with a narrow economic base to meet the galloping aspirations and expectations of the people. The pace of economic and social development was too slow to catch up to the fast political development. There were frequent changes in the government and the lack of appropriate political culture for political participation, partnership and functioning mechanism for deliberative democracy, people’s needs and expectations remained largely unfulfilled.
However, ineffectiveness of the political leaders should not undermine the achievements of the 1990 people’s movement for democracy. The Constitution of the Kingdom of Nepal guaranteed fundamental rights, protection of liberty, periodic election, independent judiciary and the rule of law. Unlike the previous constitution, sovereignty resided in the people. The absolute monarch was reduced to a constitutional monarch requiring advice and consent of the Council of Ministers for the exercise of executive authority as enshrined in the constitution. Political transition was remarkably smooth and encouraging with a new constitution in six months, relatively peaceful general election in a year’s time and local election after a year of the new government. All these positive developments created hope among the people.
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Due to a lack of political culture in major political parties and the egoistic nature and excessive individual ambition of political leaders, this hope didn’t last long. The ‘winners’ had a feeling that they were entitled to take all, whereas the ‘losers’ were impatient and suffered from an inferiority complex. Consequently, they engaged in protests against the government of the day. There was conflict not only among the parties but also within the party to grab power, purse and prestige. During this period almost all the large political parties including Nepali Congress and Nepal Communist Party of Nepal (Unified Marxist-Leninist) split into two factions. The major political parties had an autocratic and hierarchical orientation. Unethical compromise and horse trading made politics disgusting. Political leaders reeked of corruption and rent-seeking behaviour. There developed a culture of street protest, politically sponsored vandalism and rent- seeking behaviour, gradually depoliticising the political parties and ultimately breeding a culture of impunity and criminalisation of politics. In this way, the people’s high expectations turned to deep frustrations within a short span of time. Thus the second attempt at multiparty democracy was also not very encouraging. The frustration, resentment and cynicism among the general masses created a fertile breeding ground for violent insurgency.
Moreover, the massacre of King Birendra, his entire family and some close relatives in June 2001 created a situation of chaos in the country. The newly enthroned King Gynandra was better known as a businessperson than a statesman and, didn’t have a positive image as a young prince. He couldn’t demonstrate maturity and, gradually began to cross the limits of constitutional monarchy. In October 2002, he dismissed the elected Prime Minister and grabbed the executive power (Einsiedel et al. 2012, p.21). However, it’s not fair to blame only the King. As a constitutional monarch he promptly dissolved the House of Representative as recommended by the Prime Minister who promised a mid-term poll. The same Prime Minister recommended postponement of the mid-term elections after six months. His party membership was suspended for not consulting the party before making the arbitrary decision to postpone the election. Against this background he was sacked for being incompetent. The King made some experiments with the governments headed by diehard supporters of the previous Panchayat regime. Again Mr. Deuba became the Prime Minister as a leader of a splinter group of the Nepali Congress Party. However, King Gyanendra sacked him again through a coup in February 2005 to embark on yet another experiment with two classical conservative leaders of his father’s time to worsen the situation.
King Gyanendra’s unconstitutional moves and intolerant behaviour brought the parliamentary political parties and the Maoists together. The Seven Party Alliance (SPA) and Maoists signed a twelve point Understanding in November 2005 to jointly launch the people’s movement against the King, forcing him to reinstate the elected parliament on April 24 2006 and to renounce all his executive power. A Comprehensive Peace Agreement was signed by the government and the
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Communist Party of Nepal (Maoist) on November 21 2006 to end the decade long violent insurgency (Einsiedel et al. 2012, pp.23-24).
The Maoists demonstrated their commitment to competitive multiparty democratic system, civil liberties, fundamental rights, human rights, adult franchise, periodic election, complete press freedom, independent judiciary and the rule of law through the 2007 Interim Constitution. The reinstated parliament declared Nepal a federal democratic republic on December 28 2007, ending 240 year old Monarchy, which was later endorsed by the first elected Constituent Assembly on May 28 2008 with an overwhelming majority.
Meanwhile, the UN Mission to Nepal (UNMIN) was engaged in monitoring arms and armies of the state and Maoist party; a violent form of identity politics erupted mostly in Terai-Madhesh and the eastern mountainous region of the country. The underlying reason behind this escalation was the age-old feeling of alienation of Madhesi and ethnic communities from the mainstream politics and the dissatisfaction on the existing state-society relations. It affected the transition process but didn’t obstruct it. However, the violent Madhes Movement of January 2007 gave birth to a number of armed groups in Terai, conducting criminal activities including extortion and abduction (Einsiedel et al. 2012, p.26).
Despite some turbulence, the peace process held together through an arduous negotiation process between the Seven Party Alliance (SPA) and the Maoists party (who demonstrated commendable flexibility to conclude the peace process)went relatively well. In fact, Nepal’s peace process was largely internally driven (Slavu 2012, p.251). However, the UN’s role was also vital in monitoring peace agreements, arms and armed forces of both sides and the election process. The peace process reached an advanced stage with the election of the much awaited Constituent Assembly on April 10, 2008.
The Constituent Assembly (CA) was successful in furthering the peace process towards a logical conclusion by integrating the Maoist army into the Nepal Army. However, despite much effort, the inclusive CA could not come up with a new constitution in time, when ethnic and identity politics was fused into the mainstream national politics, derailing the constitution making process. Besides, the CA was more focused on changing governments than the constitution-making process. Highly populist politics, coupled with the opportunistic ad hoc decision making tendency of major political parties, also hindered the CA’s attempts to come up with a new constitution. For these reasons, the CA failed to draft a complete constitution, not only within the originally stipulated time of two years, but even after four years. Consequently it was dissolved on May 27, 2012, as the Supreme Court of Nepal ruled against the indefinite extension of its tenure, highlighting the need for a fresh mandate from the people.
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Amidst this political and constitutional stalemate, the major political parties agreed to form a caretaker government under the leadership of Chief Justice Khil Raj Regmi. The bureaucrats’ government successfully held an election for the CA. After a long and arduous process, the second Constituent Assembly came up with a much awaited new constitution on September 20 2015, fulfilling a dream of more than 60 years of the Nepali people to produce a constitution by the people’s representatives. The first constitution made and adopted by the popularly elected Constituent Assembly guarantees competitive multiparty democracy, along with the provisions for periodic election, social inclusion, fundamental rights, civil liberty, freedom of speech and organisation, independent judiciary and the rule of law. It also declares ending all forms of discriminations and oppressions created by the age-old unequal social structure and unitary and centralised form of government practiced in the past. It is comparable to most of the democratic constitutions in the world. Endorsed by more than eighty percent of the CA members and welcomed by a large majority of Nepalese people, the new constitution is expected to be an important milestone in the democratic process of Nepal. However, some Madheshi and ethnic based parties arenot happy with the constitution, mainly with regard to the constitution making process and the delineation of provinces, some inclusive provisions and certain citizenship provisions.
The Nepalese political system has frequently changed. New political players have emerged. Power centres have significantly widened. The new constitution is far more democratic, inclusive and progressive than ever. However, fundamental characteristics of Nepalese society and the tendency of political parties has not improved noticeably. Political parties are still not genuinely committed to institutionalise ethical and healthy politics in the country. Instead they are engaged in dominating, opposing and creating an environment of division, distrust, intrigue, destruction, indiscipline, loss of integrity, self-interest and are severely inclined to the greed for money and power. National interest became just rhetoric. Moreover, major political parties still lack broader perspectives of governance, genuine commitment to the people and country, governing skills and the statesmanship to manage political crises (Pradhan 2007, pp.92-93).
3.2 Nepalese public administration: a historical perspective
3.2.1 Feudal and family administration before 1951
Ancient and medieval Nepal was ruled by all-powerful monarchs and, the governance was guided by customary laws based on custom, ritual, tradition and socio-economic norms and usages (Chemjong 1961; Shrestha 2005). However, the system as well as practice of governance of different dynasties was somewhat different. The Kirat dynasty had a two-tiered governance system. The central administration used to cover mainly defence and foreign affairs, providing considerable autonomy to the thums (cluster of villages) in the area of their functional
76 jurisdictions. The Lichhavi dynasty had a more sophisticated system of local self-governance, organised mainly on the basis of human settlement patterns. They introduced an institution called Panchali, responsible for the administration of local affairs, including the collection of local taxes. They also had autonomous bodies such as Gosthi to administer different types of public and private trusts. The Lichhavi kings were well-known for their dedication to people’s welfare and their era is widely known as the golden period of Nepalese history (Bajracharya and Shrestha 1978; Regmi 1978; Shaha 2003; Shrestha 2005).
The Malla dynasty had two different types of authorities to run the local administration. The centrally controlled area was administered by the authorities appointed by central government who were responsible mainly to maintain law and order, collect taxes and decide the disputes and cases at the local level. On the other hand, the feudal lords enjoyed considerable autonomy in exercising executive, judicial and sometimes even the legislative power in the area of their jurisdiction (Bajracharya 1976; Bajracharya and Shrestha 1978; Hamilton 1819; Regmi 1965; Shrestha 2005). However, it is extremely difficult to present a uniform administrative system for the entire Malla rule, as it was a highly volatile period, when Nepal was divided into dozens of small principalities throughout the country.
Public administration was more centralised during the Shah regime. During the early Shah period, important political, administrative and military positions were occupied by different castes that were traditionally loyal to the Gorkha kings and had played a significant role during the unification of the country (Agrawal 1976; Kirkpatrick 1811; Shrestha 2005). The Shah kings ruled the country arbitrarily and the state organs were tasked with fulfilling their desires and expectations (Rose and Fisher 1970; Shaha 1982). The monarch had sole power of conducting pajani, the annual routine renewal and termination of tenures of all those employed in military and civil service. The King used to conduct public administration with the help of his advisers called Chautaria and Kazies whom he could appoint or dismiss at his pleasure (Shaha 1982, pp.16,166). However, evidence shows that they were also concerned with the customary laws and the welfare of their subjects. The celestial advice of Dibbaya Upadesh18 of Prithvi Narayan Shah shows that they used to value public opinion and have wider consultations before making decisions on vital issues like appointing higher authorities or waging war with the enemy states. However, the latter part of the Shah period was the period of regency and court intrigues causing huge administrative malpractices and favouritism (Shrestha 2005).
18 He delivered the celestial advice to a large number of gathering of courtiers, administrators and members of the royal family in December 1774. The translated document is available in the official website of Nepal Law Reform Commission. He appointed Kalu Pande as Kazi when he came to know that people wanted him in that position despite the fact that personally he wanted to give that responsibility to Biraj Bakhati. 77
The Rana prime ministers monopolised the executive, legislative and judicial powers to their family, delegating and transferring the supreme authority to the hereditary Rana Maharaja-cum- prime ministers from the kings (Shrestha 2005, p.2). Their administration was feudalistic in nature and always engaged in fulfilling the interest and expectations of the ruling Ranas. Military service was dominant in the country and a Military Officer could be appointed as the head of administrative office. The Rana rulers not only continued the spoil system of the Shah regime but also further narrowed down the access of common people to public service by confining most of the important official positions to their family members (Shaha 1982), arguably, to please and engage the family members and avoid the threat of leaking important information of their arbitrary and despotic rule. The regime was far less participative than the previous Shah regime. In terms of ethics and morality too they were weaker than the Shah bureaucracy. Moreover, the administration was characterised by the system of Chakari (performing someone’s personal tasks to please him/her to acquire undue benefit), Chaplusi (flattering someone with an expectation of undue advantage from him/her) and Chukli (telling someone’s real or hypothetical weaknesses to the boss or other superior authority with an expectation of getting favour from them). Influenced by the British administrative tradition, they initiated some administrative reforms focused on institution building. However, in the absence of effective implementation, the feudal administrative system hardly had any change till the downfall of regime in 1951 (Sever 1943; Shrestha 2005).
3.2.2 The seedbed of a modern civil service (1951-1960)
Public administration, in the true sense, started in Nepal only after the advent of multiparty democracy in 1951. Until the overthrow of the Rana family, entry into the administration was not open to the general public. Power and authority for recruitment or dismissal in the state machineries used to emanate from the kings or Rana prime ministers depending on their time. State administration was confined to the monarchy, ruling families and a few subjects. Against this backdrop, the interim government established a Public Service Commission in 1951 with an objective of open and fair recruitment in civil service by an independent entity (Joshi 1983).
The Interim Government of Nepal Act 1951 introduced the concept of the rule of law and separation of power. The government’s role expanded tremendously from the traditional functions of maintaining law and order and revenue mobilisation, to a wide range of development activities and welfare functions of democratic and accountable governance. However, the existing administrative system and human resources were not capable enough nor well-prepared for all these herculean tasks and a smooth transition to democratic governance. As the previous regime was run like a family business, there was no clarity in roles and responsibilities of newly organised ministries and other government offices. In the absence of any well-organised central Secretariat, coordination among various ministries was also a
78 daunting task. Against this background, the government formed a committee of experts under the leadership of a senior Indian civil servant named N.M. Buch to commission a study on the existing organisation and human resources of the civil administration and to furnish recommendations for reforms. With the dearth of expertise and experience in modern civil service in Nepal, the majority of the committee members, including the chair, were from India (ARC 1952). The 1952 Nepal Administrative Reorganising Committee marks the beginning of an organised effort for administrative reforms in Nepal.
The committee emphasised administrative reorganisation, legal reforms, the screening of existing government employees and merit-based recruitment of civil servants, training for government employees, administrative decentralisation and corruption control. It emphasised compliance of executive orders and government policies in a new democratic environment through strengthening the Cabinet Secretariat. The committee recommended secondment of a large number of civil servants from India for specific time frames. It furnished hundreds of recommendations on reforms pertaining to the central and district administration, judicial administration and security system. However, only a few recommendations such as the provision of a Principal Secretary and abolition of Hajiri Goswara19and Adda Janch Office were implemented.20
Amidst the prolonged political transition, instability, administrative chaos and confusion exacerbated by personality clashes between the old and new generation bureaucrats, a high level Administrative Reorganisation Planning Commission was formed in July 1956 under the chairmanship of then sitting Prime Minister, Tanka Prasad Acharya. Its aim was to improve administrative capacity, procedures and methods by restructuring the existing feudal government machinery (TPAMF 1997). The first endogenous effort to drive administrative reforms laid the foundation of modern civil service in Nepal by introducing the 1965 Civil Service Act and Regulations. The commission also came up with Administrative Procedure Act and Corruption Control Act in a very short span of time.
The commission did not produce a consolidated report, but listed the recommendations, which passed through as Cabinet decisions for immediate action from respective ministries. The civil service was organised in several groups and sub-groups based on the qualification and expertise. Establishment of the Institute of Public Administration, strengthening of the Public Service Commission and introduction of development planning in the country were among the significant achievements of this commission. It also developed an administrative decentralisation framework for district, village and block development committees and initiated
19 This office was responsible to inspect different government offices in connection with attendance of the public service employees. 20 The inspectorate could oversee the overall performance of all government organizations. 79 budgetary reforms. The commission is widely acclaimed for its exceptional achievements in the implementation of administrative reforms. It implemented almost all the recommendations except restructuring the ministries and execution of the proposed district administration plan (Poudyal 1989) because of the change in government.21
3.2.3 Neutral administration committed to Panchayat regime (1961-1990)
With the imposition of party-less Panchayat system following the 1960 coup, and using supreme executive power and an extensive discretionary power retained in the 1959 Constitution, King Mahendra divided Nepal into 14 zones and 75 districts in April 1961 with a view of strengthening the newly adopted political system through the expansion of administrative machinery (Rose and Fisher 1970; Shaha 1982). The King brought more than 50, 000 local representatives on board, including the ones from class organisations in the newly introduced system primarily to fortify his network and position in the national governance system. He constituted the 1963 Administrative Authority Decentralisation Commission to operationalise and institutionalise the party-less Panchayat system (AADC 1963). Following the commission report a number of decentralisation initiatives were taken during the Panchayat Era. The Decentralisation Plan 1965, Local Administration Act 1971, the District Administration Plan 1975, the Integrated Panchayat Development Scheme 1978, the Decentralisation Scheme 1984, the Decentralisation Act 1982 and Decentralisation (Working Management) Rules 1984 were all formulated during this period. Similarly, a concept of regional development was introduced in 1975 by dividing the country into five development regions. However, despite all these initiatives and the constitutional provisions, the directed decentralisation was not successfully implemented and thus the regime, by and large, remained centralised (Shreshtha 2001; Shrestha 1999).
Similarly, a 1968 Administrative Reform Commission was formed under the chairmanship of ex-minister Beda Nanda Jha with a view to making the administrative system lean, clean, efficient, capable, development friendly, economical and people oriented. The commission also emphasised public enterprise reforms and the establishment of a grievance handling mechanism for the common people (ARC 1968). However, the crux of this commission was to make the civil service neutral to the political parties and committed to the party-less Panchayat system. It was also a part of King Mahendra’s strategy to justify his political ambition. The commission furnished a long list of recommendations pertaining to administrative restructuring and rightsizing, personnel and financial administration reforms, administrative decentralisation, economic planning and development and public enterprise reforms. Very few of the recommendations were implemented such as establishment of Department of Public
21 King Mahendra replaced him by Kunwar Indrajit Singh on July 26 1957 within one and half years’ time. 80
Administration and Administrative Court,22 separation of district administration with the district level political unit (District Panchayat), issuance of a code of conduct for civil servants and formulation of a decentralisation strategy, position classification plan and Public Service Commission Strengthening Plan. However, the strategies and plans were not effectively implemented (Poudyal 1989).
The new King23with a new vision on development and democracy constituted yet another reform commission headed by then Finance and General Administration Minister Bhekh Bahadur Thapa in 1975 with a view to overcoming the legal barriers to national development efforts and making public administration more development-friendly. The commission emphasised improvement in the implementation of development plans, organisational reforms and downsizing the ministries, procedural reforms and corruption control. However, of the 17 major recommendations only four were fully implemented (CSVTF 2007). Interestingly, even in the relatively stable political situation and under a strong party-less political regime, many of the recommendations, including the reduction of ministries were not implemented.
During the latter part of the Panchayat regime the World Bank and the IMF had substantial policy influence in the country through their conditionality-based lending programmes for economic stabilisation and structural adjustment. The programmes based on the ‘Washington Consensus’ doctrine and focused on economic and financial liberalisation drove the government towards market-oriented governance reforms by limiting the role of the state (Khanal et al. 2005). A number of renowned scholars came from the US to advise the Panchayat regime for administrative reforms but nothing happened except collecting dusty reports.
To sum up, during the Panchayat Era, the bureaucracy was politically neutral but highly committed to the Panchayat system and monarchy. Written competitive examinations conducted by the Public Service Commission were reasonably fair, but the successful candidate would not be offered an appointment letter unless the authority received a positive police report stating that he or she was not involved in party politics. Ethics, integrity, morality and discipline were considered more important than competence and performance. A form of check and balance between politics and the bureaucracy was sought with a system of regular meetings between the King and senior bureaucrats (Poudyal 1989; Shrestha 2005). However, in practice, the Royal Palace Secretariat remained more powerful than the government’s central administrative secretariat throughout the regime. Tilted towards a welfare approach to development, the government adopted a centralised planning system that increased the size of
22 Administrative court was established but with different objectives. The commission recommended an administrative court that would address the grievances of common people but it was established just to address the grievances of civil service employees. 23 King Birendra succeeded to the throne on 31 January 1972 after the death of his father King Mahendra. 81 the civil service significantly. From merely 27,000 positions in 1961, it crossed 100,000 in early 1990s where the share of non-officers and helpers together was about 90 percent. This reflected the enduring impact of feudalism (ARC 1992b).
3.2.4 Administrative organization to governance reforms (1991-2016)
3.2.4.1 New public management and administrative reforms during 1990s
Unlike the previous reform commissions, the 1991 Administrative Reform Commission (ARC) adopted a comprehensive approach to public sector reforms. Many of the recommendations were oriented towards new public management. Chaired by the first elected Prime Minister after the restoration of multiparty parliamentary democracy in the country, the commission urged the government to redefine the role of the state in a changed context and ensure broader participation of non-governmental and private sectors in public sector governance. Major recommendations of the commission included: public service delivery improvement through process simplification, outsourcing and one door service policy, privatisation of public enterprises, implementation of complete devolution along with fiscal decentralisation, reduction in the number of ministries from 21 to 18 and retrenchment of civil servants by 25 percent, strengthening the anti-corruption bodies through legal reforms and establishment of a mechanism for continuous monitoring and administrative reforms (ARC 1992b). Following the 1992 ARC report there were major legal reforms to strengthen anticorruption bodies. A comprehensive Local Self-Governance Act came into force. A number of public enterprises were privatised. Outsourcing was initiated for basic services such as cleaning, driving and gardening. A number of budgetary reforms were carried out, and a high level Administrative Reform Coordination and Monitoring Committee (ARCMC) headed by Kulshekhar Sharma who was also the Vice Chairperson of the 1991 ARC, was established.
The government initiated a number of new public management (NPM) oriented reforms in the 1990s aiming at reducing the role and scope of government, downsizing the public service, establishing service standards, privatising public enterprises and introducing a performance management system to the Nepalese public service. However, the NPM reforms did not produce the expected results, mainly for two reasons. First, many reform measures remained unimplemented due to the lack of sustained political support and the lack of bureaucratic accountability for non-performance and resistance. Second, a number of reforms didn’t reach their logical end. There was significant progress in downsizing the civil service. However, other public services such as teacher and security services increased significantly. Moreover, reductions in civil service numbers failed to deliver efficiency gains, as a large number of civil service positions continued to be filled with contracting-out provisions. Similarly, instead of reducing the ministries, the number went up from 21 to 25. Moreover, despite the efforts to
82 design level wise performance indicators in civil service, there was a conceptual flaw in the performance appraisal system recommended by the reform commission, as well as the provisions stipulated in the 1993 Civil Service Act and Rules. In both cases the performance appraisal system was trait-oriented, lacking actual performance orientation.
The quality of decisions also failed to improve, despite the reduction of the decision-making layers in the civil service. The 1999 Local Self-Governance Act and Rules were not implemented in the letter and spirit. The initial zeal of privatisation did not last long, with inbuilt weaknesses in the privatisation process and the lack of sustained political support for privatisation. Similarly, substantial improvement in the anti-corruption legislation and institutions did not make significant impact in corruption control, as the socio-political and administrative culture was not conducive to implement the legal and institutional reforms effectively (Dhungel and Ghimire 2000; Gautam 2013; Jamil and Dangal 2009).
With a view to formulate a long-term strategy for civil service, the Ministry of General Administration commissioned the Twenty-Five Years Master Plan of Civil Service through the Council of Retired Civil Servants (CRCSE) in 1999. A report submitted by the CRCSE included a five yearly action plan emphasising people oriented public administration, short route to public accountability, clear role delineation between the political and bureaucratic executives, transparent and result oriented governance system and capacity development in the public sector (CRCSE 1999). However, the government did not respond to the report, and thus, by and large, it remained unimplemented.
The NPM reforms were set back by political instability and frequent changes of political leadership in the major political parties, leading to a huge gap in policy development and actual policy implementation. There were nine different governments between 1994 and 2000. Similarly, the public service was highly politicised after 1990, jeopardising its principle of neutral competence and causing an erosion in work culture, public service ethos and individual discipline. There was also no consistency and coherence in the policy statements of subsequent governments. When reform measures were less popular and had a low political expediency, the political parties reversed their support for reforms (Atreya 2002; World Bank 2000b).
3.2.4.2 Governance reforms amidst the political turbulence (2000-2007)
Continuing to use the commission approach to driving public sector reforms, the second majority government of Nepali Congress Party formed the 2000 Public Expenditure Review Commission (PERC) under the chairmanship of a member of parliament from the ruling party to review the structure, pattern, distribution and trend of public expenditure in different areas. The report minutely analysed the implications of government involvements in different sectors or subsectors. Following the poor track record of previous commission reports, of the 96 major
83 recommendations of the PERC only 27 were fully implemented leaving 21 partially implemented and 48 unimplemented. However, the one concerned with civil service rightsizing was implemented freezing five thousand vacant civil service positions and abolishing 1045 positions (GBMESRC 2010). Yet another report on civil service reforms was submitted to the government by an Asian Development Bank consultant in March 2000 (Tay 2000). The government did not consider the report seriously except incorporating a few recommendations in the 2001 Governance Reform Programme (GRP).
The GRP (2001-2007)24was commenced against the background of Ninth Plan (1997-2002) that highlighted clean, lean, transparent, efficient, competitive, employment-oriented, capable, productive, service-oriented and accountable public administration. The reform programme was designed following the Nepal Development Forum in Paris in 2000 that emphasised civil service reforms, corruption control and overall governance reform agenda. Having as its thrust a results and people-oriented and gender-responsive civil service, the programme also covered a wide range of governance issues such as corruption control, political party reforms and implementation of performance based management system in the public sector (ADB 2001).
Most of the policy directives emanating from the conditionality-based GRP were related to institutional development for governance reforms. Some new concepts such as a performance incentive fund, succession planning, gender mainstreaming in the civil service and grievance handling; along with the whistle-blowing and anti-money laundering legislations were also introduced. Similarly, the government initiated a number of legal reforms such as the amendment in the Commission for the Investigation of Abuse of Authority Act 2002 and enactment of the Prevention of Corruption Act 2002, Special Court Act 2002 and Political Parties Act 2002. A large number of civil service positions were eliminated and civil service recruitment was frozen for a number of years. The government complied with almost all the policy conditions.25 However, the programme had only a moderate impact on the national governance system. ADB’s independent evaluation team labelled the programme as less efficient, less effective and less likely to be sustainable (ADB 2010a). Although some of the reform measures were implemented in the first stance by building the legal frameworks, very few such legal provisions were further implemented as expected. Similarly, the institutional set up of the GRP was crumbled down along with the termination of loan assistance.
24 The programme was carried out under the loan assistance from the Asian Development Bank. The tied loan had 32 broad policy actions with three sets of tranche conditions. 25 According to ADB evaluation reports some of the policy conditions were partially complied and at least three conditions were not complied. However, the policy conditionality related to the adoption of the rules of procedure for the Constitutional Council was waived by the ADB considering the political situation of the country. Similarly, annual random checks of civil service employees’ property was not practical as it didn’t fall within the jurisdiction of the Ministry of General Administration. On the remaining conditionality, the government argued that most of the important provisions of the draft bill on Whistle Blowing were incorporated in the Right to Information Act 2007. 84
The government implemented another comprehensive conditionality based Public Sector Management Programme (PSMP)26in 2003, in view of contributing to the overarching goal of poverty reduction by strengthening its fiscal position, disengaging public enterprise ownership and management and improving corporate governance in the country. Of the 36 policy conditions, 31 were fully or substantially complied with, one partially complied with and the remaining four mostly related to public enterprise reforms were not complied with. Similarly, 12 non-tranche loan conditions were fully complied leaving four partially complied with, two not complied with, and the remaining one was found not applicable to the government (ADB 2008a).
Amidst the growing pressures on the government budget due to the growth of controllable and uncontrollable future liabilities, the government initiated a number of reforms to improve public finance and financial sector in the new millennium. The 2002 Financial Sector Reform Taskforce emphasised privatisation, private sector investment and result-based public expenditure management to reduce budgetary burden and foreign aid dependency. In the meantime, a Medium term Expenditure Framework was developed in 2002 as a three years rolling plan to prioritise government expenditure and focus on targeted programmes. The government allocated annual budgets to the projects and programmes on the basis of priority i.e. P1, P2 and P3. Hundreds of scattered ‘political projects’ were also scrapped based on the priority and budget appropriations. A value added tax was introduced as a fully automated revenue management system. In 2004 the government formed another high level Government Expenditure Review Commission to improve public expenditure management, government accounting and the budgetary process. With all these reforms there was a substantial improvement in financial information management system and revenue mobilisation and management (World Bank 2010).
As the broader public sector governance is an iterative process, it is difficult to assess the impact of far-reaching reforms such as the GRP and PSMP in the project/programme time frame. However, some aspects were not encouraging, such as the implementation process, the reform outputs and the sustainability of the major reform initiatives (ADB 2008a). Given the extremely complex political environment following the Royal massacre in 2001, Royal coup in 2002 and 2005, escalation of Maoist armed insurgency and the series of protests of parliamentary parties against the direct rule of the King, specifically the conditionality-based reform programmes were too ambitious to implement (ADB 2009a). A close analysis of the reform process reveals that the government was not genuinely committed to reforms as the focus was on loan
26 Like the GRP, PSMP was also a conditionality based lending programme of the ADB with 36 loan tranche policy conditions and 18 non-tranche covenants. 85 disbursement fulfilling the tranche conditions rather than improving overall governance system in the country.
3.2.4.3 Reforms during the post-conflict transition (2007-2016)
In the wake of far-reaching political change following the 2006 peaceful movement jointly launched by the Seven Party Alliance and Nepal Communist Party (Maoist), the government formed a task force to formulate a vision paper for civil service in the changed context. The task force headed by a Regional Administrator and steered by the Chief Secretary of the Government of Nepal was entrusted to bring in a vision paper for civil service that would be more result- oriented, responsive, efficient, accountable and inclusive through organisational restructuring, sectoral devolution, improved decision making and effective service delivery mechanism with an extensive use of information and communication technology and performance based management system.
The 2007 Vision Paper for the Civil Service suggested a number of reform measures to redefine the role of the state, forge partnership with non-state actors and improve public service delivery by inculcating positive attitudes, behaviour and work styles among civil service employees and adopt a performance-based management system (CSVTF 2007). The report emphasised evidence-based policy-making, participative and transparent policy process and continuous policy evaluation. It also recommended right-sizing and a citizen-friendly administrative design framework. The taskforce emphasised democratic, transparent and ethical governance, along with an inclusive civil service. It also recommended conducive work environment in public service and an inbuilt mechanism for continuous administrative reforms. However, there was no uniform opinion within the Cabinet about the relevance of the taskforce and its report.27The vision paper prepared after a series of interactions with the major stakeholders and subject experts remained just a reading material for civil service examinations as the government never acted on the report.
The government introduced the unified civil service system based on rank-in-position through the second amendment to the 1993 Civil Service Act in order to address the problem of special promotion system based on performance and experience.28A special promotion system was introduced on the back of strong pressure from the highly politicised civil service trade unions
27 The Prime Minister formed the task force but the General Administration Minister heading one of the key reform leading institutions clearly showed that he had reservations on the relevance of the task force itself. In a public hearing organized to collect views and suggestions on the draft report of the task force, he publicly announced that the vision paper was already irrelevant by then (The Himalayan, dated 4 January 2007 http://thehimalayantimes.com/kathmandu/suggestions-sought-on-future-of-civil-service/ : access 8 August 2016). 28 The new promotion system, though, said to be based on work performance and experience, in practice everybody gets promotion in specific period of service irrespective to competence and work performance. Thus it is often known as auto promotion or ‘water promotion’. 86 along with a provision of unified civil service based on rank-in-position. But the unified civil service remained unimplemented. The special promotion system was abolished in March 2014 through the third amendment in the Civil Service Act by adjusting thousands of civil servants promoted under the new provision. However, the study, commissioned by a team of experts to implement a position classification system, became yet another dusty report – despite being relevant for transformational change in the civil service.
With a view to transform the unitary form of public administration into a federalised system of governance, the government formed a reform commission in November 2008. The commission produced a number of reports on public service delivery, organisational restructuring and capacity development of public service, trade union and public enterprise reforms and a final report on federalising the civil service. However, alternative scenarios regarding the form and system of federalism remained unsettled for quite a long time (ARC 2011). Similarly, the 2009 Government Budget Management and Expenditure System Review Commission (GBMESRC) also had some implications on administrative reforms as it sought the ways and means to reduce administrative and recurrent expenditure through administrative restructuring, and to improve the operation and management of state-owned public enterprises (GBMESRC 2010).
Moving a little out of the box of the conventional commission model of reforms, the government launched an innovative ‘Hello Government’ initiative in 2011 with an objective of regaining and deepening public trust in public sector governance through improved people- government interface. The government received hundreds of complaints on a wide range of issues ranging from the lack of daily consumable goods to political consensus on the national interest. Complaints came through toll free phone and fax numbers that were operational twenty-four hours a day. The Hello Government Desk received 46,056 complaints from November 2011 to May 2016 through the toll free phone and fax, email, post and the social media such as Facebook and Twitter.29Response rate was also remarkable as the Hello Government Desk resolved 36,610 cases out of 39,063 total complaints in a four years’ time from November 2011 to November 2015.30However, in reality the resolved cases were just transferred to different government agencies and not actually settled. Close observation of the forwarded complaints reveals that many of such cases were lying in different government agencies without any further action. The buck-passing tendency was clearly observed during author’s field work in 2014 and follow-up visits in 2015.
29 E-Kantipur, 3 June 2016 (http://kantipur.ekantipur.com/news/2016-06-03/20160603075434.html , Access: June 3 2016). 30 The Himalayan Times, 15 November 2015(https://thehimalayantimes.com/kathmandu/hello-sarkar-resolves- 36610-complaints/ access: 24 February 2016).
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The government also launched an integrated Good Governance Action Plan for all the ministries and central level organisations, with the objectives of making public service customer-friendly and effective, and controlling corruption and discrepancies in public service by adopting three broad strategies. These were focusing on direct service providers, promoting public accountability, and continuous monitoring and evaluation of public service providers (GoN 2012). But the action plan failed to receive sustained attention by policy makers. In the meantime, the government formed yet another Administrative Reform Recommendation Committee in 2013 to recommend policy, laws and structural measures for broader administrative reforms in order to promote dynamic, accountable, transparent, result-oriented governance in the country. The committee submitted its report in April 2014, incorporating legal, structural and behavioural reforms of government organisations including judiciary, security sectors, and public enterprises, along with the NGO reforms (AARRC 2014). An Administrative Implementation Monitoring Committee was formed to expedite the implementation of the committee report. However, the committee has not been able to move beyond the ceremonial functions such as organising visits and seminars in different parts of the country (ARIMC 2015). The report has tried to touch upon almost all issues of public sector governance. However, it lacks a specific and implementable action plan.
3.3 Connecting political change with the reform trajectories
3.3.1 A snapshot view of political change and the reform trajectories
Nepal has undergone a series of political upheavals since the introduction of multi-party democracy in 1951, overthrowing the 104 years Rana family oligarchy (Figure 3.1). But Within a decade, the transition to democracy had become absolute monarchy with a party-less political system. The party-less Panchayat regime continued for three decades; the 1980 referendum for political change had a marginal win, resulting in a reformed Panchayat system instead of a multi-party democracy. With a democratic constitution and elected government around a year later, the political transition after the restoration of multiparty democracy in 1990 was relatively smooth. However, the democratic transition had a setback of infightings within the ruling party, the Maoist armed insurgency, unhealthy competition between the major political parties, the 2001 Royal massacre and royal interventions in 2002 and 2005. Now, a negotiated settlement with the Maoist party, following popular uprising in 2006 and elections of the Constituent Assembly, has more or less settled political conflict. However, political instability still continues even after the promulgation of new constitution in September 2015. Since 1990, there
88 have been 25 governments.31Given the form of government and election system, the prospect of majority government in the near future is unlikely.
31 Nepal National Weekly, http://nepal.ekantipur.com/news/2016-07-17/20160717120922.html access: 17 July 2016
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Figure 3.1 Pathway to democratic republic
Note: CPA= Comprehensive Peace Agreement, CA= Constituent Assembly
Source: Author's Construct
There was no ‘public’ sector in the true sense before the political change of 1951, as the government used to run like a family business. Public administration in the modern sense was introduced in Nepal only after the advent of multi-party democracy. Since then, a large number of reform initiatives have been carried out by different regimes (Table 3.1). The 1950s was a decade of transition, from a system of patronage to traditional administration in the country. Traditional public administration was promoted for three decades during the Panchayat regime. National public administration was committed to the monarch and the party-less Panchayat regime. The 1990s decade was a period of new public management experiment within the traditional administrative framework. The early phase of the new millennium can be characterised as a period of broader public sector governance reforms. Public sector governance reforms has remained off the priority of political parties and governments since 2007.
In 2013, the government launched a project to prepare the public administration for state reform (PREPARE) that would facilitate administrative restructuring and transition management in line with the federal structure of the government. The project, aligned with the United Nations Development Assistance Framework (UNDAF), has also incorporated some administrative reform agendas such as promotion of accountability and transparency, institution building and affirmative actions for inclusive civil service. However, a detailed and systematic administrative framework to suit the new political system and form of governance is yet to be designed. Thus this period can be characterised as a period of confusion with regard to public sector governance in the country.
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Table 3.1 Public sector governance reform approach and trajectory in Nepal Approach Year Reform Trajectory
Commission/Public Inquiry ➢ Evolution of modern civil service 1950s
Nepal Administrative Reorganizing ➢ Committed bureaucracy of Party- 1952 Committee less Panchayat Era (1962-1990)
Administrative Reorganization Planning 1956 ➢ NPM reforms in the 1990s Commission
➢ Broader public sector governance Administrative Reform Commission 1968 reforms: From Administration to good governance (2000- 2008)
➢ Federalizing public service (2008 Administrative Reform Commission 1975 onwards) Administrative Reform Commission 1990 Corruption Control Recommendation Committee 1999 Public Expenditure Review Commission 2000 Financial Sector Reform Taskforce 2002 High level Government Expenditure 2004 Review Commission Task- force for Vision Paper of Civil 2006 Service Administration Restructuring 2008 Commission Budget and Public Expenditure Review 2010 Commission Administrative Reform 2013 Recommendation Committee
Conditionality-based Lending Governance Reform Programme 2001-7 Public Sector Management Programme 2002-6
Source: Author’s compilation.
3.3.2 Political development, societal culture and administrative tradition
There were fast and revolutionary changes in the political system in Nepal after the restoration of multiparty democracy in 1990. The worldwide wave of democracy in the late 1980s and early 1990s (Diamond 1990) extended to South Asia, including Nepal. However, political changes hardly brought any change in the fundamental social and political structure. While the Westminster style of parliamentary democracy was introduced, a democratic system and culture was yet to be institutionalised. Nor were political parties yet democratised and fully institutionalised. Politics was hardly driven by ideological standing, political parties’ values, ideals or principles. Factional politics has been prevalent ever since multiparty parliamentary 91 democracy was introduced. All the major political parties have suffered from factionalism. Factional leaders of the ruling parties bargained with each other for their share of ministerial portfolio.32 This factional politics hampered development of political culture in the country (Brown 1996, pp.217-222).
Patronage culture is prevalent among all the major political parties, though the extent differs. Political change has brought more people and power centres on board with national politics. However, the fundamental structure and characteristics of traditional society and polity remain intact. Political systems, forms of governance and the governments have gained more legitimacy from international development partners compared to the Panchayat regime. However, the first-past-the-post voting system reinforced traditional society. The traditional forces retained power in the guise of electoral democracy. Political parties remained excessively influenced by a few leaders than the values, ideology, policies and programmes. A small group continued to have a dominant role in national politics, which perpetuated status quo power dynamics and social and cultural rigidities in the country (Einsiedel et al. 2012; Malik et al. 2009; Pandey 2012).
The Maoist insurgency quivered the age-old traditional society in rural Nepal. However, gradually it reversed back to the normal situation. This is partly because of the ideological flaw of this party in attempting to introduce change by force and violence, rather than by changing attitudes and behaviour. Similarly, the change was not well-designed. They raised social issues as a strategy to gain political support from wider communities. The means they used were not appropriate to change deep-rooted societal culture. Social agendas were used as tactics to defeat political opponents, rather than to initiate lasting reforms for the country.
Frequent changes of governments weakened the democratic system and value-based politics. There were 12 governments between 1990 and 2002. Political parties were engaged in bribery horse trading, blackmail, conspiracy and manipulation of laws (Hachhethu 2015). It was said that people joined parties with an objective of fulfilling their selfish motives and interests. When they realised that their motives and interests would not be fulfilled, they split the party, quit it or jump to other parties with better opportunities to promote their interests. Consequently, despite so many political parties, there was a dearth of ethics and positive political culture. The winners took elections as a license to arbitrarily govern the country without restraint. The impatient losers used violent protests to destabilise the governments. In 2002 alone opposition parties
32 The Himalayan Times, 25 August 2016, http://thehimalayantimes.com/kathmandu/nepali-congress-ministers-take- oath-friday-intra-party-dispute-ends/ access: 31 August 2016
92 organized 39 bandhs33(Malik et al. 2009, pp.390-396). It eroded social norms and values of democracy.
Social change did not catch up to the spirit of political change. Debates on social transformation were sporadic. They did not come out of the seminar rooms to be a part of life. Fatalistic beliefs prevailed in large sections of society. There was no dignity in work. Hierarchical society based on traditional social stratification persisted (Bista 1991). Individualism became self-centred and egoistic, unlike the one De Tocqueville promoted in the US (Hutt 1994). The social fabric of Nepali society was dominated by rigidity and conservatism that did not favour transformational changes. Independent and self-assertive professionals and balanced views were hardly promoted at the core of governance.
The formal administrative system based on the values and traditions of Westminster bureaucracy was neither professionalised nor insulated from politics. The highly politicised bureaucracy eroded independence and neutral competence (Einsiedel et al. 2012; Malik et al. 2009). Before 1990, the formal structure of politics and bureaucracy was under the shadow of an informal structure within the Royal Palace. Opportunity for leadership development was skimpy, both at political and bureaucratic level. The Panchayat regime promoted sycophantic ‘yes men’ instead of competent leaders. In the post 1990 period, the informal political agents promoted corruption and put public bureaucracy in defensive positons with undue pressures. As a result, the administrative machinery worked far below the capacity – like the grossly underutilised production plants in large industries.
Similarly, with the erosion of political and societal values and the absence of a strong accountability enforcement mechanism, neo-patrimonial relations among political leaders and senior bureaucrats flourished. Decision were often based on informal connections and relations rather than evidence and formal rules. The senior executives took decision making as a risky business rather than an opportunity for reforms. Incongruence between the political change and societal culture, as well as status and process oriented subservient public bureaucracy, was clearly evident. Arguably, it had significant influence in the making and implementation of governance reforms in Nepal.
3.4 Summary
Most of the political history of Nepal revolves around monarchy and similar familial rules. For this reason, feudal culture is deeply ingrained in the Nepali society. In ancient, medieval and modern Nepal (before 1951), a number of ruling dynasties changed, but the political system and the governance fundamentals remained the same. Rulers changed but the rules of the game
33General strikes 93 virtually remained the same as the state-society relations, societal culture and power structure remained intact. There was no systemic drive to bring in changes in administrative and governance systems, though a few concepts were considered by some relatively liberal rulers. However, personality-based sporadic efforts were quickly diffused by the dominant power structure and traditional culture of the country.
After the advent of multiparty democracy in 1951, Nepal witnessed a series of political changes. However, despite the changes in the political system, structural rigidities of traditional feudal system were still prevalent. As the 1951 revolution concluded with a mediated negotiation and a compromise between the traditional forces represented by the ruling Rana family members and the pro-democracy political parties led by Nepali Congress Party, the shackles of structural rigidities of traditional feudal society remained intact. For this reason, the institutionalisation of democratic change was fiercely resisted by traditional forces. On the other hand, the democratic forces lacked democratic culture and governing experience to launch far-reaching, comprehensive reforms in the country and ensure its sustainability. Nevertheless, the modern civil service was established in 1956, based on the British administrative tradition.
In Nepal there is a pattern of forming an administrative reform commission (or multiple ones) after every major political change. During the initial phase of modern public administration, the commissions were focused on reorganising the feudal administrative mechanism to be a more open public administrative system in the country. During the three decade long party-less Panchayat era, a number of reform commissions were constituted with the view of strengthening the centralised traditional public administrative system committed to the party- less Panchayat regime. New public management oriented reforms were tried with the traditional administrative mechanism in the 1990s after the restoration of multiparty democracy in 1990. In the new millennium, broader public sector governance reforms were commenced through a number of reform commissions, along with some policy based lending financed by the international development partners. When the country was declared a federal democratic republic following the 2006 people’s uprising, administrative reforms were geared towards restructuring the centralised state machinery to fit into the federal structure for the country. However, implementation always remained a daunting task for the government.
In-depth analysis of political change and reform trajectories in Nepal reveals that political change did not commensurate political development and societal change, leaving the fundamental characteristics of state society relations and power structure unaltered. Arguably, implementation and sustainability of public sector governance reforms remain a serious issue in a developing country like Nepal unless democratic culture is institutionalised, societal culture is transformed and administrative culture becomes performance oriented.
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Chapter 4 Nepalese perspectives on the dynamics of governance reforms
Having provided a critical review of Nepal’s political history and administrative reform trajectories in the previous chapter, this chapter focuses on the dynamics of governance reforms in Nepal in the post- liberalisation era (1990 onwards). Analysing political development, regime characteristics, state-society relations and state-donor dynamics, it contextualises reform dynamics in Nepalese perspectives. This chapter also analyses the role of key reform actors, along with their interests and incentives to engage in the reform process. Moreover, thischapter explores the role of oversight agencies in holding the reform leading and coordinating institutions accountable for the design, adoption and implementation of governance reforms. In this chapter I argue that implementation of governance reforms largely depend on the quality of interactions among the key actors, institutions and networks throughout the reform process. This is further advanced in chapters 5, 6 and 7. 4.1 Political context and regime dynamics in Nepal
Witnessing a number of vicissitudes involving upheavals, blockages and reversals in the political development process, the Nepali people have constantly struggled to institutionalise and consolidate democratic politics ever since parliamentary democracy was introduced in the country in 1951. Despite a number of major political changes to institutionalise democracy, such as the restoration of parliamentary democracy in 1990 and 2006, and the declaration of a federal democratic republic in 2008, there has been no significant progress in deepening democracy. Even after six decades, democracy is still facing foundational challenges (SDSA Team 2008).
Nevertheless, the country has moved beyond the party-less Panchayat regime to the party-based democratic system. Adopting a more open and progressive governance system, parliamentary democracy in 1990 heralded ‘revolutionary’ changes in the governance system. Sovereignty was transferred into the hands of its people from the grip of monarchs. The 1990 Constitution of the Kingdom of Nepal guaranteed freedom of speech along with a long list of fundamental rights. With a constitutional provision for the separation of powers and checks and balance, the rule of law was seemingly guaranteed.
However, the initial zeal and progress of democratic reforms in the 1990s did not last long as faction-ridden politics weakened the country’s major political parties. The major political parties exercised floor-crossing, horse-trading and bribing to retain power, thereby overshadowing the achievements of the early 1990s (Webster 2011). Similarly, political instability, leadership-reliant political parties, the short-sightedness of political leadership and the symbiotic relationship between political authorities and public bureaucracy all hindered popular access to and participation in the reform process. 95
As Burnell et al. (2011) argued, the real politics of developing countries cannot be understood without analysing the nature and structure of regime, governance processes, power relations and interactions among different actors at both the centre and local levels. Viewed from this perspective, the political regime in Nepal fits into the hybrid category. The form and system of governance is nominally democratic. However, democratic norms and values are frequently violated for the convenience of the ruling elites. The regime is coercive unless there is fierce resistance. Democratic culture is almost non-existent and the political parties are yet to be democratised. There is no competitive environment or internal party democracy among the major political parties. Riven by factional politics and without clear ideological standings, the major political parties have become increasingly opportunistic and unpredictable (Brown 1996).
Nepal’s political culture remained hierarchical and patrimonial even in the democratic republic (Dulal and Foa 2010, p.94). Personality factors remain dominant in national politics. The civic associations are also influenced by personality factors rather than shared norms, values and commitments. Informal norms of political elites dominate national politics. Political leaders are often nominated for office based on personal relations rather than competitive elections. The first-past-the-post election system adopted in the 1990s helped perpetuate the highly centralised political system with ‘artificial majorities’ (Malik et al. 2009, p.390). Money, muscle and the traditional mindset of the people made electoral democracy a rich man’s power game. The unethical gamesmanship for political power undermined democratic norms and values in the latter part of the 1990s, something that has continued into the new millennium (Rizal and Yokota 2006).
Focused more on procedure than substance, parliamentary democracy in Nepal promoted unhealthy rivalries among the major political parties. The winners claimed the privilege of unfettered rule, whereas the losers lost patience with constructive opposition. The unhealthy competition among the major political parties often obstructed the democratic process and provided fertile ground for the Maoist insurgency. During the insurgency, the government was more focused on demonstrating its presence in different parts of the country and, accordingly governance reform was mostly off the agenda.
With a majority government and a reform-oriented political party led by an ardent supporter of liberalisation policies at both the political and economic fronts, Nepal initiated comprehensive public sector reforms in the early 1990s. However, the chaotic coalition governments of the late 1990s compromised everything for political power, undermining popular hopes and expectations for reform. The royal moves in 2002 and 2005 were bluntly regressive in political terms. Nevertheless, public sector governance reforms were carried out with more resolute commitments, despite the fact that conflict resolution was the first priority of the government. In
96 the aftermath of the 2006 popular movement for the restoration of parliamentary democracy, public sector governance reforms were sidelined as peace settlements and constitution-making became the priority of the government of the day. Moreover, Communists, who were unmoved by economic liberalisation and new public management, headed most of the governments after 2006.
Institutional and historical factors have remained serious challenges for the consolidation of democracy in Nepal (Ganguly and Shoup 2005; Kochanek 2010). Democracy is yet to become a way of life. Institutions and governance structures inherited from the past are still dominant in contemporary politics. Patron-client relations exist at all levels of governance. There is also speculation of a return to authoritarian rule (Dulal and Foa 2010, p. 86). As Brown (1996) argued, rampant corruption, criminalisation of politics and polarisation of society based on ethnicity and regionalism, are becoming threats to Nepal’s democracy.
Since the political change in 200634, governments have spent considerable time and energy negotiating agreements among different political parties and other groups involved in the emergent conflicts. There is an increasing trend of compromising democratic norms and rules and thus the rule of law in the name of consensus. The informal High-level Political Mechanism (HLPM)35 was alleged to undermine the formal structure of public sector governance. With the mixed-proportional election system adopted in the democratic republic, majority government is not likely in the near future. Ethnicity and regionalism-based identity politics is on the rise, specifically in the Central Terai Region and in some parts of the Eastern Hills, even after the promulgation of the much-awaited inclusive Constitution in September 2015. With the erosion of public trust in public sector governance in the post-conflict period (Askvik et al. 2010), and the decline in government’s capacity to enforce rules, state capacity to introduce and implement transformational reforms has been reduced significantly. Therefore, given the political context, the implementation of public sector governance reforms remains a daunting task in Nepal.
4.2 State-society relations and cultural context
Political awareness has increased in Nepal since the restoration of multiparty democracy in 1990. People seem more open to change than ever. Despite the growing dissatisfaction and declining trust in major political parties, the majority of people have faith in liberal democracy.
34 The 2006 democracy movement ended King Gyanendra’s direct rule reinstating the parliament dissolved in May 2002 and stripping the king of many of his powers. With the Comprehensive Peace Agreement between the Seven Party Alliance and the Maoists, armed insurgency came to an end. However, series of region and identity-based conflict emerged during the transition period. 35 The HLPM was formed on 8 January 2010 to move the country from a political impasse in the peace process restoring dialogues among the three major political parties in the Constituent Assembly. It opened an avenue to engage the major political parties in the peace process. However, the informal political mechanism didn’t have legal foundation and thus was often criticised for being a ‘three party syndicate’ and undermining the rule of law. 97
People’s participation in the first and second constituent assembly elections of 2008 and 2013 demonstrate their unflinching commitment to democracy (Carter Center 2013; Gellner 2014). However, democracy is yet to be a part of life even after two and half decades since parliamentary democracy was restored in 1990. This shows that periodic elections alone have not fostered a democratic culture in Nepal.
As Haynes (1996) argued, democracy cannot flourish in the absence of interactive relationships between the state and citizen. When people contest the actions and interactions of the government, they can forward their differing opinions on political, economic and social reform agendas. However, as elsewhere in South Asia, parliamentary democracy in Nepal has rarely provided opportunities for ordinary citizens to further their interests or stakes in the governance processes. The populist political parties raised peoples’ expectations without enhancing the state’s capacity to fulfil them. Lagging far behind in fulfilling people’s expectations, Nepal is regarded as a failed democracy (Dulal and Foa 2010; Ganguly and Shoup 2005). However, it has also been argued that since an ‘expectation overload’ has emerged, the Nepalese case is a ‘frailed’ one rather than a failed democracy (Webster 2011). Whether it has failed or frailed is a matter of debate. However, democracy in Nepal failed to be a stepping-stone to initiate and implement far-reaching reforms.
The regime type, power structure, societal culture and the level of social development determine state-society relations. All these influence the state’s reform priorities. Similarly, political, societal and administrative cultures determine state capacity to implement policy reforms (Leftwich 2011; Meier 1991). Therefore, democracy cannot be functional in the absence of social transformation. In Nepal, all the major political initiatives ended up with negotiated settlements and thus social transformation hardly took place along with political changes. This is why political democracy has not percolated into the grass-roots of society (SDSA Team 2008, p.152).
Incongruity between the political change and socio-economic development has also been problematic in Nepal (Hutt 1994). The country adopted a parliamentary democracy system which demanded a well-developed political culture. However, there has hardly been any positive change in a deep-seated patriarchal society such as Nepal’s, highly influenced by fatalist beliefs. Patron-client relations have long been retained, further contributing to the development of neo-patrimonialism rather than abolishing it. Similarly, with the prevalence of fatalistic attitudes, the mainstream of Nepali society still believes in miraculous achievements, where luck rather than hard work leads to change in people’s lives. The status oriented hierarchical society feels threatened by transformational change and thus tends to obstruct the
98 reform process rather than facilitating it. Contemporaneously, Bista (1991, pp.115-117) argued that fatalistic hierarchism is the crux of the governance problem in Nepal.
There is a growing tendency to view governance issues in terms of social inclusion and identity politics in multi-ethnic, multi-cultural, multi-religious and multi-lingual societies like Nepal’s, as social exclusion and inequality are common in such countries (Hachhethu et al. 2008; Hutt 2004; Tamang 2011; von Einsiedel et al. 2012). Highlighting the exclusionary informal systems and practices of Nepali society, Drucza (2016) argued that without addressing social issues, political reforms cannot be effectively implemented. Therefore, without making breakthroughs in the social system and enduring bureaucratic traditions largely based on personal links and informal networks, the implementation of governance reforms remains a daunting task. Similarly, the huge gap between rhetoric and reality of the ruling elites is also responsible for eroding the very foundation of progressive development in the country (Panday 1999).
Recently, ethnicity and identity-based politics have been brought into the limelight of contemporary governance and development discourse. With democratic rights and an open political environment, issues pertaining to ethnicity, regionalism, caste and religion have come to the fore to address the issues of social exclusion and inequality. The movement led by international and national non-government organisations in association with caste, ethnicity and regionalism-based associations has developed assertiveness and activism in society in favour of the right-based approach to development. However, with the expansion and intensification of these issues there is an increasing tendency of defying the state. In fact, the much hyped ethnicity and identity-based politics has been poorly handled in Nepal, which has created mistrust and fear among different ethnic communities and regional groups. The proponents and advocates of ethnic federalism pushed their case to the extent of demanding special privileges to the traditionally dominant ethnic community/group by reserving the position of a chief minister for at least two terms (Lawoti 2014,p.139). All these developments have created both opportunities and challenges for governance reforms in the country.
4.3 State-donor dynamics and its impact on reform initiatives
Nepal has been an aid-dependent country ever since it was opened up to the rest of the world in the 1950s. The first periodic national plan was solely financed by foreign aid (Khadka 1997). Despite the declines in its share to GDP recently, foreign aid still occupies a significant role in the overall development of the country. At present, foreign aid contributes around six percent of gross domestic product and occupies 20 percent of the annual budget (MoF 2016b).
In principle, foreign aid depends on mutually negotiated agreements between the donor and recipient countries. However, in the absence of negotiation capacity and policy manoeuvrability,
99 developing countries like Nepal hardly have any say in the negotiated agreements. This is not only because the donors push their priorities based on their perceptions and interests, but also because the recipient countries cannot clearly articulate their priorities and national interests (Wildavsky 1972). Policy practioners argue that this recipient factor is recently becoming stronger. The developing countries also do not pay due attention to the negotiation process. In Nepal, international negotiations are taken as an opportunity to visit foreign countries and thus negotiators are often selected based on their links with the power centres rather than experience and expertise in the field (EI002).36
External development partners are increasingly involved in governance issues such as the rule of law, human rights and security sector reforms. Almost all the major government institutions, including the Prime Minister’s Office and oversight agencies, run foreign aided projects to strengthen their institutions. There is donor funding even to improve electoral and legislative processes and democratise political parties. Diplomatic communities in Kathmandu organise regular interaction programmes and dinner parties focusing on political party leaders, youth wings of the major political parties and advocacy groups involved in identity politics (Wild and Subedi 2010,p.vii). Bureaucratic leaders are fond of running foreign aided projects under their departments with an expectation of foreign visits and readily available stationary and other office supplies.37
The external donors are often blamed for not being sufficiently attuned ‘politically’, and for failing to pay due attention to historical and social issues and effectively engaging in contemporary issues such as social inclusion, identity politics and various dimensions of inequality (Drucza 2016). It is also argued that foreign aid helped to consolidate power of traditional elites rather than bringing in changes in the existing power structures. Perpetuation of traditional elites’ control in national governance and donor collusion are attributed as major reasons for Nepal’s development failures (Metz 1995, p.181). On the other hand, they are also blamed for meddling in sensitive governance issues (Adhikari 2011), as well as breaching established international norms, values and diplomatic practices.38
36 An in-depth interview with a former Secretary of the Government of Nepal on 25 May 2014. 37 All the major government institutions including the Parliament, Supreme Court, Prime Minister’s Office, Commission for the Investigation of the Abuse of Authority, Office of the Auditor General and Nepal Police have had foreign aided projects recently. During my field visit, it was found that Office of the Prime Minister and Council of Ministers recently prepared a report on gender-based violence in selected rural districts in Nepal through a technical and financial support from external donors operated by a local non-governmental organization which is hardly justifiable on any ground. 38 For instance, some Kathmandu based European Union representatives were charged for promoting a Terai- Madhesh based separatist activist. They called on then Prime Minister Sushil Koirala to state that their meeting with the separatist activist should not be interpreted as their endorsement to his activities and political agenda (http://kathmandupost.ekantipur.com/printedition/news/2015-02-02/meeting-with-ck-raut-apolitical-insist-european- ambassadors.html access: 19 June 2016). 100
An analysis of annual budget speeches in the post-liberalisation era (1990 onwards) sheds light on state-donor dynamics in Nepal. The policy recommendations of donors are taken as guiding principles during budget preparations (MoF 1996). Similarly, the government is more concerned with the foreign aid commitment than the country’s development performance (MoF 1997), as the foreign aid commitment is considered one of the most important indicators of governments’ success. Finance ministers cherish the opportunity to announce that donors have pledged more foreign aid commitments, especially if they are impressed with Nepal’s compliance to donor recommendations (MoF 2003). The following statements of a Communist Finance Minister (MoF 2004b) further illuminates state-donor dynamics in Nepal:
Government is serious on the concern raised by the donor agencies regarding human rights, peaceful settlement of conflict, and absence of elected representatives in local bodies, and democracy and governance. It is not easy to prepare a budget neglecting the financial and technical support of bilateral and multilateral donor agencies to a developing nation like Nepal.
During the 1990s, almost all foreign donors were happy so long as Nepal adopted economic liberalisation and structural adjustment programmes. However, recently the country has been sandwiched between the international financial institutions promoting liberal economic policies and the advocacy of critical sociologists within and outside the country for social inclusion, equality and ethnicity/regionalism-based identity in a country with 123 languages and 125 ethnic and caste groups (Lawoti 2014). As there is no unanimity among the major development partners regarding Nepal’s reform agendas, the country faces many difficulties in the design and implementation of its reforms (Nayak 2008). With the increase in foreign assistance through non-governmental sectors following the decline in foreign aid at the state level, the influence of international non-governmental organisations has increased tremendously in the 21st century.
To sum up, international development partners have played an influential role in the making and implementation of policy reforms in Nepal. This is not solely because external donors are interested in policy transfer or exerting pressures on the government, but also due to the ineptness, incompetence and inability of Nepalese political and bureaucratic leaders to handle the affairs of state. Nevertheless, public accountability has been eroded along with the growing interventions of international donors, as they have become a party to success or failures of reforms. On the other hand, the traditional elites are prone to exert fierce resistance to reforms, claiming the reform agenda to be entirely externally driven.
4.4 Actors, interests and incentives
4.4.1 Political leaders
Political leaders embraced a long-term vision of economic liberalisation and new public management (NPM) oriented public sector reforms in the country during the early 1990s. The
101 following excerpts from the 1993 Budget Speech clearly demonstrate the government’s genuine commitment to market-oriented public sector reforms during that period:
This budget is also a document of liberal and competitive economic development of the popularly elected government ...We are aware that reform process is often painful. It can be politically risky and, may have detrimental impact on government’s popularity. However, the government does not adopt economic policies only viewing its five years tenure or the next general election (MoF 1993).
However, with frequent changes of governments, the initial commitment and ownership to reforms gradually withered in Nepal, as happened in Uganda during the 1990s (Robinson 2007a). Political instability led the leaders to concentrate on forming and retaining the coalition governments. Similarly, the governments did not have much zeal to continue reforms, as they were criticised for abandoning the edge of democratic socialism to embrace capitalist ideology – even by some of the senior leaders from the ruling party. In the absence of a common understanding among the major political parties, a number of subsequent governments ‘talked’ the reform agenda. However, none of the governments completely pulled off the reforms, as all of them were interested in developing cordial and credible relationships with the international donors for sustained development cooperation. That is why they tried to show off themselves as reform-oriented leaders. In the words of a former secretary of the government of Nepal “they dramatise with the false commitments that they are committed to reforms” (EI002).39
During my fieldwork for this thesis, many of the political and bureaucratic elites and the civil society leaders I interviewed portrayed political leaders as weak, visionless, stuck in the status- quo and election oriented (EI005, EI006, EI029, EI040, and EI086).40 Political leaders hardly have firm standings on any issues, including public sector reforms. They coin statements viewing the size and mood of the masses they address. Similarly, the ministers were more interested in day-to-day operational management than broader policy issues. Most of the time they were encircled by their party cadres and, thus hardly had sufficient time for their ministerial business. As reforms did not have direct benefit to them, they did not have much interest or incentive to initiate and implement governance reforms in Nepal.
4.4.2 Public servants
Incongruities between the highly sophisticated formal administrative system and structure and the traditional non-performing culture of pubic bureaucracy is clearly visible in the Nepalese public service. As stated by Ezrow and Frantz (2013), the formal system and structure of the Weberian model of public administration is based on highly capable administrative institutions equipped with neutral competence of public professionals, which is insulated from the party
39 An in-depth interview was taken on 25 May 2014. 40 In-depth interviews were taken in 2014 on May 27 and 28, June 29, July 6 and August 19 respectively. 102 politics. However, the subservient, self-serving, poorly organised, politically partisan, inefficient public servants (Malik et al. 2009) are dominant in the Nepalese public service. Driven by the feudal ‘courtiers’ mentality, they have a tendency of projecting themselves as the masters of ordinary citizens. They also lack the courage to engage in logical arguments with their seniors and the political authorities, and are thus subservient to them, and lack an orientation to support innovation or reforms(Bajracharya and Grace 2014).
The buck-passing tendency of the Nepalese public bureaucracy can be best described by the ‘meeting’ and ‘committee’ metaphors (Bista 1991; Rose and Fisher 1970). They organise meetings or send decision agenda to the committees to avoid the risk of decision-making. Meetings and committees are also strategies to hide from public scrutiny or to buy some time until a more favourable situation eventuates. Moreover, many of the status-oriented senior officials have a tendency for hiding their weaknesses and are seldom open to learning. Most of the time they are not prepared for meetings and are thus not in a position to participate in discussions during the meetings. When time runs out or matters are already decided, they complain and even maintain a hands-off approach instead of taking ownership for their own decisions (EI034).41
The Peter Principle perfectly fits the Nepalese public bureaucracy. The higher the level, the more dysfunctional are the public servants. At the lower levels, officials are more active, assertive and professional. When they rise through the career ladder, they suddenly lose their backbones, as they need favours from the political leaders to reach leadership positions. With the advent of highly politicised trade union activism, senior public servants’ proactiveness in offering expert advice to the ministers is declining (EI031).42
However, compared to the Panchayat era, senior public servants are more vocal and assertive since the restoration of multi-party democracy in 1990. They are also good at crisis management, with civil servants playing a commendable role during the Maoist insurgency. They were able to ensure the government’s presence at the grass-roots level when all the major political polities pulled back to the centre. Moreover, public servants are now better educated and informed than previously. However, with permanent tenure, fixed salary and a non- preforming culture, public bureaucracy in Nepal is not fond of transformational changes in the public service. Being a ‘cluster of vested interests’, the upward looking bureaucracy hardly moves beyond career development issues (IE061).43 They have a tendency of picking up
41 An in-depth interview with a senior official of a prominent development partners on 25 June 2014. 42 An in-depth interview with a former secretary of the Government of Nepal on 21 June 2014. 43 An in-depth interview with a civil service trade union official on 24 July 2014. 103 reforms selectively that serve their interests. When reforms do not fit to their interests, they silently kill them (EI033).44
4.4.3 Development partners
With high reliance on foreign aid, Nepal is exposed to the external influence in the policy process. However, the influence of development partners largely depends on the quality of their interactions with the host governments. Government representatives face a number of limitations during the dialogue and negotiation process. First, they are more focused on aid commitments than holding effective interactions. Similarly, many of them are less fluent in English and feel more comfortable saying ‘yes’ than ‘no’; the latter requires backing up with clear arguments and credible evidence. The information technology (IT)-perceptive English speaking experts also psychologically defeat them. As a senior government official involved in foreign aid coordination for a long time states, negotiations and dialogues are mostly held just to formalise the documents prepared by the development partners (EI033).45
On the other hand, with a shallow general knowledge about the country, based on a brief visit, the donor representatives and their consultants tend to generalise about the Nepalese context. They hardly get feedback from their field offices (EI034)46, who believe that their experience in other developing countries fits well to Nepal. Similarly, while they often release positive statements such as: ‘Development partners should offer dialogue and options, not prescriptions’(ADB 2009b,p.106), they rarely translate such normative statements into reality.
With a slightly different approach, focus and ‘modus operandi’, the bilateral donors exert a more direct influence on the policy process in developing countries. They are becoming more assertive and prone to intervene in micromanagement of political and social issues in aid- recipient countries. There is a growing tendency of channelling development assistance through non-government organisations that are vocally critical of governance issues in many developing countries. Multilateral donors also loudly broadcast their support of values such as democracy, human rights and inclusive development, but they tend to be more neutral on sensitive political and social issues. However, both the donors have an interest in technical assistance that allows hiring international consultants (EI009)47. Nevertheless, they are keenly interested in supporting the implementation of governance reforms in Nepal, as it would enhance their image and
44 An in-depth interview with a senior government official on 23 June 2014. 45 During an in-depth interview on 23 June 2014, he told that almost all the foreign aided projects are designed and prepared by the foreign experts. 46 An in-depth interview with a senior official of a prominent development partner on 25 June 2014. 47 An in-depth interview with a senior civil servant involved in the implementation GRP (Governance Reform Programme, 2002-2007). 104 credibility among the wider public within and outside the countries – though their focus is more on ‘best practices’ than the ones that would ‘fit best’ to the country contexts (EI014).48
4.4.4 Trade unions
The public sector has been excessively unionised in Nepal since 1990. Following the active involvement in the 1990 political movement organised by major political parties, public service employees including the civil servants began to view themselves as shareholders of political change (EI021).49 They have a substantial impact on the system of national governance.
Trade unions are so strong that they sometimes challenge even the Prime Minister if his or her position in the ruling party is relatively weak. They often influence the senior executives including the chief secretary and secretaries by using their connections with the ruling party. They do not cooperate with ministers even from their parent parties if they fail to assist their interests (EI060).50 In contrary to the bureaucratic norms and values unionised officials organise Chhaka Jam (vehicle closure) and dharnas (sits-in) within the premises of the Central Secretariat to fulfil their demands. Sometimes they threaten and even vandalize offices of permanent secretaries to exert significant pressure on them. Consequently, trade unions are weakening governance and governability, reducing the level of policy compliance and promoting non-performing culture in Nepalese public service (EI019).51
Organised as sister organisations of major political parties, trade unions are more interested in party politics than professional improvements. Similarly, short-term interests of their members guide their actions, rather than systemic change in public service in the broader public interest. They hardly have any incentive to promote public sector reform. Instead, they oppose and even resist reforms that pose a threat to their job security and comfort zones of non-forming pleasure.
Despite their claims of contributing good governance by supporting the enhanced public accountability and the reduction in impunity – along with creating conducive environment in the public service – they do not enjoy a positive image among the general populace. The mass media is also very critical of their role and have advocated the expunging of trade unions in the civil service.52 In the meantime, the mainstream trade unions have pleaded for ‘trade unions
48 An in-depth interview with a senior government official on 5 June 2014. 49An in-depth interview with a joint secretary of the Office of the Prime Minister and Council of Ministers on 12 June 2014. 50 An in-depth interview with a former minister for General Administration on 24 July 2014. 51 An in-depth interview with a former secretary of the Government of Nepal on 12 June 2014. 52While the government was holding an election for an authentic trade union in the Nepalese civil service in June 2016, almost all the print and online media in Nepal expressed a views in favour of abolishing it. It is interesting to note that interviewees from all the major political parties were very critical of the public service trade unions though they rarely oppose them in public. 105 with political rights’ where civil servants can contest national/local elections and resume their positions when they lose election or complete their tenure as the people’s representatives (EI062).53
4.4.5 Civil society
With the adoption of a pluralistic form of governance in 1990, civil society began to flourish in Nepal. However, in the absence of adequate intellectual discourse, it still encounters definitional problems. This is not because civil society is an ambiguous concept. It is the practice that is obscured. If defined in its original meaning and philosophy, civil society is almost non-existent in Nepal. It evolved as a ‘mimetic articulation’ of developed countries’ philosophy (Shah 2008), which covers almost everything except the state, market and family. Lacking neutrality, civil societies in Nepal resemble lobbyists and interest groups more than citizen-centred civil societies (EI006)54.
Sectional groups are criticised for their involvement in partisan politics. With heavy reliance on donor funding and low level of transparency and accountability, they do not command social legitimacy and trust (OAG 2015b; SDSA Team 2008,p.149). They have a tendency to show-off their progress through various reports full of catchy slogans and populist agendas in order to please the donors. They are also often criticized for having high operational costs. Highly dependent on donor funding, these civil bodies tend to promote the agenda of donors instead of promoting innovative reforms that would fit into the ground reality.
Civil societies have been actively involved in major political movements in Nepal since 1990 (Krammer 2010). However, the desire for political change has not managed to institutionalise substantial achievements. Focused on social issues, they have little interest, stake or incentive to promote broader governance issues. In the absence of a partnership culture on the part of both the government and civil societies, they have a poor track record in supporting the implementation of governance reforms (ADB 2008a). In a nutshell, Nepal lacks vibrant civil societies and the requisite partnership culture to functionalise and institutionalise democratic institutions and effectively implement governance reforms.
4.4.6 Private sector
The liberal economic policies introduced in the early 1990s provided tremendous growth opportunities to the private sector. The government was genuinely interested in participating with the private sector in the national development process (World Bank 2009). However,
53 Interview with a civil service trade union leader on 25 July 2014. 54 An in-depth interview with a former chief secretary of the Government of Nepal on 28 May 2014. 106 grown and groomed in the closed political economy of the Panchayat regime, the private sector was not well prepared for its new role. Before 1990, it was limited to a few business houses patronised by the Royal Palace. However, there has been a phenomenal growth of small and medium-scale enterprises in the post-liberalisation era.
The private sector has achieved significant expansion, growth and improvement after 1990 despite a number of political turbulences including the Maoist armed insurgency and the royal coups. With significant progress in conflict settlement and the transition to federal democratic republic, Nepal has risen in the Global Competitive Index. Out of 140 countries, it ranked 125th during 2012/2013, improving to 100th position in 2015/2016. However, doing business is not problem-free. It is still constrained by a number of factors such as government instability, infrastructure bottlenecks, policy instability, rampant corruption and inefficient public bureaucracy (WEC 2015, p.274).
Private sector support for the public sector reform process was advocated by the 1991 reform commission. However, it was not whole-heartedly engaged in the reform process and thus its contribution was far less than expected (EI016).55 Accustomed to a patronised business culture, the large business houses are still more interested in sorting out their individual business problems with the help of their own networks rather than improving the overall business environment in the country. The private sector in Nepal is far behind in terms of business innovation, research and development (WEC 2015, p.275). It has not shown much interest in broader public sector reforms that require a relatively longer time to reap the benefits or are shared among the wider public.
4.4.7 Academic community
Academics are sometimes involved in the reform commissions/inquiries but they are mostly selected based on their affiliation with the political party in government or on personal connections rather than experience and expertise in the field. Selections are based on their official positions rather than their vision and orientation towards reforms. There are a few scholars who have the knowledge, experience, expertise and vision on governance reforms, but they are not interested in working for the government, partly because it offers very low remuneration compared to the international organisations and the donor community. They also do not believe the government would seriously consider their recommendations.
Similarly, without a vibrant research culture, educational institutions have not encouraged academic advancement in the country. The education system is solely based on textbook and rote learning rather than critical thinking, research orientation and academic excellence.
55 An in-depth interview with the member secretary of the 1991 Administrative Reform Commission on 6 June 2014. 107
University teachers are more occupational than professional academics. Many of them are also affiliated with the major political parties (EI064).56 On the other hand, policy practioners and reform agents in the government rarely consider that research makes any difference in the policy process. For this reason, there is no strong interface between the academic community and government in Nepal to expedite the reform process.57
4.4.8 Media
There has been a remarkable growth of mass media in the private sector in Nepal since 1990, most significantly in radio stations and television channels.58 However, despite the constitutional provision, members of the media and journalists were attacked by both the Maoist insurgents and the government during the decade-long armed conflict (UNESCO 2013, pp.2-4). They were further suppressed during the royal takeovers in 2002 and 2005. However, after the reinstatement of the dissolved House of Representatives in 2006, press freedom was restored, though the attacks were not completely stopped, mainly because of the deteriorating law and order situation. The 2007 Interim Constitution also guaranteed media and press freedom, albeit with more restrictions than in the 1990s. The 2015 constitution, the first constitution made and adopted by the popularly elected Constituent Assembly, ensures complete press freedom along with a competitive multi-party democratic system, an independent, impartial and competent judiciary and the rule of law.
There was agreement among all seven interviewees from the media that the level of transparency has increased since 1990, along with the constitutional provision of press freedoms and right to information, the promulgation of the Right to Information Act 2007, the provision of spokesperson and information officer in each ministry and regular interactions of spokesperson and media representatives.59However, there appears no substantial change in behaviour of public officials with regard to information dissemination. The media is often portrayed negatively. A culture of information suppression is prevalent in public bureaucracy. Overall, transparency has increased but it has not been functional. Issues have come out but government rarely considers these issues while making decisions. Public authorities feel pressured with the
56 In-depth interview with a professor at Tribhuvan University, Nepal on 28 July 2014. 57 Institutions such as Institute of Public Administration and the Centre for Economic Development and Administration were established in 1960s to assist the government in administrative reforms and improve the policy process imparting knowledge and skills, conducting research and providing forums for policy decisions. Despite the claim of these institutions having close ties with the government (http://www.cdpa.edu.np/index.php?option=com_contentandview=articleandid=1andItemid=102 access: 28 September 2016 and http://www.cdpa.edu.np/index.php?option=com_contentandview=articleandid=1andItemid=102 access: 28 September 2016), all the academics interviewed during the field work agreed that government and academic community in Nepal do not have strong interface for policy reforms. 58 From one each in 1990, the radio stations and television channels reached 515 stations and 58 channels respectively in 2013. 59 In-depth interviews were taken in Kathmandu from June 14 to 16 July 2014. 108 legal and institutional arrangements for transparency and accountability. However, they do their best to avoid the media, mainly to refrain from being controversial. On the other hand, the media lacks ethics-based professionalism.
In the absence of investigative and research-based journalism, many media outlets serve as information disseminators rather than opinion makers, though there have been some recent improvements in this regard. However, there is a long way to go to develop professionalism in the media sector. This is further hampered by the fact the government does not consider media scrutiny seriously, the rapid expansion of print and online media in the country notwithstanding. Public authorities rarely invite suggestions and feedback on policy reform agenda. They have a tendency to disseminate information only when decisions are taken. Media operators are usually not interested in furnishing suggestions for broader public sector reforms. However, along with the introduction of the desk system, the mainstream media has started raising implementation issues recently, though so far they are concentrated more on specific governance issues like privatisation and corruption.
4.5 Political-administrative institutions leading and coordinating reforms
4.5.1 Office of the Prime Minister and Council of Ministers (OPMCM)
The OPMCM is an apex body of the government responsible for the overall guidance, operations and control of the national governance system. The Constitution of Nepal 2015 entrusted executive power to the Council of Ministers, the highest decision making body headed by the Prime Minister to run the overall governance affairs in the country60. The OPMCM acts as a secretariat to both the Council of Ministers and the Prime Minister. It coordinates, monitors, evaluates and controls all the ministries in the country. The governance system is based on the Westminster cabinet system and the principle of collective accountability. However, with the prevalence of coalition politics the Prime Minister in Nepal is less powerful than in many other Westminster countries.
Nevertheless, OPMCM is at the centrality of the national governance system. For this reason ministerial performance also depends on quality of monitoring, supervision, coordination and evaluation of this office. There is a separate division to look after governance issues including the anti-corruption reforms in the OPMCM which is organized into the desk system.61 Major functions of the OPMCM include formulation of policies and plans, supervision, coordination
60 Article 75 61https://goo.gl/i9LsyQ access: 4 September 2016 109 and control of various ministries, organisation and management of government organisations and the implementation of policy reforms including governance reforms.62 In addition to the administrative structure of this office, there are different Cabinet committees to carry out an in- depth analysis of policy proposals submitted through various ministries. Of the five Cabinet Committees, the Administrative Committee and the Bill Committee are more relevant to the public sector governance reforms.
The strong political and administrative structure of the OPMCM is hardly functional in real practice for a number of reasons. Firstly, the Council of Ministers and the Cabinet Committee meetings are not truly interactive. Ministers do not care about the reform agenda unless it directly relates to their ministries or they have some stake in it. Similarly, they are more interested in operational management than policy issues. Policy formulation and lawmaking in general are not the foremost priority of political leaders. Indeed, many of them do not have much idea on policy issues. Similarly, they are rarely well prepared for the meetings. A former minister terms cabinet decisions as ‘political stamp on bureaucratic decision’ (EI077).63 A Law Secretary with an extensive experience in the Cabinet Committee meetings agree that ministers often attend the meetings off-hand and without any substantive preparation (EI075).64 On the other hand, the civil servants at the OPMCM have neither orientation nor capacity to initiate and implement transformational reforms. All the time they are busy in meetings ‘reinventing the wheels’.
4.5.2 National Planning Commission (NPC)
Mainly concerned with the formulation of periodic plans and annual programmes, the high-level advisory body of the government is not directly involved in the making and implementation of public sector governance reforms. However, governance has remained an important issue in almost all the development plans since 1990. The NPC offers expert advice to the government on economic policies and development-related issues from the national perspective. It issues guidelines to various ministries during the planning and budgeting process. It can also issue directives for the effective implementation of development plans, programmes and projects and, the concerned organisations are required to comply such directives.65
Periodic plans indicate the government’s vision for further policy reform. Similarly, perspective plans and sectoral policies are also prepared in consultation with the NPC. In many cases, the periodic plans detail down wider governance issues like privatisation, civil service reforms and
62The Government of Nepal (Business Allocation) Rules 2015, pp.6-7 63 An in-depth interview on 12 August 2014. 64 An in-depth interview on 12 August 2014. 65 Point 16 of the Executive Order to Constitute and Operate National Planning Commission 2010. 110 anti-corruption reforms.66 With a huge network, strategic position and a pool of experts, the NPC has influential role in policy reforms as the periodic plans contain a number of guiding principles for annual policy and programmes of the government. However, in the absence of executive power, there are many instances that policy guidelines and indicative plans of the NPC not fully complied with by the line ministries.
4.5.3 Ministry of Finance (MoF)
The MoF is responsible for the formulation and implementation of economic, fiscal, financial and monetary policies. Other important functions include resource mobilisation, resource allocation, public expenditure management and management of national treasury. Public enterprise management and privatisation, operation and regulation of capital market and anti- money laundering policies are also under the domain of this ministry.67
As many of the major policy reforms have required additional financial resources, the MoF has played a crucial role in the implementation of governance reforms. Without adequate resource allocation and timely budget release, effective implementation of policy reforms is almost impossible. For this reason all the programmes creating additional liability to the government require prior-consent of the MoF.
The MoF is also one of the executing agencies for the reforms such as public revenue and expenditure management reforms and privatisation of public enterprises. Other programmes such as civil service rightsizing and performance-based incentive plans are executed by different government departments which require additional funding from the MoF. Similarly, reforms requiring technological updates also demand additional financial resources. Many of the interviewees agreed that resource availability is a key factor for the implementation of governance reforms in Nepal.68 A former secretary emphasised that a number of activities of Governance Reforms Programme (GRP) were simply an ‘unfunded mandate’ given to the Ministry of General Administration and other line ministries. And so the GRP was not implemented (EI002).69
66 Experts on governance, management and institutional development argue that the NPC is often dominated by the Economists and, thus institutional factors are always left at the back-seat in the planning process which is attributed to the failure of the planned development despite the good policies backed-up with resource availability ( for example: EI071, EI034). 67The Government of Nepal (Business Allocation) Rules 2015, pp.7-9 68 For example: EI002, EI003, EI013, EI017, EI021, EI034, EI041 and EI042. 69 An in-depth interview with a former Secretary of the Government of Nepal who was involved in the design and implementation of Governance Reform Programme (2002-2007). 111
4.5.4 Ministry of General Administration (MoGA)
The MoGA is a central personnel agency for the Nepalese civil service. Its responsibilities include formulation of civil service personnel policy, administration and management of civil servants, organisation and management study of government organisations, administrative reforms, management audit, civil service trade union management and inter-ministerial coordination for effective human resource management in the Nepalese civil service.70
The Administrative Reform Committee (ARC) headed by the MoGA Minister steers the administrative reform programmes in the country. It has a separate division for administrative reforms. It executes civil service reforms and assists other line ministries to implement reforms by providing necessary advice and additional human resources. However, the ministry is often criticised for failing to coordinate different line and staff agencies to expedite the reform process. It is also criticised for having a ‘control orientation’, a rigid outlook on administrative reforms and reproducing feudalistic and conservative views of public administration. The line ministries also blame the MoGA for not recognising their specific needs and imposing unnecessary restrictions on human resource management. Arguably, the existing administrative tradition is not supporting administrative reforms in the country.
4.6 Major oversight agencies and accountability enforcement mechanism
4.6.1 Parliamentary committees
Oversight agencies are the sine qua non to responsive and accountable governance. They hold the government accountable through monitoring, supervision, inspection, investigation and audit. For this reason, oversight agencies should have access to all the relevant information of the government agencies. With extensive powers, both enumerated and implied, parliamentary committees should hold government accountable for its policies, programmes, actions or inactions. Similarly, they can also contribute in the making and implementation of policy reforms with the help of information, expertise, networks and detailed analysis on various governance issues.
Besides holding the government accountable for its performance, Nepal’s parliamentary committees provide a mechanism for effective coordination and constructive collaboration between the parliament and the cabinet. The committees are in a strategic position for streamlining the political institutions into the reform process. Such committees can help ensure high-level political commitment to governance reforms. The institutional structure and
70The Government of Nepal (Business Allocation) Rules 2015, pp.36-37. 112 operational procedure and performance of parliamentary committees can have significant impact on the success or failure of governance reforms (Schedler and Mastronardi 2005).
Despite the fact that Nepal’s parliamentary committee system was introduced in the 1960s, it became functional only after 1990. Currently there are twelve standing committees and two special committees in the legislative-parliament constituted in accordance with the provision of the Constitution of Nepal 201571and the Legislative-Parliament Rules 2016.72 The committees hold the government accountable to the parliament, assess the government’s performance, provide suggestions and direct the government to initiate and implement governance reforms. Parliamentary committees also conduct monitoring and evaluation of constitutional bodies73 such as the Commission for the Investigation of Abuse of Authority and the Office of the Auditor General. Of the twelve standing committees, the Legislation Committee, Public Accounts Committee, State Affairs Committee and Good Governance and Monitoring Committee are more relevant to governance reforms in the country.
Parliamentary committees can summon the key public authorities including the Prime Minister, ministers, and senior civil servants to furnish answers to the queries raised by the people’s representatives. They also have mechanisms to assess the implementation status of their suggestions and directives to the government. These committees produce voluminous reports based on their monitoring and investigation of government policies and programmes, constitutional bodies’ reports and other self-initiated studies. They also issue directives to the government to resolve governance issues. However, all the committees are not equally active in their mission. Of the twelve standing committees, the Public Account Committee is the most active oversight agency.
However, parliamentary oversight is far from being efficient and effective for a number of reasons. Nepal’s parliamentary system has produced cabinet dominance (EI057)74 and parliamentary committees have few avenues to influence the governance process. There is also a continuous erosion in democratic norms and values in almost all the state organs including the parliament. Similarly, in the absence of a well-developed political culture, there is a ‘skinny’ distance between the parliament and the major political parties (Bhandari 2015). Individual actors or coalition groups rather than the systemic integrity are dominant in the governance process, preventing parliamentary committees from being efficient and effective. The level of compliance to parliamentary directives is also considerably low. The government does not
71 Article 97 72 Rules 176 and 177 73 Article 293 of the Constitution of Nepal 2015 74 An in-depth interview with a Member of State Affairs Committee in the national parliament on 23 July 2014. 113 routinely provide information to the parliamentary committees. The Secretary to the State Affairs Committee carps that it is very difficult to get complete information from the government agencies in time (EI035).75 There are also weaknesses on the part of parliamentary committees. They lack serious consideration while discussing the constitutional bodies’ reports turning the meetings into just formalities. Similarly, the parliamentary committee members are also sometimes criticised for not sticking to their professional ethics and integrity and for being guided by the stakes rather than genuine efforts for governance reforms (EI095).76
4.6.2 Commission for the Investigation of Abuse of Authority (CIAA)
The CIAA is an anti-corruption body responsible for the investigation of malfeasance or abuse of office by public officials. Following a thorough investigation, it lodges cases to the courts against such persons. Similarly, it can also write to the concerned authorities for necessary action to be taken against the person involved in corruption.77 Its role in anti-corruption reform will be examined in chapter seven. Here, I briefly discuss its role in the formulation and implementation of broader public sector governance reforms.
Like other constitutional bodies, the CIAA submits its annual report to the President.78 The Prime Minister presents the report to the parliament which includes suggestions for broader governance reforms in addition to the preventive measures for corruption control. For instance, a recent annual report of the CIAA suggests a 42 point reform programme ranging from legal reforms, structural reforms, sectoral policy reforms and improvement in balance of trade, among many others. It is instructive to note that many of the suggestions are repeated in subsequent annual reports. The Chief Commissioner in his foreword to the 25th Annual Report indicated the poor implementation of such suggestions when he remarked, “Though the Commission has provided reformative suggestions on improving good governance and controlling corruption to the Government of Nepal, it seems merely a continuity of the tradition. With a hope that the suggestions forwarded this time would be taken seriously to implement effectively” (CIAA 2016).
Based on the facts and information acquired while investigating the cases, the CIAA may furnish suggestions to the concerned public offices to carry out legal reforms or, adopt precautionary measures against any office or a public servants or to implement procedural
75 An in-depth interview with the secretary of the State Affairs Committee in the national parliament on 26 June 2014. 76 An in-depth interview with a former chairperson of Public Accounts Committee in the national parliament on 27 August 2014. 77 Article 239 of the Constitution of Nepal 2015. 78 Article 294 of the Constitution of Nepal 2015. 114 reforms. Such suggestions have to be backed up by clearly articulated reasons which need to be incorporated in the annual reports.79 However, overall implementation of the CIAA suggestions is not encouraging. While discussing the implementation issues, a non-governmental organisation (NGO) activist actively engaged in the area of governance reforms in Nepal remarked: “Stop carrying out further studies or furnish suggestions for governance reforms. Reports are there in the archives. Need of the hour is compliance and implementation. We don’t do what we already have but waste our time and energy in searching the same thing time and again” (EI028).80
4.6.3 Office of the Auditor General (OAG)
Though not primarily anti-corruption institutions, supreme audit institutions contribute corruption control indirectly by promoting public sector transparency and accountability through financial, performance, environmental or ethical audits. They help legislators to monitor and control public revenue and expenditure to ensure effective use of public funds. Audit reports also help policy-makers in identify key areas of reforms in the public sector. The reports also help the government identify key implementation issues of governance reforms.
The supreme audit institution of Nepal is not primarily a reform leading institution but it recommends practical suggestions to enhance effectiveness of government institutions through various audit reports. The independent constitutional body audits all the government institutions with due consideration to the regularity, economy, efficiency, effectiveness and the propriety in public revenue and expenditure management.81 With the core values of integrity, independence, professionalism, transparency and accountability, the OAG seeks to promote good governance by ensuring transparency and accountability through efficient and effective utilisation of public resources in the country. It also carries out sample-based performance auditing which, if heeded, can contribute in improving the public sector governance in the country. It also promotes performance culture in the public service and, provide recommendations for structural, procedural and legal reforms in order to enhance effectiveness of government institutions.82
OAG submits its annual report to the President and to the Parliament through the Prime Minister. It is discussed in the Public Accounts Committee. However, the Public Accounts Committee does not seem proactive to discuss the OAG reports. During the fieldwork a senior official at the OAG remarked: “It has been eight months since the last election for Constituent Assembly was held. Still they are not able to select the chair to the committee. Our annual
79 Section 28 of the CIAA Act 1991. 80 In-depth interview was taken on 19 June 2014. 81 Article 240 of the Constitution of Nepal 2015. 82http://www.oagnep.gov.np/content.php?id=102 access: 10 October 2016. 115 reports have not been discussed for the last three years. We are worried that they are gradually losing relevance” (EI054).83 Moreover, Public Accounts Committee decisions regarding irregularities are often not complied with. The audit reports also do not give complete picture of government’s financial transactions, as there are many non-budgetary expenses in the public institutions. Repetition of the same issues in the subsequent reports also indicates the low level of compliance of the audit reports (OAG 2016).
4.7 Summary
In this chapter I presented an overview of reform dynamics from a Nepalese perspective, highlighting the political, social and administrative context in the post liberalisation era. I sketched the state’s interface with society and with people at large along with the state donor dynamics and its implications to the making and implementation of governance reforms in Nepal. This chapter also enumerated strengths and weaknesses of the major reform leading institutions relating to governance. Finally, it analysed the key oversight mechanisms in holding the reform leading institutions accountable to the people and its impact on the reform process.
Nepal witnessed a number of major political changes since parliamentary democracy was restored in 1990. Following a brief royal interregnum in 2002 and a coup in 2005 for a year, parliamentary democracy was restored again in 2006. The country was declared a federal democratic republic in 2008. Despite all these political changes there has been no significant progress in deepening democracy. Political in-fightings and the messy coalition politics in the late 1990s frequently violated democratic norms and values for the convenience of the ruling elites. Political parties hardly had any interest and incentives to think over governance reforms. Consequently, the hopes for democratic reforms of the early 1990s gradually withered in the subsequent period.
Political ‘revolutions’ brought hardly any significant change to state-society relations. Consequently Nepal’s fatalistic and hierarchical society didn’t allow democracy to percolate to the grass-root level. Instead, it promoted social exclusion in different spheres of public life. Recently, identity-based politics has come to the front in reaction to this incessant social exclusion. Guided more by the storm of programmed emotions than rational decisions, poorly handled identity politics has created a sort of mistrust, enmity and fear among different ethnic and regional groups. Consequently, public sector governance reforms gradually faded from government priorities. Further, the rise of identity politics led the elite groups to intensify resistance to reforms.
83 An in-depth interview with a deputy auditor general on 19 July 2014. 116
The government’s relations with the international development partners influence the reform agenda as well as the implementation process. Donors’ influence comes through aid- conditionalities, consultancy services and dialogues with the recipient countries. For this reason, the negotiation capacity of aid-recipient countries is vital in setting the reform agenda and its implementation. A thorough review of government’s annual budget speeches clearly shows that international development partners have significant influence in the reform process. The increasing trend of funnelling foreign aid through non-governmental organisations, and donors’ tendency to emphasise ‘acting politically’, have made the influence more direct, swift and visible.
As reform is an interactive process, actors and stakeholders have a crucial role to play. A review of policy documents along with the elite interviews shows that political leaders’ genuine commitment to economic liberalisation and the new public management oriented public sector governance reforms of the early 1990s gradually withered, along with the frequent changes in governments and the prevalence of the chaotic coalition politics. Political leaders hardly had any novel idea, interest or incentives to initiate and implement public sector governance reforms as it didn’t accrue immediate benefits to them. However, they never failed to pretend their genuine commitment to reforms as failing to do so would forfeit foreign aid commitment.
Nepal’s subservient public servants take hardly any risks to pursue reforms that jeopardise the interests and stakes of their political masters. Accustomed with formalism and process compliance, public servants are not interested in innovation, research and reforms. A few highly politicised public servants selectively support aspects of the reform agenda, but also resist those that jeopardise their interests. With direct affiliations with the major political parties, the public service trade unions are powerful enough in Nepal to resist the NPM oriented reforms. Moreover, the politically partisan civil society has hardly any interest, stake or motives to pursue governance reforms. For its part, the emergent private sector, groomed and patronised by the Royal Palace, has hardly moved beyond the fences of its business house to promote broader business interests and pursue governance reforms. Similarly, the academic community, in the absence of a strong interface with the policy-makers and lacking a research-oriented culture, has undertaken scant research on governance reforms. With significant growth after the restoration of democracy in 1990, the media has started to investigate and disseminate topical governance issues, albeit on a small scale so far.
Reform-leading institutions have a critical role to play in articulating and integrating governance issues along with their implementation. They also facilitate the implementation process through coordination, supervision, monitoring and evaluation. The Office of the Prime Minister and Council of Ministers (OPMCM) has not been effective in coordinating, supervising and
117 directing the reform process. Engaged in routine works, it has little interest or incentive to expedite governance reforms. The Ministry of General Administration, potentially a key institution to pursue administrative reforms, is hard pressed to coordinate different line ministries and other relevant government institutions. On the other hand, with power of the purse, the Ministry of Finance is found to be very influential in the reform process.
Of the three key oversight agencies, parliamentary committees appear the most powerful agencies to hold the government accountable for its action, inaction or failures. They can suggest or direct the government to initiate or expedite reforms. The Commission for the Investigation and Abuse of Authority and the Office of the Auditor General also influence the reform process through their reports to the parliament. However, these oversight agencies have not been effective for two main reasons. First, governance reforms are not their top priority and second government’s compliance rate to their suggestions or directions is considerably low.
Therefore, from this contextual overview, it would appear that the implementation of governance reforms would be a most daunting task in developing countries like Nepal.
Contextualisation of the reform dynamics helps us understand the major actors, factors and institutions, their roles and actual behaviour during the reform process. This also helps us make assessments of what worked and what did not work during the implementation of reforms. Although actors, interests and incentives to reforms may differ to specific sectors or issues, the contextual overview helps us identify the contributing or inhibiting factors, along with the explanation and interpretation of reform outcomes in relation to the reform objectives across the three cases: civil service rightsizing, privatisation of the public enterprises and the anti- corruption reforms in the public service.
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Chapter 5 Rationalising government staffing size through cut-back management
After contextualising the reform dynamics of Nepalese governance in the previous chapter, I comprehensively explore the politics of making and implementing key governance reforms in chapters five, six and seven. In chapter five, after providing a conceptual understanding of rightsizing policy, I present a brief account of how civil service rightsizing policy evolved in Nepal in the last 26 years. While focusing on the dynamics of making and implementing civil service rightsizing policy, I identify the key actors and stakeholders of reforms to find out where and how the rightsizing agendas came into being. I compare the formal roles of these stakeholders and policy actors with their actual roles during implementation. Following a thorough analysis of implementation, I examine whether or not the reforms achieved their objectives. I discuss the survey findings, analyse the views of focus group discussants and interpret the narratives from elite interviews in order to draw my conclusion. I use civil service statistics, all the periodic plans, annual policies and programmes and budget speeches after 1990, to support my arguments.
5.1 Contextualizing rightsizing in the Nepalese civil service
The modern civil service has a relatively short history in Nepal. The 1956 Civil Service Act provided a legal foundation for the first time in constituting the civil service in the country. Public service positions were open to the common people in Nepal only after the establishment of a parliamentary democracy in 1951 following the overthrow of the Rana regime. Before that public administration was essentially run as a family business by the ruling elites (Poudyal 1989).
Table 5.1 highlights the dramatic growth of the civil service between 1951 and 1991. During the democratic transition from 1951 to 1961 the number of civil servants declined from 28,047 to 27,272. However, there was a massive expansion of civil service during the Panchayat era (1960-1990). From 27,272 in 1961, the number of civil service positions increased to 102,74484in 1991(ARC 1992a). The welfare approach to development, along with the state’s presence in all spheres of public lives, caused this massive growth of the Nepalese public sector.
84 There are two different figures in the report of 1991 Administrative Reform Commission. This figure is based on the data of the concerned government offices provided to the commission. The figure supplied by the Department of Civil Personnel Records was 100,632. 119
Table 5.1 Growth of civil service from 1951 to 1991 Permanent Change S.N. Year Position Number Percentage 1 1951 28047 n.a. n.a. 2 1961 27272 -775 -2.8 3 1971 45123 17851 65.5 4 1981 71232 26109 57.9 5 1991 102744 31512 44.2 Source: ARC (1992)
It is argued that foreign aid also contributed to such a massive expansion of civil service in Nepal (Panday 1989). The national bureaucracy was expanded, along with the adoption of an ambitious development agenda, like the fulfilment of basic needs and integrated rural development (EI00485; EI03286; EI07787). Development partners seemed more concerned with timely implementation of development projects than enhancing the institutional capacity of public bureaucracy (EI01688; EI07189). Therefore, they induced governments to create dualism in development management through the Development Board Act 1956.
The development partners wanted a ‘modern’ and more flexible development administration rather than capacitating the administrative machinery. Consequently a large number of temporary employees were recruited in development projects. For instance, in 1963 there were 9,895 temporary staffs in development projects compared to 27,589 permanent civil servants (Panday 1989; Vaidya 1996). Members of my focus group agreed that a large number of civil service positions were created between the 1960s and early 1980s in order to please the donors for more development aid.90
It is also argued that the party-less Panchayat regime adopted a co-optation strategy of creating new public service positions to continue support from the powerful loyalists and gain favour from the influential potential dissidents (Panday 1989). However, the public sector’s unfettered growth began to gradually decline after Nepal implemented structural adjustment programmes in the 1980s that became more evident after the political change in 1990.
85 An in-depth interview with a free-lance consultant (also a former civil servant) was taken on 26 May 2014. 86 An in-depth interview with a sitting secretary of the Government of Nepal was taken on 21 June 2014. 87 An in-depth interview with a former member of the Parliament, a former member of the National Planning Commission, an academician and a freelance consultant was taken on 9 September 2014. 88 An in-depth interview with the member secretary of the 1991 Administrative Reform Commission was taken on June 6 2014 with a follow-up visit in 25 March 2015. 89 An in-depth interview with a former executive director of Nepal Administrative Staff College was taken on 6 August 2014. 90 The focus group discussion on civil service rightsizing was held in Kathmandu on 4 September 2014. 120
Political change opened-up the country to the rest of the world and provided exposure to contemporary governance and development paradigms around the globe. This also created pressure on governments to address people’s increasing expectations through improved public service delivery. In the absence of visible improvements in public affairs and peoples’ lives, resentment and frustration against the government and even the political change grew quickly.
Realising the need for change in the national administrative system to align with the new political system by enhancing its capacity, the first elected government after the political change of 1990 instituted a high level Administrative Reform Commission (ARC) in 1991 under the chairmanship of then Prime Minister G.P Koirala. The ARC adopted a systems approach to administrative reforms and submitted its report within six months covering a wide range of governance issues, including redefining the role of the government, civil service reforms, corruption control, decentralisation and public enterprise reforms, among many others (Dhungel 1997).
The commission sought to restructure the administrative machinery, realigning the state’s role and encouraging non-governmental sectors in the national governance and development process (ARC 1992b), which had a direct implication on the structure and size of the public bureaucracy. Against this backdrop, the rightsizing policy was introduced in Nepal through the 1991 ARC report. The report adopted a ‘true spirit of rightsizing’ with the prime motive of creating a lean, clean and effective government. Functional analysis, devolution, contracting- out, one door service, merger of government organisations, cross-boundary service91, multi- skilling civil servants at operational level and finally reducing unnecessary positions through freezing recruitment, abolishing vacant positions and other retirement schemes were the major rightsizing strategies as stipulated in the report (ARC 1992a; Dhungel 1997).
Reducing the number of ministries and arbitrarily dismissing civil servants were not new to Nepal. The 1952 ARC recommended the government to reduce the number of ministries from 14 to 11. The committee also highlighted top-heaviness in government organisations at the centre and excessive clerical staffs at the department and district levels (ARC 1952). There was a tendency of sacking civil servants after almost every political change since 1951 in the name of screening or downsizing civil service by using political discretion or purposefully amending existing civil service regulations (Dhungel 2005; Poudyal 1989). However, rightsizing as a systematic policy was formally introduced only after 1990.
The 1991 ARC introduced a rightsizing policy for government organisations as well as public enterprises to bring transformational changes in public organisations and ensure more efficient,
91 In this system a district level office can deliver services to the people in adjoining areas depending on the convenience of service bearers like geographical proximity. 121 economical and effective public service delivery (ARC 1992b). However, the question of where and how the civil service rightsizing agenda originated requires a rigorous analysis. About two- thirds of my survey participants ranked the vision of political executives as the most important source of idea to initiate civil service rightsizing in Nepal. As the table 5.2 highlights, they also indicated influential role of external development partners in generating the idea for reforms. Similarly, political pressures to deliver results and make people feel change after the restoration of parliamentary democracy was perceived as the most important driving force to adopt the rightsizing policies followed by the populist pressure of galloping expectations on the government and ecological pressure of the wave of the new public management reforms.
Table 5.2 Drivers of civil service rightsizing policy (N= 88)
First Second Third
Three Most Important Vision of External Popular Demand Sources of Idea Political Development Executive Partners’ (options 10 plus) Recommendation
Three Most Important Political Pressure Populist Pressure Ecological Driving Forces Pressure
(options 5 plus)
Source: Field survey during April-September 201492
Policy practioners agreed that political change was the key driver of rightsizing but they had somewhat different interpretations.93 Some of the participants of the FGD argued that political leaders brought the agenda ‘just to buy in time as a short-term strategy to manage massively growing popular expectations and aspirations’ after the political change (FGA02; FGA06). Similarly, political leaders lacked knowledge, vision and experience on other important aspects of public sector reforms and thus their limited horizon did not let them go beyond the size and number of civil service (FGA03). It is interesting to note that the United Kingdom also had a similar situation when Margaret Thatcher initiated her civil service downsizing policy. She “appeared to have no idea of what to do about the civil service when she entered office other than to distrust it” (Dowding 1995, p.62) . Nepalese political leaders also had a negative attitude towards senior civil servants who were supposed to be the pillars of previous Panchayat regime. They had a sense of distrust towards the civil servants who had not behaved well during the previous regime (FGA01). The focus group discussants also highlighted the global wave of
92 Options and questionnaire details are included in the annex. 93 Focus group discussion was held on 4 September 2014. 122 economic liberalisation and international donors’ influence as some of the key drivers of civil service rightsizing.
Political regime change has been a major reform drive in Nepal since the introduction of parliamentary democracy in the 1950s. Political leaders attempted to change regime values after every political change. Similarly ‘reform’ is an attractive term that political leaders often use to convey an impression of improvements to the general public. It is also important to institutionalise political change. Political leaders, senior civil servants and the academics agreed that civil service rightsizing policy was part of a broader administrative reform that was initiated in the early nineties in line with the political change and the global wave of economic liberalisation and new public management (NPM) reforms where political executives were the key drivers of reforms (EI01094; EI00795; EI02496; EI01697; EI07098; EI09799).
The field survey, focus group discussion and elite interviews showed that reform was primarily driven by politics. However, there was a triangular contribution of politics, bureaucracy and international development partners in introducing the rightsizing policy in Nepal. Civil servants, specifically the ones in the middle of their career path, were interested in rightsizing with an expectation that retirement of the senior civil servants would open a window of opportunity for their promotion. In fact, a large number of civil servants had an opportunity to become secretaries, the highest positions in the civil service, in their early 40s, following a massive retrenchment in civil service in the early 1990s (EI028).100
International development partners influenced Nepal’s reform directions. However, such reform agenda are rarely unilaterally imposed by development partners as these are adopted following a long process of negotiation between the development partners and government representatives. A former Finance Secretary remarked:
Based on my own experience I can tell you that most of the time reform agenda are jointly cooked. While we do not have any specific idea or agenda for reforms during the negotiation process, we are happy to adopt it as a knowledge product or lesson
94 An in-depth interview with a former minister who was in a core team of then Prime Minister G.P. Koirala to initiate public sector reforms in the country was held on 31 May 2014. 95 An in-depth interview with a former secretary of the Government of Nepal who also worked with the 1991 Administrative Reform Commission was held on 28 May 2014. 96 An in-depth interview with a professor of Public Administration was held on 15 June 2014. 97 An in-depth interview with the member secretary of the 1991 Administrative Reform Commission was held on 6 June 2014. 98 An in-depth interview with a former finance secretary of the Government of Nepal was held on 31 July 2014. 99 A former member of the Parliament and a vocal critics of economic and political liberalisation was interviewed on 9 September 2014. 100 An in-depth interview with a civil society activist was held on 19 June 2014. 123
learnt. When we are not able to sell it to the domestic stakeholders, we complain that it was donor driven. (EI008)101
It is often argued that the 1991 ARC was an endogenous reform initiative. It did not have financial support from donors except for a few advisory services. However, a close observation and analysis of the reform process before and after the formation of the ARC shows a different picture. For example, a report submitted to the Government of Nepal on behalf of the World Bank102 had a significant impact on the formation, working procedures and content of the 1991 ARC report. Although women were not represented in the reform commission, many other recommendations were in line with the World Bank report. The 1991 ARC report adopted the logical steps of administrative restructuring as recommended by the World Bank. Similarly, the commission recommended retrenchment of 25 percent of the civil service in line with the World Bank’s recommendation of 20 to 30 percent cuts.
The reports submitted to the ARC on behalf of the Overseas Development Administration (ODA) of the United Kingdom103 also had a significant influence on rightsizing reforms. In line with the reports, the government adopted an arbitrary approach104 and executed a retrenchment programme before adopting a rational approach. Initially the then Prime Minister G.P. Koirala was in favour of a rational approach, but later he changed his mind following a meeting with an ODA representative. An excerpt from John Mayne’s minute:
The Prime Minister asked for my views on how the problem of reducing the size of the civil service might be approached. I said that my experience of British Governments, notably from 1970 to 1978 and since 1979, suggested that an entirely rational approach to civil service reductions did not work; there had to be a combination of arbitrary reductions, determined politically, followed by implementation of the required reductions guided by the Government’s policies and priorities, especially with respect to allocation of resources.
When I used the term “ruthless” in describing the Prime Minister’s approach to civil service reduction from 1979, the Prime Minister said that he did not wish to be ruthless; his policy was to be fair but firm” (Mayne 1992).
Similarly, the ARC target of reducing the civil service size to 77,000 was close to the 70,000 recommended by the ODA reports. The ARC also adopted the concept of service contract and next step agencies. A circular of the British Cabinet Office was translated several times to
101 An in-depth interview was taken on 30 May 2014. 102 The unpublished report entitled Administrative Reform: Efficiency in Government was submitted by Coopers and Lynrand Deloitte in August 1991 on behalf of the World Bank before the 1991 ARC was constituted on 3 October 1991. 103 The unpublished reports submitted by John Mayne in February and March 1992. 104 An unpublished minute of John Mayne about a meeting with then Prime Minister G.P. Koirala on 23 January 1992. 124 derive lessons for Nepal while recommending the roles of ministers and senior civil servants in Nepal.105
Another report106 submitted to the Government of Nepal on behalf of the World Bank recommended the first-round downsizing exercise focusing on the peons107 and non-gazetted staff – the largest proportion of the civil service without any detailed study. The report emphasised a targeted voluntary early retirement scheme (VERS) to minimise the loss of competent people. Interestingly, the report recommended temporary staff (specifically in donor- funded projects) be adjusted to the civil service, which is a clear example of how individual and group interests are incorporated in institutional reports (World Bank 1993b).
Despite the fact that the need of civil service reforms were realised by the government, the reform agenda was heavily influenced by major external development partners. Their motivations can be questioned as some proposals were guided by contentious assumptions. For example, institutions like the World Bank shared a dream of increasing the salaries of senior civil servants with the savings derived from the civil service retrenchment (World Bank 1991a).
Civil service rightsizing was not a separate policy like other sectoral policies such as tourism policy, industrial policy or privatisation policy. It was incorporated in various periodic plans, annual programmes and budget speeches, governance reform programmes and civil service acts and regulations. In the following section I analyse how the civil service rightsizing policy evolved in Nepal in the last 26 years. I do so by thoroughly reviewing periodic plans, annual policies and programmes, and budget speeches from 1990 to 2016.
5.2 Adoption of rightsizing policies in the post-liberalisation era (1990- 2016)
Although structural reform has remained the focus of administrative reforms since the 1950s, the policy of rightsizing was introduced only in the 1990s by the 1991 ARC, which emphasised lean and smart public organisations to reduce excessive overhead costs and ensure efficient and effective governance in the country. The first democratically elected government after the restoration of parliamentary democracy owned the report through periodic plans, annual policies and programmes and budget speeches, and vowed for its gradual implementation. The government adopted a strategy of redefining the role of the state as a promoter and facilitator and off-load the government from the tasks that could be better managed by the emergent
105 During the field work the Member Secretary of the 1991 ARC told that he himself translated the circular several times to prepare Chapter 13 of the ARC report. 106 The unpublished report was submitted in May 1993. 107 The lowest rank in the civil service mostly performing the menial tasks. 125 private sector and other non-state actors. Other strategies included: functional analysis, procedural simplification and rationalising decision making layers in government organisations. Organisational studies based on functional analysis and workload analysis became the major criteria for civil service restructuring (ARC 1992a).
The government accorded high priority to civil service rightsizing to produce immediate and visible impact of administrative reforms in the country that would help further medium and long-term strategies of public sector reforms. The rightsizing policy as stipulated in the plan documents is presented in Table 5.3.
Table 5.3 Civil service rightsizing policies in periodic plans Periodic Plans Rightsizing Policies Remarks
Eighth Plan 1. Gradual implementation of the 1991 Concerned with the (1992-1997) Administrative Reform Commission(ARC) report expansion of highly 2. Emphasis: job description with clear, specific and centralised, poorly measurable performance criteria structured, 3. Policy to restructure the existing administrative burdensome and organisations at all levels of the government unproductive civil service
Ninth Plan 1. Redefining the scope and role of the government Concerned with the (1997-2002) and the public sector heavy involvement 2. Emphasis: lean, clean and efficient government; of central multi-skilled staff at non-officer level and review administration in of civil service groups and sub-groups minor 3. Only essential civil service positions to be created implementation by linking the civil service positions with the programmes national budgetary system
Tenth Plan 1. Policy of ‘proper sizing’ the civil service by cutting Clearly defined the (2002-2007) off unproductive civil service positions role of government 2. Emphasis: promotion of efficient civil and non- administration government sectors 3. Policy to restrict creation of additional financial burden by setting up new offices under the Development Board Act 4. Minimising recurrent expenditure through a performance based incentive system
Eleventh Plan 1. Job description for all civil servants with clearly Commission a study (2007-2010) identified criteria for performance evaluation to restructure the 2. Emphasis: decentralisation and the use of existing civil information and communication technology to service in line with improve public service delivery and rightsize the the federal structure
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government of governance system
Twelfth Plan 1. Long-term vision of paperless government Commission a study (2010-2013) 2. Emphasis: effective public service delivery through to restructure civil the establishment of integrated service centres in service and other different parts of the country service providers to 3. Review of administrative organisations and make them more positions to improve governance effectiveness inclusive and 4. Simplification of administrative procedures decentralised
Thirteenth 1. Continuation of the e-governance policy Develop civil Plan (2013- 2. Promotion of lean, strong and responsible judicial administration to 2015) administration ensure effective 3. Adjustment of civil service positions to address the service delivery in issue of mass promotion as per the ‘24 gha’ the aftermath of provision of the 1993 Civil Service Act state restructuring 4. Expansion of integrated service centres in different parts of the country
Approach 1. Administrative restructuring in line with the federal Administrative Paper to the structure of governance system restructuring to Fourteenth 2. An extensive use of information technology and improve people’s Plan (2015- procedural simplification in government offices access to and 2017) 3. Emphasis: service-oriented and development quality of public friendly administration accountable to the people services
Source: Author’s compilation.
The government accorded high priority to the rightsizing policy during the Eighth, Ninth and Tenth Plans, although it was not sustained in later periodic plans. Initially focused on rationalising civil service positions and retrenchment and later on decentralisation, procedural simplification and e-governance were emphasised. For instance, the Eighth Plan discouraged any expansion of the highly centralised civil service and its inefficiency and under-utilisation as criticised by the 1991 ARC (NPC 1992). Guided by economic perspectives, the Eighth Plan pointed out the poorly structured, burdensome and unproductive administrative machinery and emphasised specific and measurable job description for all civil servants. Although the plan document did not explicitly mention rightsizing or downsizing policies, it had a policy of cutting down the under-utilised civil service positions based on functional review of government agencies.
The Ninth Plan emphasised lean, clean and efficient government by reducing unnecessarily heavy involvement of the central administration in minor programmes that could be more
127 efficiently handled by local governments. It adopted a policy of multi-skilled staffs at non- officer level and emphasised appropriate structure of civil service through a review of existing service groups and sub-groups in civil service. The plan linked civil service positions with the national budgetary process (NPC 1997).
The Tenth Plan clearly defined the role of central government, local governments, private sector and other non-governmental sectors, including civil society. It had a policy of cutting off unproductive civil service positions based on organisational reviews. Emphasising efficient civil administration, the plan imposed restrictions against the creation of new civil service positions that would incur an additional financial burden to the government (NPC 2002). None of the periodic plans thereafter explicitly mentioned rightsizing policy.
The annual policies and programmes and budget speeches of the early nineties supported the rightsizing policies of periodic plans. For instance, the first Finance Minister, after the restoration of parliamentary democracy in 1990, highlighted the need of redefining the role of the state in line with an open and liberal economic policy of the government (MoF 1990). The following excerpt from the royal address to the parliament clearly demonstrates the government’s commitment to control the unsustainable expansion of government activities.
The past thirty-two years have witnessed the ever-expanding administrative machinery beyond the capacity of the economy to sustain it. The existing administrative structure will therefore be reviewed and redundant agencies closed down, keeping in mind both the interests of the service personnel and the country’s needs.”(HMG 1991, p.3)
The rightsizing policies incorporated in various budget speeches are presented in the Table 5.4.
Table 5.4 Civil service rightsizing policies in annual budget speeches Budget Speech Rightsizing Policies
1990/1991 1. Redefining the role of state in line with an open liberal economic policy 2. Controlling unsustainable expansion of government activities
1991/1992 1. Reducing unproductive and unsustainable administrative expenses incurred by the expansion in government offices 2. Implementing administrative and financial management reforms 3. Emphasis: Reduction in administrative expenses
1992/1993 1. Gradual implementation of the 1991 Administrative Reform Commission (ARC) recommendations to rightsize the civil service 2. Abolish or merge government offices that are no more relevant in the context of economic liberalisation and devolution policy of the government within a year
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3. Emphasis: lean, clean and people-oriented administrative system
1993/1994 1. Continuation of devolution and economic liberalisation policies 2. Expedite administrative restructuring by making the Administration Reform Monitoring Committee more effective
1994/1995 1. Minority government: None
1995/1996 1. Election government: None 2. Coalition government: economic liberalisation as a main strategy of financial sector reforms
1996/1997 1. Encourage non-government sectors in public service delivery 2. Discourage new positions in the public sector
1997/1998 1. Continue liberal economic policies
1998/1999 1. Policy to depute civil servants in foreign aided projects to control new recruitment 2. Conversion of the Department of Civil Aviation into Civil Aviation Authority of Nepal
1999/2000 1. Policy to close down the public offices that are no more relevant in the context of limited government and economic liberalisation 2. Policy not to create new positions in public service and to abolish one third of the vacant positions 3. Policy to fulfil additional human resources requirements through internal adjustment of existing public service positions with relatively less workload
2000/2001 1. Explicitly mentioned the rightsizing policy in order to make civil service more productive, efficient and effective 2. Discourage the creation of new positions and freeze vacant ones 3. Closure or merger of unnecessary and unproductive offices 4. Continuation of internal adjustment policy to fulfil human resources in the needy areas 5. Introduction of voluntary retirement scheme where the vacant positions would be automatically eliminated 6. Continued the policy to depute civil servants in development projects/boards 7. Establishment of 20 Area Post Offices
2001/2002 1. Gradual implementation of Public Expenditure Review Commission report 2. Rationalise unnecessary and ineffective committees, commissions and centres through restructuring and dissolution 3. Contracting-out services such as cleaning, gardening, mail
129
delivery and security services in order to reduce long-term liability of the government 4. Freezing the vacant positions along with the continuation of VERS in civil service 5. Voluntary retirement scheme for the armed forces
2002/2003 1. Adoption of austerity measures to control regular (recurrent) expenditure 2. Continued freezing policy along with a deadline of mid October 2002 to abolish the vacant civil service positions
2003/2004 Continued rightsizing policy to eliminate vacant positions and introduce contracting-out for the basic services
2004/2005 None
2005/2006 None
2006/2007 1. Electronic correspondence among the ministries on a pilot basis 2. Qualitative improvement of civil service through the implementation of unified civil service 3. All the vacant positions of Nepal Army during 2006/2007 to be automatically redundant
2007/2008 1. Upgrading 25 sub-health posts into health centres 2. Master plan of e-governance working procedure to be implemented
2008/2009 1. Formation of an Administrative Restructuring Commission to restructure civil service in line with the federal structure of governance system 2. Establish an anti-money laundering department
2009/2010 Integrated service centres in all parliamentary constituencies
2010/2011 Restructuring the Department of Revenue Investigation to incorporate an additional responsibility of anti-money laundering reforms
2011/2012 None
2012/2013 None
2013/2014 Provision for new regional offices of the Commission for the Investigation of Abuse of Authority
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2014/2015 1. Assertion: administrative mechanism was not cost-effective and efficient
2. Merger of schools based on the number of students and distance to the closest school
3. Position creation: upgrade sub-health posts to health posts; increase doctors in primary health centres and specialists in
different health institutions; establishment of a technical school in each parliamentary constituency; a new technical laboratory at the
National Vigilance Centre; two thousand teacher positions for higher secondary schools; a national level Mangala-Sahana
Rehabilitation Centre
2015/2016 1. Review of retirement age for civil servants 2. Formulation and implementation of a new austerity policy for all the public offices Source: 3. Discourage establishment of public agencies such as development committees and development boards Author’s compilati 2016/2017 A comprehensive study to determine the size and terms and on. conditions of human resources required to run the state affairs in the federal structure of governance system The rightsizing policies during the early 1990s were guided by economic liberalisation and the concept of limited government whereas in the later stages, pragmatic factors were prominent in guiding the policies. The idea was shelved after the 2006 political change making Nepal a federal democratic republic. Administrative restructuring after 2006 was more concerned with making public administration compatible with the newly introduced political system. Restructuring was guided by inclusive democracy rather than economic liberalisation and the concept of limited government. However, in 2006, the government announced that all the vacant positions of the Nepal Army during fiscal year 2006/2007 would automatically become redundant. However, it was not directed to rightsizing but integrating the Maoist combatants in the national army.
Most of the governments after 2006 have been headed by Communist leaders, which partly explains the gradual evaporation of rightsizing policy in Nepal. External development partners’ position on rightsizing also changed. A senior civil servant remarked:
The development partners themselves were fed-up with the rightsizing policies. In the 1990s and early 2000s they used to push the governments to pull out its hands from different economic sectors, enhance participation of the non-government sector and slash down national civil service by cutting extra fats. However, in 2011, I still remember that a senior World Bank official told that Nepalese civil service
131
was too small to effectively deliver public services. It’s an interesting irony, isn’t it? (EI009)108
Similarly, as constitution-making was the overarching goal of the government, administrative reforms did not continue to remain a government priority after 2006.
5.3 Dynamics of rightsizing in Nepalese perspectives
5.3.1 Institutional framework for civil service restructuring
5.3.1.1 Institutional set-up
Various institutions and actors were involved in the civil service rightsizing process in Nepal. The Office of the Prime Minister and Council of Ministers (OPMCM), Ministry of General Administration (MoGA) and the Ministry of Finance (MoF) had a crucial role in the making and implementation of rightsizing policies. The Government of Nepal (Business Allocation) Rules provided institutional frameworks to restructure the civil service. The OPMCM was responsible for the creation or dissolution of any ministry or government offices. It was also responsible for organisational restructuring of all government offices. Similarly, the Ministry of General Administration (MoGA) was entrusted with the task of creating civil service positions.109 The Civil Service Act and Regulations 1993 provided institutional arrangements and legal frameworks for the creation, abolition and dissolution of organisational structure and civil service positions.
The Ministry of Finance (MoF) was also involved in administrative restructuring. The MoF was required to assess the financial implications of creating new positions or administrative restructuring, to ensure resource availability after restructuring. The line ministries, along with the concerned offices, were responsible for carrying out an organisation and management study and prepare restructuring proposals. The Department of Civil Personnel Records (DoCPR) was required to maintain records of all civil servants, civil service positions and organisational structures of government organisations. Besides these institutions, the Chief Secretary was also responsible for making government organisations leaner, smarter and more effective.110
5.3.1.2 Restructuring process
The Civil Service Act and Regulations 1993 detailed the procedure for civil service restructuring. Following an organisation and management survey based on an analysis of programmes, work-load, job nature and available human resources, the concerned ministry used
108 An in-depth interview was taken on 30 May 2014. 109Government of Nepal (Business Allocation) Rules 2015, Annex 2. 110 Good Governance (Management and Operation) Act 2008, Section 10 (g). 132 to prepare a proposal for administrative restructuring. The proposal had to be submitted to the Ministry of General Administration (MoGA) for analysis, evaluation and approval. Consent of the Ministry of Finance was a prerequisite to initiate the restructuring process.111
The MoGA was required to evaluate the proposal before submitting it to the OPMCM for Cabinet approval. The Council of Ministers could approve the proposal, forward it to the Administrative Committee (a Cabinet committee) for study or return it back to the MoGA with feedbacks. Once a new structure or civil service positions were approved, the concerned office was required to get the record updated at the DoCPR along with necessary documents within fifteen days of the receipt of Cabinet approval. The restructuring process would be complete once the DoCPR duly updated the record.
5.3.1.3 Institutional analysis
The 1993 Civil Service Act and Regulations clearly stated the legal basis for civil service rightsizing. The MoGA as the central personnel agency with respect to the constitution, operation and service conditions of civil service, had a crucial role in rightsizing the civil service. Position creation, review or alteration in civil service required functional analysis. Positions created or fulfilled in contrary to the legal provision were ipso facto annulled.
The Civil Service Act allowed contracting-out basic services like cleaning, gardening, and security from the private sector. Retirement age was reduced to 58 years from 60 years. There was a special provision to guide retirement of the persons having physical or mental health problem as certified by a medical board constituted by the government. There was also a provision for voluntary retirement for the employees over 50 years of age and completing a 20 years’ service periodthat would be operationalised upon a notification published in the national gazette (Article 33, 34 and 35).
All the government agencies were required to acquire consent from the Ministry of General Administration and the Ministry of Finance before entering into any agreement with development partners if additional human resources is required. Similarly, no new civil service position could be filled without registering the position in the DoCPR which maintained records of all civil service positions and employees. All the new civil service employees were required to register their sheet-rolls in the DoCPR, to draw their salaries and allowances. Appointment in civil service could be made only in vacant positions or duly approved new positions. If any employee was appointed contrary to the legal provisions, all the amounts paid for salary and allowances were required to be recovered from the official making such appointments.
111Civil Service Act 1993, Chapter 3 133
Similarly, if any civil service position remained vacant for more than a year, and no process was initiated to fulfil the position, such positions were inevitably abolished.112
Initially driven by the political leaders, the rightsizing policy did not remain a priority of the major political parties in the later stage. They did not care much unless their relatives, party cadres or operatives had specific and clear interests or stakes in it. During my interview, a former minister recounted that ministers rarely had any idea, interest or incentive to seriously carry out organisation and management study. When they had special interests in it, they used to submit the restructuring proposals directly to the Cabinet meeting without any study or supporting document (EI 077).113
The MoGA lacked competent, experienced and capable human resources to effectively carry out or evaluate an organisation and management study for a number of reasons. First, the staff rarely had an opportunity to enhance their understanding and skills on organisation and management study. Similarly, they did not have a conducive environment to utilise their knowledge and skills. Moreover, they hardly had any time to develop expertise because of frequent transfers across ministries. In many cases, civil servants approached MoGA just to make a ‘platform’ for so-called ‘good offices’.114 On the other hand, the MoF was more concerned with additional resource requirements than anything else.
The line ministries also lacked expertise to effectively carry out organisation and management study. They lacked skills even to prepare job descriptions with specific and measurable criteria for performance evaluation. In the absence of a proper homework they were often unable to logically defend their proposal. Connection, rather than evidence-based research, used to be a major criterion for decision making. Authorities in the line ministries were interested in using their informal networks to get their proposals through the process.
The formal structure and rules for civil service rightsizing sound advanced and scientific. However, this does not provide a clear and complete picture of the real politics of rightsizing. As institutions operate within a socio-economic and political context, societal values, norms and culture, economic conditions and the political situation of the country influence their functions. This is more relevant to the developing countries where informal organisations, rules and powers are predominant to the formal ones. The reform leading institutions lacked clear orientation, expertise and capacity to effectively implement and monitor rightsizing reforms. Guided by control orientation and heavily influenced by the culture of personal appeasement, nepotism and favouritism, the reform leading institutions’ actions were rarely predictable.
112 Civil Service Act 1993, Chapter 2 113 An in-depth interview with a former minister on 12 August 2014. 114 Offices with higher amount of annual budget and an opportunity to corrupt are often called as ‘good offices’. 134
5.3.2 Actors, idea, interests and incentives
State actors, specifically the political leaders, civil servants and external development partners, played a decisive role in the adoption and implementation of civil service rightsizing policies. The non-state actors, including the private sector, did not have much idea or interest in rightsizing. A few academics had some involvement, but did not have much interest or stakes in it. Civil society and the media were just emerging during the early 1990s. The non-state actors did not have much space and role in civil service reforms. Recently, the media and the academia have become more vocal to the poor performance of civil servants. However, they still do not have clear idea or a firm standing on rightsizing reforms.
Political leaders were the ones having clear interests, stakes and incentives on rightsizing reforms. They had some knowledge and experience in administrative restructuring as it was practiced in the 1950s. However, they did not have in-depth knowledge or expertise on different aspects of civil service reforms. For this reason, the government sought technical assistance from the British Government and the World Bank to specify the rightsizing policies and devise implementation plans and strategies.
Political interests on reforms varied among different political parties. Sometimes, political leaders within the same party also had different opinion on reforms. In the 1990s, the leaders of the ruling Nepali Congress Party were in favour of economic liberalisation and NPM-oriented reforms. They were for a small government that would encourage the non-state actors’ involvement in public sector governance and thus they were interested in civil service rightsizing. Many of the political leaders in government did not trust the senior civil servants who were groomed by the party-less Panchayat regime. Therefore, they wanted to bid them farewell and bring in a new breed of civil service leaders who would offer full-fledged support to the new government.
There was also pressure on governments to meet growing popular aspirations and expectations following the restoration of parliamentary democracy. The leaders in the government had little trust that the senior bureaucrats could effectively address this challenging task. Similarly, civil servants did not have a positive image among the general public. That said, the major aid donors were interested in promoting NPM-oriented reforms in the country. For this reason, too, political leaders accorded high priority to rightsizing reforms to ensure more aid commitment and acquire both domestic and international legitimacy for their governments.115 Policy practitioners also argued that as the political leaders did not have much idea, experience and
115 Majority of the survey respondents, focus group participants and the interviewees agreed on international aid donors’ influential role for the adoption of rightsizing policy in Nepal. 135 expertise on wider issues of governance, they opted for a relatively easy-to-handle civil service rightsizing reforms.116
The main opposition party was not in favour of rightsizing reforms though it kept silent while they had a minority government in 1994. None of the Communist governments in the post- liberalisation era were fond of rightsizing reforms. Many of the fringe parties did not develop a strong position on it. A number of senior leaders of the largest reformist Nepali Congress Party also had serious reservations on economic liberalisation, privatisation and the NPM reforms. Rightsizing reforms were hardly on the priority of coalition governments. That is why the initial zeal and enthusiasm for rightsizing reforms gradually withered in the new millennium, specifically after 2006 when the Maoist rebels came to share power, participate in open politics and form government.
Civil servants were both the main stakeholders and actors of rightsizing reforms. Despite the fact that many of them were educated and trained in developed countries and had good exposure to public sector governance reforms, most were not interested in rightsizing, as it would reduce their power, prestige and even cause them to lose their jobs. Nevertheless, interests and incentives to rightsizing were different among the different layers of civil service. The senior- most civil servants such as secretaries were not much interested in rightsizing reforms. Neither were they interested in creating positions of their level and increase their competitors. Many of them pledged support to the government to implement rightsizing policy in order to gain an image of reform agents capable to address people’s needs and expectations. The ambitious civil servants at the second layer such as joint secretaries and undersecretaries were interested in pushing the rightsizing policy, which would potentially expand their promotion opportunities. Civil service trade unions and junior civil servants opposed the rightsizing reforms. They were the ones with the most antagonistic views on civil service rightsizing as it would cost their members’ job.
In aid-dependent countries like Nepal, foreign aid works as an incentive to adopt liberalisation- based and NPM-oriented reforms such as civil service rightsizing. That is why political parties having no genuine interest in reforms also had incentives to adopt the rightsizing policy. However, with highly volatile political situation in the country, it was found less effective during implementation as the political leaders were guided more by short-term benefits than long-term interest of the country.
116 Participants of a focus group discussion held in Kathmandu, Nepal on 4 September 2014 had an agreement on this view. 136
5.4. Implementation of rightsizing policies in the post-liberalisation era
5.4.1 Implementation status
Rightsizing the government was among the major priorities of the reform agenda after the restoration of multi-party democracy in 1990. The interim government, through its budget speech, announced a policy of redefining the role of the state in line with an open liberal economic policy and vowed to control unsustainable expansion of government activities that had occurred during the party-less Panchayat regime (MoF 1990).
The 1991 Administrative Reform Commission (ARC) headed by the then Prime Minister G.P. Koirala recommended a rightsizing policy that would redefine the role of government, restructure the state machineries, decentralise governance and simplify administrative procedures. The government created the Administrative Reform Monitoring Committee (ARMC) in August 1992 to expedite implementation of the 1992 Report of the ARC. The ARMC started administrative restructuring in accordance with the priority of the government.
While the ARMC was preparing the groundwork for the restructuring exercise with guidelines, six technical teams and departmental committees in concerned ministries, the government abruptly announced the retrenchment of nearly 3,700 senior civil servants on 6 November 1992 (World Bank 1993b, p.iii). To this end, the government amended the 1965 Civil Service Regulations,reducing the mandatory retirement age of civil servants from 60 to 58 year along with a 30-year service clause. The government also used a 20-year service clause to forcefully retire a large number of civil servants selectively (Asia Foundation 2012, p.5). In this arbitrary way the government started the execution of civil service rightsizing policy with a controversial arbitrary retrenchment.
However, the ARMC continued the implementation of the rightsizing policy, adopting a more rational approach to restructure the national civil service. The technical committees of the ARMC and the departmental committees of the concerned ministries jointly carried out the restructuring exercise for nine months. The restructuring exercise came up with around 28 percent reduction at the central level (excluding the Supreme Court) and four percent at the field level. Overall, 10 percent of the civil service positions were reduced by the time a review of the central level organisation and positions was completed in September 1993. The total number of civil service positions was reduced from 100,632 to 90,229117(ARC 1992b; Dhungel 1997, p.51).
117 This data is based on the record of the Department of Civil Personnel Records. The data collected by the ARC through various ministries and constitutional bodies was slightly higher than this figure (102,744).
137
The government introduced a number of policy reforms in economic sectors such as industry, trade and investment in the early 1990s to promote non-state actors’ involvement in the national development process. It also privatised a number of public enterprises. Decentralisation policy was emphasised to rationalise the central government and strengthen democracy from the grass- roots level.
The new retirement provisions introduced through an amendment of the 1965 Civil Service Regulations were incorporated in the 1993 Civil Service Act. The first and second amendments to this Act, in 1998 and 2007, introduced more stringent clauses for position creation, requisition and appointment in the civil service. The government adopted a policy of gradually eliminating non-gazetted fourth and third class positions in the civil service. Provision for a voluntary early retirement scheme was also introduced. Job descriptions were made mandatory across all civil service positions that clearly specified the functions, duties, responsibilities and powers of civil servants. Organisation and management surveys were made mandatory for the creation or alteration of any civil service positions (HMG 1993).
When the Nepali Congress Party came to power with a clear majority in the parliament in 1999, the implementation of the policy on civil service rightsizing gained added momentum. Creation of new civil service positions was discouraged. Vacant civil service positions were frozen. The 1999/2000 budget speech also adopted a policy of abolishing one-third of the vacant positions in civil service. The government reduced the number of ministries from 26 to 21 in 2000 (ADB 2003). Personnel information systems were established for civil servants and teachers under the Governance Reform Programme (2001-2007). The government implemented the Voluntary Early Retirement Scheme (VERS) in 2000. More than 2,200 civil servants were retired under this scheme, which continued for a couple of years. The vacant positions caused by VERS were automatically eliminated. Similarly, a number of ministries, including the Ministry of Agriculture and Cooperatives, Ministry of Education and Sports and Ministry of Health were restructured. Service Contract Guidelines was issued in 2003 to facilitate the outsourcing of services that were traditionally carried out by the civil servants, such as driving and security services. It was expected to reduce the long-term liability of the country. Moreover, a performance incentive fund was introduced in September 2004 to improve the efficiency of civil servants that would ultimately contribute to reducing their number (ADB 2008a).
More than 7,500 civil service positions were eliminated while implementing the conditionality- based Public Sector Management Programme (2003-2006). The government also issued an order to freeze the recruitment of non-gazetted third and fourth class civil service positions on May 14 2003, which was incorporated in the second amendment of the 1993 Civil Service Act. A formula-based block grants to the local bodies was introduced in January 2003 to reduce the administrative burden of the central government and strengthen local bodies. Similarly, more
138 than 35 thousand public schools were transferred to the local school management committee (ADB 2008b) which would potentially help reduce the size of centralised public service.
The policy of eliminating civil service vacant positions continued until the fiscal year 2003/2004. After the royal takeover in February 2005, the government emphasised the need for efficiency in public administration but focused on performance improvement rather than downsizing the number of civil servants. Since then, like other reforms, civil service rightsizing suffered as a result of the escalating political conflict. After the 2006 political movement, all the vacant positions of the Nepal Army during 2006/2007 were made redundant. The prime motive behind this was not government rightsizing but accommodating Maoist rebels in the national army. However, somehow this served the purpose of rightsizing without which the size of the Nepal Army would have increased.
Civil service rightsizing did not remain a priority issue after 2006. Since then, governments have not had a specific rightsizing policy. The 2007 Interim Constitution of Nepal adopted a welfare approach to development. The state’s role was tremendously increased. For this reason, several new positions were created in the social sectors, such as health and education. Several health posts were upgraded with additional specialist positions and management experts. A number of new departments such as the Department of Money Laundering Investigation, Public Procurement Office, and regional offices of the Commission for the Investigation of Abuse of Authority, were created. Similarly, thousands of teacher positions were created. Despite the government policy of discouraging the establishment of development committees/boards, several new development committees, especially in the tourism sector, were created after 2006. However, the policy of deputing permanent civil servants to temporary positions of government-run development projects has been continued satisfactorily – despite resistance from some of the line ministries.
Review of policy documents and government reports shows that several strategies were adopted to rightsize the civil service. Commencing with rather arbitrary measures to forcibly retire some of the senior civil servants, gradually the government adopted a rational approach to rightsizing. Organisational restructuring was made more realistic by announcing the organisation and management survey be made mandatory for the creation or alteration of civil service positions. Other strategies included the elimination of vacant positions, recruitment freeze and outsourcing. Performance-based management and e-governance systems were also introduced with an expectation of doing more tasks with less workforce.
With the reform-oriented homogeneous majority government (1991-1993) and strong leadership, initially civil service rightsizing was expressively implemented with great enthusiasm. During the highly unstable political situation from 1994 to 1999, rightsizing did not
139
receive the priority of the eight coalition governments in power during that time. Implementation regained momentum during 1999-2003 under the majority government of a reform-oriented political party. Amidst the escalation of political conflict, rightsizing policy gradually withered after 2004 as conflict management and resolution became the topmost priority of governments. After 2006, rightsizing policy has not been specifically included in governments’ policy documents, except for sporadic mentions in some of the budget speeches by finance ministers from the Nepali Congress Party.
5.4.2 Implementation analysis
My field survey found that civil service rightsizing policy was not efficiently implemented in Nepal in the post-liberalisation era. As the table below demonstrates, more than 56 percent of the respondents did not agree that rightsizing policy was efficiently implemented. Further, a majority (more than 65 percent) of the respondents believed that the implementation was not successful.
Table 5.5 Implementation of civil service rightsizing policy (N=87) Statement Strongly Agree Neutral Disagree Strongly Don’t Agree Disagree Know
Overall, 0 15 23 37 12 0 implementation of civil service (17.2%) (26.4%) (42.5%) (13.8%) rightsizing policy was efficient
Overall, civil service 0 14 16 49 8 0 rightsizing policy was successfully (16.1%) (18.4%) (56.3%) (9.2%) implemented
Source: Field survey during April-September 2014.
A focus group discussion on civil service rightsizing118 had a similar view that implementation was far below expectations. However, for them, the implementation process was not the sole problem. They questioned the quality of the policy itself. As the policy was an outcome of prejudice against senior civil servants, its design was not well-thought out. It lacked proper sequencing. Furthermore, the policy, as well as the implementation modality, was largely prescribed by international donors who neglected local realities.
118 The focus group discussion was held in Kathmandu on September 4 2014. 140
The political context remained crucially important for the adoption and implementation of rightsizing reforms. The reform went well when the Nepali Congress Party, an ardent supporter of economic liberalisation and NPM-oriented public sector governance reforms, held a clear majority in the parliament in 1991 and 1999. It slowed down between 1994 and 1999 when the eight coalition governments focused on retaining political power rather than implementing governance reforms. The escalation of Maoist conflict after 2000, followed by the royal interregnum of 2002 and the King’s direct rule in 2005, also had negative impacts on the implementation of rightsizing policy in Nepal (ADB 2008a). It did not progress when left- leaning political parties formed the government, although they did not publicly oppose the policy. As most of the governments after 2006 were led by different Communist parties, the rightsizing policy gradually evaporated. Similarly, transition management and constitution making became the overarching goal of the governments; the governance reform agenda was therefore sidelined after the country entered into an era of federal democratic republic in 2006. The external development partners also gradually lost their assertiveness to impose pressures for NPM-oriented public sector reforms.
Elite interviewees also believed that the rightsizing policy was partially and poorly implemented. They argued that the crux of the problem of Nepalese civil service was not the number of civil servants, but its structure and work culture. Thus the rightsizing policy was poorly diagnosed. They highlighted conflict of interest of civil servants, crisis of governability in the country, visionless politics, a decision-averse bureaucracy and instability as the main reasons for poor implementation. They also argued that with excessive emphasis on the number of civil servants ignored the importance of behavioural change, meaning the externally driven reform agenda did not go well.
A fear psychosis in the initial period of starting the reform was also a prominent reason for implementation failure. Political leaders had a fear that civil servants groomed in the party-less Panchayat regime would not pledge full support to the new government. They also believed that senior civil servants helped the previous regime suppress them. They wanted to get rid of them and usher in a new, young breed of leaders. For this reason, the Prime Minister started civil service rightsizing with arbitrary retrenchment, in contrary to the 1992 report of the ARC chaired by himself.
This arbitrary retrenchment was a major setback not only to the civil service rightsizing but also for the overall administrative reforms in the country. When the Supreme Court reinstated many of the forcefully retired civil servants who filed cases against the arbitrary dismissal, the government faced a severe blow to its reform initiatives. This created a huge rift between politics and the bureaucracy. It also posed a question regarding whether the government was genuinely interested in civil service rightsizing or just retiring some of the senior civil servants.
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There is evidence to reinforce this argument. For instance, the government reduced civil service positions to 90,229 by September 1993. And, contrary to the ARMC recommendation to stop new position creation for some time, the same government created two thousand additional positions within a year without any valid reason (Dhungel 1997, p.58).
Political leaders were not the sole actors to implement arbitrary retrenchment, though they were the ones who formally decided it. Both as the key stakeholders and implementers, civil servants had a crucial role in rightsizing reforms. However, in reality, it was possible only when some of the external development partners’ advice, political leaders’ motives and ambitious mid-career civil servants’ interests converged. There were no visionary political leaders to independently drive reforms. In the absence of experience and a clear vision on administrative reforms, political leaders were easily convinced by external advisers. On the other hand, some influential mid-career civil servants exerted pressure on the government through their relatives, minions and advisors of senior political leaders to forcibly retire the senior-most civil servants, thus paving the way for their swift promotion. The government opted for a whimsical move to forcibly retire nearly 3,700 civil servants on November 6, 1992. A retired secretary termed it as the Kot massacre (EI016)119 of the civil service. There remained only two permanent secretaries and the rest were recruited on contract. Three people became General Administration Secretary on the same day. The humiliating forceful retirement of senior civil servants not only deprived the country of well-trained experts and experienced administrators, but also created a suspicion and fear between political leaders and the senior civil servants (EI 016).120
Political leaders did not have much stake or interest in civil service rightsizing except in the aftermath of significant political changes. They intervened only in a few cases where people from their parliamentary constituencies were seriously concerned on the issues such as building or upgrading hospitals, health centres or health posts. Similarly, they used to exert pressure on the concerned ministry when their ‘afno manchhe’ (one’s relative, friend or a person within the circle) in civil service had interests or stakes on it. On the other hand, the initial zeal and enthusiasm of the rightsizing advocates gradually waned, thus allowing greater latitude to the civil servants who not only resisted reforms detrimental to their interests but also successfully pursued their personal interest through distortionary implementation. Policy distortion was evident while contracting-out basic services and carrying out administrative restructuring. Focus group discussants121agreed that the provision of contracting-out policy was misused to appoint
119The court massacre generally known as kot parva took place on 19 September 1846 when Jung Bahadur eliminated his rivals by killing the then Prime Minister and many other nobles. Later he establish the Rana Autocracy. 120 An in-depth interview with a former secretary and the member secretary of the 1991 Administrative Reform Commission. 121 Focus group discussion on civil service rightsizing held on 4 September 2014. 142 the leaders’ close relatives, followers, supporters or other members of their networks. In many cases, permanent staff were made redundant by appointing others on a contractual basis.
Similarly, mostly junior positions were eliminated, keeping senior positions intact that could ensure better promotion opportunities to senior officers. As the junior civil servants did not have much voice to the decision-making authority mostly their positions were eliminated or made redundant while the higher echelon of civil service remained almost untouched. Policy distortion also occurred during position creation. Focus group discussants interviewed for this thesis were concerned over the tendency of flocking around the power centres at the Ministry of General Administration, Ministry of Finance and the concerned line ministries to get through the senior positions, especially at undersecretary and joint secretary levels, in order to increase their promotion possibilities.
Bureaucratic politics was much more prominent than anything else during the rightsizing reforms. Enhancing promotion opportunities for the civil servants rather than the job nature or functional analysis used to be the guiding factor for position creation. A retired joint secretary, who spent most of his working life at the Ministry of General Administration, recounted an interesting story:
The Commission for the Investigation of Abuse of Authority had delegated some of its power and authority to the Regional and District Administration Offices and a few selected districts. Realising the need of legal experts to handle corruption cases, the Ministry of Home Affairs proposed five additional positions of Under Secretary and ten Section Officers from the Attorney’s Subgroups for the five Regional and the selected ten District Administration Offices. However, the Ministry of Law, Justice and Parliamentary Affairs twisted the proposal to include five Under Secretaries from the Law Subgroup instead of Attorney’s Subgroup. For the same nature of job, positions were created from different Subgroups just to increase promotion possibilities. See this is how the influential civil servants play for their interests. (EI023)122
There are several interesting stories about position creation in the Nepalese civil service. A sitting joint secretary, who worked in the Ministry of General Administration as an undersecretary for more than five years, recounted:
It’s really difficult to deal with the Ministry of Foreign Affairs. They are extremely powerful with their hospitality services to the influential political leaders while working in the Nepalese embassies abroad. They build-up relations with food, accommodation and transportation services that they cash out while creating additional civil service positions for their promotion or posting. They have done so several times. This is how civil service rightsizing is going on (sarcastically), but this is a fact. (EI009)123
122 An in-depth interview was taken on 15 June 2014. 123 An in-depth interview was taken on 30 May 2014. 143
Societal culture also helps explain the implementation of rightsizing reforms. In Nepal, societal values and tradition promote favouritism whereas formal rules and regulations expect impartiality and neutral competence. The informal system and dynamism of ‘afno manchhe’ (favouring one’s relatives, friends, supporters, etc.) still plays a significant role in Nepalese public service. A sitting secretary, who worked in the Ministry of General Administration for more than a decade, recalled his experience:
When I was in charge of the Organisation Development Section in the Ministry of General Administration, I received a letter from the Ministry of Foreign Affairs to create some new positions under the ministry. They had proposed a few positions for Nepalese embassies abroad.
Within half an hour, my boss called me to his chamber. He asked me if I had received any letter from the Ministry of Foreign Affairs. I told that I had just received a letter to create some positions under the ministry. I came to know that one of the positions was for a nephew of the sitting Chief Commissioner of the Commission for the Investigation of Abuse of Authority. My boss was informed by our Secretary who received a call from the Chief Commissioner who was quite powerful during that time. A few other positions were put together with that position. My immediate boss knew that I did not work for any vested interest and was very much firm in my view. He was very clever and in a sense more practical than me who could mould himself very well to any situation. He nominated me for a short training at the Nepal Administrative Staff College. By the time I came back to my office my boss had managed to inform the Chief Commissioner that the Ministry of Foreign Affairs’ request was already through. (EI032)124
The practice of favouritism deeply rooted in the Nepali society also influenced the rightsizing process. A joint secretary recalled his experience while he was working in the Ministry of General Administration:
A sitting secretary who also worked as a Secretary in the Ministry of General Administration came to my office. While he was in that ministry he hardly entered into my chamber. I was working on a restructuring exercise of the Ministry of Science, Technology and Environment. Having a glance at the file we were working on, he told that coincidently he arrived at my chamber while we were working on the restructuring exercise. He enquired about the likely changes as if he was completely unknown about it. It was not difficult for me to understand that he came with a mission by knowing the restructuring exercise. When I told that we were eliminating some of the positions that were found redundant, he spoke in favour of a particular position and the person attached to it. Later we came to know that the person was a Yoga teacher to the Secretary. (EI009)125
Lack of commitment on the part of political and administrative leaders is often attributed to the poor implementation of governance reforms ignoring the fact that they are also the product of the same society. The leaders are the mirror image of the society in which they operate. They are so engrained into the societal culture and tradition that they could hardly move out-of-the box while making decisions or implementing reforms.
124 An in-depth interview was taken on 21 June 2014. 125 An in-depth interview was taken on 30 May 2014. 144
The following statements by a former secretary who also worked in the Ministry of General Administration as a joint secretary reveals how civil servants used their strategic position to pursue personal or group interests:
We were restructuring the Office of the Attorney General and its offices throughout the country. There was a need to restructure it in line with the new structure of judiciary. My team was seriously assessing job nature and work-load analysis with available data and information. They wanted the restructuring exercise to move fast as they were interested in finalizing it during the tenure of the then Attorney General who had a very good relation with the then Prime Minister. They used every network including their employees who were close friends or relatives to our staffs to expedite the restructuring process.
One day a senior under secretary of Attorney General’s office came to my office to request to expedite the restructuring process. I asked him to provide a letter of consent from the Ministry of Finance (MoF) which was a prerequisite for submitting a restructuring proposal to the cabinet. During our informal conversation he told that he could get the letter in no time. He was advised by the MoF staffs to convince us first. Gradually he disclosed the tricks. He told that many of the MoF staffs had cases in the court, mostly corruption cases. They were the ones who could advocate, advise or counsel them during the litigation process. In fact they had a key role to strengthen or weaken the cases. For that reason the MoF staff who were generally known for their toughness with their ‘power of the purse’ would readily provide support to them as an exchange for their support in the courts. Jokingly, he told that unfortunately the Ministry of General Administration staffs did not have any case in the court.
He was working hard to get through the proposal only because it would lead to his promotion to joint secretary. I was surprised when he got the letter of consent from the MoF on the same day. See this is how bureaucracy works. How can you expect rightsizing from civil servants? I don’t think that politicians have much to do with this (EI017).126
Weaknesses and shortcomings of reform institutions also hampered the efficient and effective implementation of the rightsizing policy. Like the major political parties they also did not have uniform understanding and common voice on reforms. The Office of the Prime Minister and Council of Ministers (OPMCM), an apex body of the reform leading institutions, acted just as a formalizing agency to approve ministerial proposals. The restructuring proposals used to be sent straight to the cabinet meetings without any study or analysis in the OPMCM. Similarly, the ministers rarely had broader national perspectives. They did not pay much attention to the proposals submitted by other ministries unless that had a direct impact on their ministries.
Reform leading institutions also lacked capacity to effectively coordinate concerned institutions and carry out an in-depth study on organisation and management. None of the staff involved in organisational restructuring was found to be trained in organisation and management study. They did whatever they knew by themselves or whatever they thought was good in their experience. Similarly, institutional infrastructure for a detailed and systematic organisation and management study was not in place. Job description lacked specific and measurable indicators.
126 An in-depth interview was taken on 7 June 2014. 145
Despite the dedicated department and huge amount of investments for more than two decades, the Department of Civil Personnel Records did not have reliable and updated civil personnel database.
In Nepal the pace of social development was not mirrored by epoch-making changes on the political front. Consequently, the reform leading institutions inherited a status-quo tradition and culture characterised by a tendency of path-dependency, which inhibited a breakthrough in the reform process. The deeply entrenched tradition and the path-dependent tendency hindered development of innovative, liberal and democratic institutions willing and able to make change happen. As Presthus (1961, p.4) argued, traditional values, norms and institutions deeply seated in traditional societies did not facilitate change but rather resisted it.
Informal systems were found to be more prominent in public administration than the formal ones. In the absence of clear, specific and measurable indicators, individual responsibility and accountability was often blurred. Performance evaluation was highly influenced by individual relationships between junior staff and supervisors. Supervisors’ evaluation and behaviour towards their subordinates depended on their knowledge about the connections and proximity to the power centres.
A low level of compliance was yet another important factor in the poor implementation of rightsizing. Like ordinary citizens, civil servants were more concerned with their rights but failed to consider their duties and responsibilities. Consequently, the compliance level was significantly reduced, along with the politicisation of the civil service through trade unions affiliated with the major political parties. Even the ministers did not extend full-fledged support to the Prime Minister (EI023).127 Widespread impunity in the country also contributed to the deterioration of discipline and low level of compliance. Similarly, in the absence of effective accountability enforcement mechanism, there was no clear distinction between the performers and non-performers. Consequently, reform implementers did not have any incentive to implement reforms.
Like many other reform policies, the rightsizing policy was implemented without adequate deliberations/consultations. Implementers had a feeling that it was imposed by some external factors. Reforms were not effectively communicated before, during or after implementation. There was no effective deliberation mechanism in the Nepalese public service. The hierarchical society and feudal culture also did not allow effective deliberation. Similarly, strategic communication was not employed to enhance ownership and commitment on the part of implementers.
127 An in-depth interview with a former joint secretary on 15 June 2014. 146
5.5 Implications for the reform objectives
Civil service rightsizing was initiated in the early 1990s with an objective of making public administration more efficient, effective and economical that would ensure improved public service delivery. Rightsizing strategies included a functional review and analysis of government organisations, work load measurement, organisational restructuring, hiring freeze, voluntary retirement, procedural simplification and the greater involvement of non-government sectors in public service delivery. In the early 1990s, the Nepalese civil service was generally perceived as being overstaffed. For this reason, the rightsizing exercise was geared towards downsizing the public bureaucracy. As discussed earlier in this chapter, with ups and downs in government priority amidst the highly volatile political situation, implementation of civil service rightsizing was not encouraging. This has to be considered while analysing the impact of rightsizing reforms.
In a questionnaire survey carried out for this thesis, majority of the participants believed that rightsizing objectives were not achieved. Only 11.5 percent of them agreed that the objectives were achieved against 51.7 percent disagreements and 10.3 percent strong disagreements. Similarly, for a majority of them, rightsizing reforms did not have an overall positive impact on the civil service. The financial burden of government organisation was not significantly reduced as envisaged while initiating the rightsizing reforms. Nor was there a significant improvement in public service delivery. The following table highlights the impact of civil service rightsizing in Nepal.
Table 5.6 Impact of civil service rightsizing (N=87) Statement Strongly Agree Neutral Disagree Strongly Don’t Agree Disagree Know
Working methods and 1 21 28 32 5 procedures were (1.2%) (24.1%) (32.2%) (36.8%) (5.7%) significantly improved
Financial burden of 17 17 42 10 1 government (19.5%) (19.5%) (48.3%) (11.5%) (1.2%) organisations was significantly reduced
Motivation and morale 10 16 46 15 of civil servants was (11.5%) (18.4%) (52.9%) (17.2%) improved
Non-government 24 18 39 6
147 sector’s involvement (27.6%) (20.7%) (44.8%) (6.9%) in public service delivery was increased
Public service delivery 14 26 39 8 was significantly (16.1%) (29.9%) (44.8%) (9.2%) improved
Objectives of 10 22 45 9 1 rightsizing were (11.5%) (25.3%) (51.7%) (10.3%) (1.2%) achieved
Overall rightsizing had 1 14 28 41 3 positive impact on (1.2%) (16.1%) (32.2%) (47.1%) (3.4%) civil service
Source: Field survey during April-September 2014.
My focus group discussants128 had similar, yet more decisive, views on the impact of civil service rightsizing. They were critical of the way rightsizing policy was implemented. They agreed that senior civil servants distorted rightsizing policies during its implementation. Conflict of interest was clearly visible as the senior civil servants mostly reduced junior level positions in the name of officer-oriented administration. Lower level positions were indiscriminately eliminated while retaining and, in some cases, increasing the senior positions, mainly to ensure better opportunities for promotion of mid-career and senior civil servants. A massive cut in street-level civil service positions had a negative impact on public service delivery. As one of the participants remarked:
We reduced a number of office assistants in the health posts/centres. Doctors’ positions were mostly unfulfilled as they were not interested to work in the rural areas with a low prospect of private clinics. In the absence of qualified doctors, the office assistants with considerable service experience became the doctors of the ordinary people in rural remote areas of the country. They were the ones providing first aid to the populace. (FGA03)129
Practioners also argued that civil service rightsizing did not reduce government’s financial burden as new employees were recruited on a contractual basis while the redundant civil servants were still in service. A participant was very critical of this situation:
We had massive massacres of the public bureaucracy in the name of rightsizing. We mainly abolished the positions of voiceless lower level staffs. Now we are recruiting
128 Focus group discussion held on 4 September 2014 in Kathmandu, Nepal. 129 A joint secretary who was involved in rightsizing reforms while at the Ministry of General Administration. 148
the same positions on a contractual basis. Is it the rightsizing that we were looking for? (FGA02)130
Rightsizing reforms focused on numbers and targeted the street level junior staffs resulting in a detrimental impact on public service delivery. It was not considered as a part of the overall challenge of civil service reforms. It also did not cover other public services. Alternative ways and mechanisms to deliver pubic service after restructuring were rarely considered. Consequently, neither public service delivery was improved nor administrative cost was reduced (IE021).131 Overall, rightsizing policy did not have a positive impact on the civil service (EI005).132
Many of the elite interviewees had a bitter experience with civil service rightsizing. An interviewee termed rightsizing reforms as a ‘futile exercise’ (EI004).133 A former secretary and the Member Secretary of the 1991 Administration Reform Commission said, “civil service has reached nowhere in the last 25 years” stating that “people still need to bribe to pay tax to the government”(EI016).134
With partial and poor implementation, rightsizing reform did not achieve expected results. It was also distorted during the implementation process. Similarly, rightsizing policy was adopted without properly diagnosing the problems of civil service. However, counterfactuals have to be considered before making a fair assessment of rightsizing reforms. Rightsizing policy created massive awareness among the political leaders and civil servants to control the long-term liability of the state (EI008).135 Policy to depute permanent civil servants in government-run development projects was encouraged, and recruitment of temporary staff was discouraged. The concept of a contributory pension fund was introduced, though it is yet to be materialised. A solid legal foundation was built for the management of civil service positions. Organisation and management surveys were made mandatory to restructure government organisations or make any change in civil service positions. People began to think of value for money in public service. Similarly, the non-governmental sector had plenty of space to get involved in the national development process.
With the introduction of contracting-out in the public service, basic services like security, cleaning, gardening, photocopying and mail services became more cost-effective and efficient.
130 A senior undersecretary with 30 years’ experience in civil service. 131 A joint secretary of the Office of the Prime Minister and Council of Ministers during an in-depth interview on 12 June 2014. 132 A former secretary of the Government of Nepal during an in-depth interview on 27 May 2014. 133 A free-lance consultant having an extensive experience on civil service reforms in Nepal during an in-depth interview on 26 May 2014. 134 An in-depth interview held on 6 June 2014 with a follow up on 25 March 2015. 135 An in-depth interview with a former minister and finance secretary held on 30 May 2014. 149
It also reduced government’s long-term pension liability. Moreover, growth of civil service significantly reduced after 1990. For instance, the number of civil servants increased by 65.5 percent, 57.9 percent and 44.2 percent in 1960s, 1970s and 1980s respectively (see Table 5.1), which was reduced to 2.2 percent and 2.9 percent in 1990s and 2000’s respectively. Although civil service positions went up by 5.9 percent during 2011 to 2015 (table 5.7), it was still far less than the ones before 1990.
Table 5.7 Growth of civil service after 1990 SN Year Permanent Change position Number Percentage 1 1991 102744 31512 2 2001 105000 2256 2.2 3 2011 108078 3078 2.9 4 2015 114433 6355 5.9 Source:ARC (1992a); MoF (2011c) and Department of Civil Personnel Records.
During the early 1990s, there was a significant reduction in the size of civil service. The structure of civil service was also improved by reducing the unproductive positions.136 The proportion of officers has increased significantly in the last 25 years. As the table below demonstrates, the proportion of officers in the civil service increased significantly in the last 25 years. The proportion of non-officers was reduced although the absolute number was slightly increased. Office Assistant positions were reduced both in proportion and absolute number after 1991.
Table 5.8 Structure of civil service positions in 1991 and 2015 Year Level 1991 2015 Change (+/-) Number Percentage Number Percentage Number Percentage Officer 10215 9.9 19604 17.1 9389 91.9 Non-officer 63048 61.4 66193 57.8 3145 5 Office Assistant 29481 28.7 28636 25.1 -845 -2.9 Total 102744 100.0 114433 100.0 11689 11.4 Source: ARC (1992) and the Department of Civil Personnel Records, Print (March 23, 2015).
136 Positions like peon and drivers that mostly served the senior civil servants were reduced. These positions did not perform the core functions of the concerned organization and did not have much to do with public service delivery. In that sense these positions are termed as unproductive positions. 150
The government initiated procedural simplification to support the rightsizing policy and improve public service delivery. In this connection, a Manual for Providing Services to the Public More Effectively 1999 and a Directives on Simplification of Government Decision 2008 were issued. A Citizen Charter was introduced, along with a provision of compensation. Stringent restrictions were imposed on position creation, vacancy fulfilment and appointments to control unnecessary expansion of civil service through the amendments in the 1993 Civil Service Act. An in-built mechanism to review salary and allowances of civil servants was introduced in 2007 in order to enhance motivation and morale of civil servants. However, these provisions are yet to be fully functional to produce desirable outcomes.
Despite all these initiatives for civil service rightsizing and improvement in public service delivery with a greater involvement of the non-government sector, the Nepalese civil service has a long way to go to ensure efficient and quality service to the populace. Even after 26 years of reforms, the government is yet to determine the optimum size of the civil service. It still lacks basic infrastructure like reliable and updated database of civil service and job description with quantifiable and measurable indicators. This shows that civil service rightsizing policy was adopted without proper diagnosis of the issues and challenges of civil service reforms. Alternatives to the rightsizing policies were not duly considered.
The rightsizing policy was distorted during implementation. Only a few rightsizing strategies such as retrenchment, a hiring freeze and a voluntary retirement scheme were implemented. Other important strategies such as functional review and analysis, work-load measurement, procedural simplifications and greater involvement of the non-government sectors in public service delivery were barely considered. While focusing on the number of civil servants, behavioural reforms were overlooked without which efficient and effective public service could not be ensured. Similarly, while a performance incentive fund was implemented, the focus was on incentive rather than performance. Only the powerful organisations such as the Office of the Prime Minister and Council of Ministers, offices under the Ministry of Finance, Parliament Secretariat and the Commission for the Investigation of Abuse of Authority could implement it. However, the policy makers did not accord priority to the frontline offices delivering public services at the local level to implement performance incentive fund.
In the absence of a renewed commitment, the rightsizing policy has lost relevance after the political change of 2006. Similarly, even after such a long time, the implementation process could not be more systematic and criteria-based. For this reason, workload was not rationalised in the civil service. Some organisations and civil servants were overloaded, whereas others did not have sufficient work. A large number of staff whose positions became redundant during the administrative restructuring process were not adjusted for a long time to provide new business. Consequently, some honest staff suffered the psychological toll of not having any work to
151 perform for a long time, without any fault on their part. On the other hand, some crafty staff misused the redundant positions, making platforms to move back and forth to the so called good offices.137 There was also an increasing tendency to recruit temporary office assistants without any approved position. In some cases, salaries and allowances of the temporary staff were financed by the programme expenses. None of the government agencies have a complete, reliable and updated record. However, there has been a phenomenal growth of such staff after 1990. The civil service trade unions continue to exert pressure to convert the temporary staffs into permanent positions. This can be a huge financial burden to the government if not addressed in time.
5.6 Conclusion
Supply or demand theories of the growth of government cannot fully explain the situation in aid-dependent developing countries like Nepal. Government size is neither solely associated with people’s welfare nor the vested interests of bureaucratic elites. Like many other developing countries, foreign aid played a significant role in the massive expansion and growth of public service in Nepal before 1990. The public bureaucracy was expanded while complying with the development partners’ recommendations for a more flexible and modern development administration to ensure timely completion of donor-funded development projects, which would also help governments get commitment for more foreign aid and acquire legitimacy both at the domestic as well as the international front. For this reason political leaders in developing countries, even the ones having no genuine interests in economic liberalisation and NPM reforms, were prone to ‘mimicry’ as if they had genuine interest on rightsizing reforms.
Nepal initiated rightsizing policy not just for a quick-fix of the problems and challenges of public bureaucracy through downsizing or cutback management, but to bring in long-term transformational changes in public service delivery through multi-pronged strategy such as functional analysis, organisational restructuring, decentralisation and procedural simplification though some deviations were found during implementation.
Civil service rightsizing in Nepal, as shown by a questionnaire survey, was primarily driven by political leaders in the early 1990s. However, an in-depth analysis of the survey findings, a focus group discussion and elite interviews revealed that the rightsizing policy was introduced with a triangular interplay among the political leaders, senior and mid-career civil servants and the development partners. Political leaders wanted a new breed of administrative leaders who would pledge fully-fledged support to their government. Senior and mid-career civil servants were interested in widening promotion opportunities. Similarly, the development partners were
137 There is no formal definition of good offices. However, civil servants frequently use this term to denote the offices with abundant resources or the so called ‘lucrative’ offices having an opportunity to corrupt. 152 interested in promoting economic liberalisation and an NPM-oriented reform agenda. However, the major external development partners, including international consultants, were found to be the most influential actors in shaping the reform agenda.
A number of different rightsizing strategies such as organisational restructuring, functional off- loading, privatisation and devolution were adopted. However, it started with an arbitrary approach to cutback management which was a major setback to rightsizing reforms. It created a huge rift between the political leaders and the public bureaucracy. Compulsory retirement through an amendment to the 1965 Civil Service Regulations of previous party-less Panchayat regime and arbitrary dismissals of a large number of senior civil servants posed a serious question to the democratically elected government surrounding its intention to commence rightsizing reforms. This had an adverse impact on the implementation of rightsizing policies for a long time. However, in the later stage, the government adopted soft strategies such as a hiring freeze, withholding position creation and voluntary early retirement schemes.
State actors such as the political leaders and civil servants, along with the external development partners, were the influential actors for the adoption and implementation of rightsizing reforms. Political leaders’ interests were prominent in the immediate aftermath of political change. Civil servants were both the stakeholders and key implementers of rightsizing reforms, having persistent interest in it. However, interests and incentives to rightsizing cannot be generalised as it differs among different levels and positions of civil servants. This equally applies to the political leaders, since interests and incentives to rightsizing reforms differ among political parties along with their levels and positions in governance system. The non-state actors such as academics, civil society and the private sector were not found to have much interest and influence in the adoption and implementation of rightsizing reforms.
The rightsizing policy was partial and poorly implemented. It did not progress as an iterative process partly because of the negative impact of an arbitrary retrenchment of senior civil servants in the initial stage. Similarly, the lack of policy consistency, continuity and proper sequencing of the reform agenda, and a lack of ownership and genuine commitment to the donor-driven reform agenda on the part of political and administrative leaders, were attributed to the poor implementation. Institutional weaknesses and shortcomings also hampered the implementation process. The political and administrative leaders lacked uniform understanding and unity of purpose about rightsizing reforms. There was no effective coordination among the reform leading institutions. Heavily influenced by the culture of personal appeasement, nepotism and favouritism rather than the sense of public accountability, these institutions’ actions were hardly predictable. Informal institutions, rules, powers and interactions were found to be more prominent than the formal processes of reforms that promoted path-dependant characteristics of government organisations.
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The political context remained critically important to the implementation of rightsizing reforms in Nepal. Political change in 1990 brought structural changes in state institutions, which created zeal and enthusiasm among the political leaders to initiate public sector reforms. The first elected reform-oriented majority government accorded high priority to rightsizing reforms. However, it lost momentum after the downfall of a majority government in 1994, when eight coalition governments were formed between 1994 and 1999. When a majority government returned in 1999 for the second time, rightsizing reforms regained momentum until 2003. Again, rightsizing reforms gradually went off the government radar along with the escalation of Maoist insurgency and the Royal interregnum in 2002 and coup in 2005. After the people’s second movement in 2006, the state was guided more by its welfare-oriented constitution and most of the subsequent governments were headed by Communist parties. As a result, the rightsizing agenda ended up not with a bang but a whimper.
Bureaucratic politics was found immensely influential during the implementation of rightsizing reforms. Senior civil servants not only resisted reforms that would potentially jeopardise their interests, but also pursued their personal and group interest by slowing down the process or distorting implementation. Policy distortion was more evident during the implementation of rightsizing targets and contracting-out the basic services. Civil service rightsizing failed to achieve its reform objectives mainly because of the partial and distorted implementation. However, this does not mean that rightsizing reforms did not leave any positive legacies. They stopped the massive growth of civil service before 1990. They opened ample avenues for non- governmental sector’s involvement in public service delivery. And they raised the level of public awareness on the need of rightsizing in the Nepalese public service. In the absence of the rightsizing policy, civil service in Nepal would have reached to an alarmingly unsustainable level.
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Chapter 6 Privatisation of public enterprises
In this chapter I discuss how privatisation became a major political issue in Nepal inthe post-liberalisation era. I highlight the context in which the privatisation process commenced, and trace the major drivers of the policy. I explore the political dimension of privatisation in Nepal, and conduct a thorough analysis of the policy process for the last twenty six years. I argue that externally driven policy reforms linked with conditionality-based lending struggled to produce sustainable outcomes. The commitment to implement policy reforms gradually withered along with the wilting of donor engagement. I develop my arguments through the illuminating narratives of policy elites who were directly involved in the privatisation process. I support my arguments with a field survey, a focus group discussion, an extensive review of policy documents, government reports, development partners’ comments, expert opinion and media observations. I view the privatisation outcomes from a political economy lens that examines the role of context, actors, institutions and the process of policy reforms.
6.1 Contextualising privatisation in Nepalese perspectives
At a rudimentary stage of economic development after the downfall of Rana oligarchy in 1951, Nepal adopted a state-led development approach with a view to meeting the growing aspirations of the people and achieving speedy economic development. However, the government emphasised private sector development, stating that prosperity could only be achieved by increasing the stock of capital rather than simply distributing the existing property (MoF 1951). With a policy of providing public loans to establish and operate private enterprises, private sector industries were also assured of being treated and provided with facilities no less favourable than were public enterprises (NPC 1956).
However, lacking sizeable investment, entrepreneurship and managerial competence, the private sector was too weak to lay the foundation for economic modernisation and growth. For this reason, state-owned enterprises (SoEs) were established with the financial and technical assistance of foreign aid donors (Manandhar and Bajracharya 2000; NPC 1992, 1997; Panday 2011; Paudel 2006).
There was a phenomenal growth of SoEs until the Fourth Plan period to create basic development infrastructure and promote industrial development in the country (NPC 1965, 1970). From only one public enterprise in 1956, the number reached 61 in 1975. Table 6.1 presents the growth of the SoEs in Nepal from 1956 to 1990. Factors such as economic planning, the adoption of mixed-economy policies, the initial stage of private sector
155 development, foreign aid availability in the form of turn-key projects and the adoption of inward-looking development strategies were responsible for this growth. As the Nepalese economy was closely linked with the Indian economy, India’s inward-looking economic policies also had a significant impact on Nepal’s own economic trajectory (Manandhar and Bajracharya 2000; NPC 1992, 1997; PAC 2011; Paudel 2006).
Table 6.1 Growth of public enterprises in Nepal before 1990 Total number of public Periodic plan Change(in number) enterprises Prior to 1956 1 - First Plan (1956-61) 8 7 Second Plan(1962-65) 22 14 Third Plan(1965-1970) 34 12 Fourth Plan(1970-1975) 61 27 Fifth Plan (1975-1980) 59 -2 Sixth Plan(1980-1985) 54 -5 Seventh Plan(1985-1990) 63 9 Source: National Planning Commission, various plan documents
Although the increasing trend of establishing SoEs slowed after the Fifth Plan, government investment continued to grow. In addition to a large amount of government grants, direct share investment and guaranteed loans to the SoEs reached Rs. 1,380.9 million and Rs. 844.1 million respectively by the end of the Fifth Plan (MoF 1980). Government funding of SoEs recorded 76 percent growth per annum in the first four years of the Sixth Plan, with equity investment as high as Rs. 2.20 billion rupees (NPC 1985, p. 242).
Performance of these SoEs was not satisfactory. In many cases they were not able even to finance their operational expenses, thus creating a huge burden for the government (World Bank 1985, p.30). Against this backdrop, the government initiated a strategy of running SoEs on commercial principles with a greater operational autonomy and improved personnel management, along with a policy to gradually hand over SoEs to the private sector (MoF 1986; NPC 1980). Emphasising the private sector’s lead role in the economy, the Seventh Plan (1985- 1990) adopted a policy to gradually transfer industrial corporations other than defence-related industries to the private sector (NPC 1985).
However, the reform efforts had a limited result. Public enterprises once considered the engines of economic growth turned out to be a major economic problem by 1990. An average 20 percent of government revenue was absorbed by public enterprises in the previous three years. Many of these SoEs had production and productivity far below the potential. With continuous loss, the government equity was gradually eroding (World Bank 1991b).
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Although the government had already commenced a privatisation process during the Sixth Plan by amalgamating some of the enterprises with similar work nature, liquidating a few and selling some others to the private sector (NPC 1985, pp 241-242), in true spirit, privatisation commenced only after 1990 along with the adoption of a market-oriented, open and liberal economic policy. Earlier efforts were oriented more towards getting rid of the problems associated with SoEs than privatising them. As the privatisation policies in the post- liberalisation era (1990 onwards) are detailed in the following sub-section, here I focus on the drivers of reforms.
As in other South Asian countries like Sri Lanka, Bangladesh and Pakistan, pressures from influential external development partners – specifically the World Bank and the International Monetary Fund (IMF) – have been attributed as the key drivers for adopting economic liberalisation and privatisation policies in Nepal (Kanesalingam 1991; Khanal et al. 2005; Paudel 2006; Reejal 1998; Shah 1991). In fact, privatisation became a major component of Nepal’s Structural Adjustment Programme, implemented in the late 1980s to address the financial and economic hardships of the country. With a foreign exchange crisis and a skyrocketing deficit financing, Nepal’s economy was deteriorating throughout the 1980s. There was also a sharp increase in the current account deficit. From US$16 million in 1975, it reached US $296.2 million in 1989. Aid dependency also increased during that period. Foreign aid financed about 70 percent of public investment in the Seventh Plan (1985-1990). It accounted for 49.4 percent of the total budget and 73.5 percent of the total development expenditure for the fiscal year 1989/90 (Khadka 1991, pp.699-700; Khanal 1986, pp.249-251; MoF 1984, 1989). In such an extremely difficult economic situation, Nepal hardly had any leverage and option other than accepting the loan conditions of the structural adjustment programmes.
Paudel (2009) argues that the privatisation policy before 1990 was an outcome of coercive policy transfer from the World Bank and the IMF through the structural adjustment programmes. Worldwide, political leaders in the post-liberalisation era were also committed to expedite implementation of economic liberalisation and privatisation policies, and hence the 1980s and 1990s became the heyday of privatisation. For instance, during the period between 1985 and 1993, over one hundred countries raised more than US$500 billion from privatisation (Wright and Perrotti 2000, p.xv). This wave might also have influenced the Nepalese government to adopt privatisation.
The majority of the participants of the questionnaire survey conducted for this thesis ranked development partners’ recommendations as the most important inspiration for privatisation in Nepal. Forty-eight of the 74 respondents, or 64.9 percent, viewed external development partners as the most influential drivers of the privatisation of the SOEs in the country.
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Table 6.2 Drivers of public enterprise privatisation (N= 74)
First Second Third
Three Most Important External Development Periodic Plan/ External Consultant’s Sources of Idea Partners’ National Policy Report Recommendation (options 10 plus) Three Most Important Ecological Pressure Financial Populist Pressure Driving Forces Pressure (options 5 plus) Source: Field survey during April-September 2014138
Practitioners agreed that international development partners, along with the wave of liberalisation and globalisation were the key driving forces of privatisation in Nepal.139 They drew attention towards the tendency of policy transfer without moulding it to fit in the local context. One of the focus group participants remarked: We simply tried what we heard from someone or what we had seen in books but we could not internalise it in our context (FGB02).140
Another participant was more critical: We didn’t consider the state of market development and professional ethics in our society. We blindly copied the global wave of economic liberalisation and privatisation (FGB04).141
All these give an impression that privatisation was simply a policy transfer imposed by the World Bank and the IMF in consultation with influential bilateral donors such as the US and the UK. Of course the Structural Adjustment Programme142 committed the government to initiate more serious efforts to launch public sector reforms. However, the government had initiated privatisation long before this programme was started in 1986. Evidence of cases is not easily available and the little information that is available is also disturbingly inconsistent. It could be partly because of the close and non-transparent regime and partly because of the under developed information management system during that period. Similarly, as there was no effective public accountability mechanism, the authorities could make quick decisions on an ad hoc basis and without any serious groundwork for implementation. Nor were held accountable for non-implementation. On the other hand, in the absence of a research culture, public authorities didn’t care about maintaining up-to-date information of government decisions.
138 Options and respondent details are included in the annex. 139 Focus group discussion on 5 September 2014. 140 A section officer in charge of Public Enterprises at the Ministry of Industry 141 A senior under secretary at the Ministry of Finance 142 Includes Structural Adjustment Loan of the World Bank and Structural Adjustment Facility of the IMF. 158
Nevertheless, the Seventh Plan document shows that Chandeswori Textile Factory and Nepal Cheuri Ghee Factory were already sold to the private sector by the end of the Sixth Plan (1980- 1985) period. Similarly, some public corporations with similar functions were amalgamated and a rice mill was liquidated (NPC 1985, pp.241-242).
Putting Nepal’s case into Savas’s (2000, pp.5-6) framework on the driving forces of privatisation, it can be fairly argued that pragmatic factors guided first the establishment and then the privatisation of public enterprises during the Panchayat era. The government established public enterprises, initially as there was no private sector with sufficient capital and technical as well as managerial skills to create basic economic infrastructures and lead industrial development in the country. In the same vein, privatisation was commenced as many of these enterprises did not run well, and in some cases, enterprises such as rice mills were no longer relevant to be run by the public sector. The mixed economy, non-aligned foreign policy and the party-less Panchayat system was said to have been based on the pragmatic approach of King Mahendra.143 His New Year message of April 1961 – “...We are all fed up with the devastations wrought in our national life by blindly copied ‘isms’”–remained the guiding principle of Panchayat polity (Khadka 1991, p.695).
However, in the 1990s, privatisation was mainly driven by ideological considerations. Government policy documents, including budget speeches, support this argument. For instance, the then Finance Minster Mahesh Acharya termed his budget speech as an economic document promoting the liberal and competitive economic policies of the government (MoF 1993).
In my survey of senior bureaucrats, participants ranked ecological pressure as the most important driving force for privatisation after 1990 (Table 6.2). Ecological pressure signified the influence of globalisation and economic liberalisation that converged with the ideological standing of the Nepali Congress Party to introduce privatisation in the early 1990s. The ideological standing of the ruling party and the strength of the harmonious majority government to influence the policy process had an important bearing on the adoption and implementation of privatisation policy in Nepal. Obinger et al. (2014, p.21) found similar results in an empirical study of 20 OECD countries.
The right-leaning Congress government (1991-1994) was motivated to privatise SoEs with the view of rightsizing the government through privatisation. The government was also disappointed with the poor performance of SoEs. Thus there was a pragmatic drive too.
143 King Mahendra ruled Nepal from 14 March 1955 to 31 January 1972. He is regarded as an outstanding strategic leader of his time. After dismissing the first elected government of the late B.P. Koirala in 1960, charging it with rampant corruption, excessive partisan politics undermining the national interest and overseeing a deterioration in law and order, he dissolved the elected parliament and imposed direct rule for the rest of his life. He introduced a typical party-less Panchayat system in 1962 which was overthrown by the people’s movement of 1990. 159
Proponents of economic liberalisation and privatisation in Nepal argued that privatisation was not primarily guided by ideological drives but driven by grounded reality. Reforms were not solely directed by the neo-right agenda or pure capitalism as some opponents alleged. Rather, it were initiated to redefine and realign the state’s roles and priorities as the state-directed inward- looking economic policy didn’t work (IE 072).144
Scholars and policy practioners argued that many of the reform policies and programmes were donor driven and a result of direct policy transfer (IE 007).145However, I argue that in many cases the policy-makers were convinced of the merits of privatisation after a series of discussions with the development partners. Hence, privatisation was a mutually agreed policy objective. Adoption, then, cannot be attributed to direct and coercive policy transfer. As a retired finance secretary remarked,
We have to be honest that often we do not raise any issue during talks and negotiations with donors. We are happy to sign agreements amidst a grand ceremony with big claps. When we fail to implement, we do not hesitate to blame the donors, saying that they imposed difficult and impracticable conditionalities on reforms. (IE 008)146
Of course, the resource stricken poor developing countries have their own limitations. But direct coercive policy transfer seldom takes place. A sound preparation and effective negotiation can make a difference to shape the policy reform agenda to better fit to the country context.
In Nepal’s case, India’s policy shift towards economic liberalisation and privatisation was also an important driving force for privatisation. Nepal had already adopted economic liberalisation policies before the India opened its economy following the 1991 balance of payment crisis. However, Nepal was hesitant to launch a massive economic liberalisation and privatisation programme before India initiated economic liberalisation seriously in 1991. Nepal’s economy was so interconnected and interdependent with India’s economy that it could hardly pursue its independent economic and commercial policies without considering Indian economic policies. When the Indian government announced that it would ‘disinvest up to 20 percent of its equity in selected public sector undertakings’ in 1991, Nepal was encouraged to expedite its privatisation process (Gupta 2008; Kanesalingam 1991; Paudel 2006). Policy-makers in Nepal were interested to move ahead of India’s plan, arguing that faster moves would be more beneficial to the country than becoming a follower. Given the open border, free connectivity, huge portion of
144 An in-depth interview with the finance minister of the first elected government after the restoration of multiparty democracy in 1990. The one to one interview was held on 6 August 2014 at his residence. 145 An in-depth interview with a former secretary of the Government of Nepal on 28 May 2014. 146 An in-depth interview with a former finance secretary on 30 May 2014. 160 foreign trade and the economy nested with the Indian economy, Nepal hardly had options other than pursuing massive economic liberalisation (EI 063).147
Privatisation in Nepal should not be seen as a complete U-turn of economic policies, as occurred in many Eastern European and Latin American countries. In fact, the private sector was encouraged to participate in the economy ever since the first budget speech was delivered in 1952. The need to privatise SoEs was realised as early as 1968, long before privatisation became popular in developed countries.
Reports of the 1968 Reform Commission contained separate chapters on SoEs. The Commission recommended that the government limit its involvement to areas where private investment was not possible, and not involve itself in areas where the non-governmental sector was already active. It suggested that government involvement in public enterprises should not discourage the private sector; rather, it should facilitate and support it. It urged the government to stop the growing trend towards public enterprises, liquidate the public enterprises that were no longer relevant, and hold public corporations accountable to the Rastriya Panchayat.148 The government was also urged to curb the misuse of public enterprise resources after senior officials were found misusing them (ARC 1968). The commission categorically insisted the government reduce the number of public enterprises by amalgamating similar public enterprises or transferring the enterprises to the non-government sector that were found not necessary for remaining in government hands (ARC 1969). It didn’t exactly use the term ‘privatisation’, as it was not coined by that time, but its language of ‘reduce the number of public enterprises’, ‘transfer the public enterprises to the non-government sector’ and ‘liquidate the public enterprises’ were in no way less than privatisation. Therefore, I argue that the concept and idea of privatisation, as such, was not directly transferred to Nepal from the external development partners. Rather it evolved from the country’s own experiences. The fact that local policy- makers were slow to implement it does not mean that the idea did not exist. Of course there were a multitude of actors that promoted it; that encouraged or pushed the government to adopt and implement privatisation policies with or without operational target or performance indicators. There were varied motives, interests and incentives behind it. I will further discuss the drivers and driving forces of privatisation while focusing on the implementation of privatisation policies after 1990.
147 An in-depth interview with a former vice chairman of the National Planning Commission who is regarded as one of the main architects of economic liberalisation and privatisation policies after the restoration of multi-party democracy in 1990. 148 It was the apex elected body of people’s representatives during the party-less Panchayat System. 161
6.2 Adoption of privatisation policies in the post-liberalisation era
Privatisation as a systematic and priority reform agenda commenced only after the restoration of multi-party democracy in 1990. Concerned with the financial burden incurred by public enterprises during the Panchayat regime, the interim government indicated policy shifts by explicitly mentioning its adoption of liberal and open economic policies in its budget speech (MoF 1990).
The first elected majority government after the political change issued a ‘white paper’ on privatisation as a part of its broader economic reforms encouraging the private sector’s involvement in the ownership, management and control of SoEs. With the objectives of reducing the financial and administrative burden of the government, improving operational efficiency, and ensuring greater public participation in the ownership and management of public enterprises, the policy paper adopted a phased-in approach to privatisation (MoF 1991b).
A high level administrative reform commission chaired by the then Prime Minister G.P. Koirala, recommended the government to withdraw from the areas in which the having private sector had comparative advantage. The commission proposed a two-pronged strategy of privatisation and management reforms. It promoted ‘popular capitalism’, by recommending the conversion of profit-making SoEs into public limited companies by floating 75 percent shares to the public (ARC 1992b).
The government introduced a relatively short and straight-forward generic Privatisation Act 1994, providing a legal and institutional framework for privatisation (HMG 1994b; USAID 1996). The ‘white paper’ on privatisation, periodic plans and annual policies and programmes, along with the budget speeches, were other policy documents guiding privatisation. The periodic plans included medium and long-term policies and programmes of the government. Privatisation policies and programmes incorporated in various periodic plans are presented in table 6.3.
Table 6.3: Periodic plans on privatisation and public enterprise reforms Periodic Major policies and programmes Remarks plans 1. Approach: privatisation and institutional reforms Eighth Privatisation was simultaneously Plan (1992- the first priority, 2. Formulation of a long-term privatisation policy 1997) followed by and creation of a legal basis to implement it efficiency 3. Strategy: categorisation of SoEs in line with the enhancement timelines for privatisation programmes
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4. Emphasis: participation of SoE staff as well as the general public in the privatisation process 5. Opening-up utility services to the private sector 6. Establishment of a privatisation unit 7. Major programme thrusts: an extensive study on privatisation methods and modalities, institutional and legal reforms, massive awareness in favour of privatisation, and management reforms with greater operational autonomy, public expenditure management reforms 1. Long-term vision: complete privatisation of SoEs Ninth Plan Presents a rosy to let the government assume the role of a (1997-2002) picture of facilitator privatisation and 2. Focus on the privatisation process such as contains a number selection of SoEs to be privatised, evaluation of of normative policy proceeds, selection of modality, operations and statements clarity of terms and conditions of privatisation
3. Emphasis: national consensus on privatisation, post-privatisation monitoring and fair price from privatisation 4. Target: 30 SoEs during the plan period 1. Vision: creating a vibrant, dynamic and Tenth Plan Privatisation was competitive economy through privatisation and (2002-2007) considered as a private sector development policy instrument to 2. Emphasis: competitive and transparent create a vibrant, privatisation process and effective dynamic and communication among the policy actors and competitive stakeholders economy 3. Liquidation of poorly operating SoEs
4. Monitoring privatisation agreements on a regular basis 5. Operational autonomy to SoEs with commercial orientation 6. Target: 15 SoEs during the plan period 1. Offload government involvement where private Eleventh Disinvestment sector participation exists Plan (2007- policy directed 2. Multipronged strategy of disinvestment and 2010) towards releasing
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management reforms resources locked 3. Approach: disinvest the loss-making SoEs into the SoEs 4. Emphasis: attraction of foreign investment and technology transfer and post-disinvestment business plans 1. Government involvement in a limited number of Twelfth Focus on public SoEs promoting employment generation and Plan (2010- enterprise reform inclusive development 2013) rather than 2. Two-pronged strategy: public enterprise reforms privatisation through organisational restructuring, public private partnership and performance-based management and, disinvestment of SoEs that are no longer required to remain under state ownership 3. Emphasis: professionalism, financial discipline and business plan 1. Retain SoEs only in the needy areas of service Thirteenth Emphasis more on delivery and market regulation; privatise Plan (2013- private sector commercial SoEs that are no more necessary to 2015) development and retain under government ownership less on privatisation 2. Implement the concept of holding company for SoE reforms 3. Conduct improvement-oriented post-privatisation monitoring 4. Emphasis: management reforms through professionalism, commercialism, financial discipline and accountability enforcement 1. Ensure access, economy, efficiency and quality of Approach Priority to public public service delivery through commercialisation Paper to private partnership of SoEs the rather than 2. Emphasise public-private partnership for the Fourteenth privatisation operation and management of SoEs Plan (2015- 3. Close-down SoEs that are no longer required to 2017) run under the state ownership, and which the private sector does not want to invest in
Source: Author’s compilation.
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With the main objective of increasing production and productivity of public enterprises, the Eighth Plan introduced a long-term policy of privatisation for the first time (NPC 1992). Moreover, it encouraged wider public participation in the privatisation process. The Ninth Plan emphasised political consensus for privatisation. It also highlighted the need for appropriate modality and selection criteria to speed up the privatisation process (NPC 1997). However, the plan didn’t follow the established criteria while setting an ambitious target of privatising 30 public enterprises over the plan period.
While privatisation was losing its appeal, it continued to remain on the agenda of the Tenth Plan (2002-2007). With the further target of 15 SoEs for privatisation, this plan sought to create a vibrant, dynamic and competitive economy through privatisation and private sector development in the country. It emphasised the need for a transparent and competitive process of privatisation to foster the widest possible participation, and to promote private sector investment in SoEs (NPC 2002).
With a view to releasing resources locked in SoEs for inclusive development and poverty alleviation, the government announced a disinvestment policy in 2007. However, the policy lacked clarity and internal coherence (NPC 2007). The Twelfth and Thirteenth Plans continued the disinvestment policy but both the plans were focused more on public enterprise reforms than on privatisation (NPC 2010, 2013). In recent years, SoE reforms have slanted more towards public-private partnerships, encouraging cooperatives and the private sector at the same time (NPC 2017).
Annual budget speeches included information on the operational policies guiding privatisation. Table 6.4 highlights the operational policies for the last 26 years.
Table 6.4: Budget speech on privatisation and public enterprise reforms Budget Speech Major policies and programmes
1990/1991 1. Concerned with the economic burden of unsustainable expansion of the SoEs during the Panchayat regime 2. Adoption of an open liberal economic policies 3. Constructive and complementary role of public and private sector.
1991/1992 1. Promotion of market-oriented competitive economic policies 2. Encouraging private sector’s greater involvement in SoEs 3. Target: Privatisation of three SoEs and five agricultural firms 4. State’s role limited to infrastructure development, poverty alleviation and ensuring effective public service delivery
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1992/1993 1. Devise long-term strategy for privatisation 2. Safeguard the rights and interests of SoE staff during privatisation 3. Continuation of market-based liberal economic policies
1993/1994 1. Ensure economic stability through market-based liberal economic policies and fiscal discipline 2. Unflinching commitment to economic reforms
1994/1995 1. Policy to privatise selected loss-making SoEs 2. Priority to national investors and SoE staff while privatising SoEs
1995/1996 1. Liberalisation as the main strategy of economic reforms 2. Criteria for privatisation: absence of monopoly, price determination by market forces, seriously lacking management capacity, competitive SoEs having profit potential with additional investments. 3. Wider participation of the general public with due openness and transparency in the privatisation process 4. Evaluation criteria for privatisation: competitive price, additional investment and production plan, continuation of existing staff and workers. 5. Loan support to staff willing to buy shares in SoEs
1996/1997 1. Selection criteria for privatisation: performance of the SoE, financial transactions, government involvement, additional investment requirements and the analysis of market potential, possibility of monopoly and management efficiency 2. Initiation to privatise state-run media 3. Greater public participation in the privatisation process 4. Safeguard staff interests during privatisation 5. Reform the SoEs not likely to be privatised soon 6. Emphasis: effective monitoring of the privatised SoEs
1997/1998 1. Continuation of open and market-oriented economic policy 2. Selection criteria for privatisation: work nature of the SoE, possibility of monopoly, profit or loss account, additional investment requirements, potential for technological advancement
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and private sector investment and different social obligations 3. Ensure privatisation benefits to the wider public through procedural and institutional reforms 4. Reform SoEs not likely to be privatised soon 5. Regular monitoring and evaluation of the privatised SoEs
1998/1999 1. Rehabilitate or liquidate the terminal SoEs 2. Carry out evaluation of privatised SoEs 3. Austerity measures to minimise the operating costs of SoEs 4. Emphasis: business culture and management reforms.
1999/2000 1. Increase private sector participation in state-owned banks 2. Close down public offices no more relevant in the context of limited government and economic liberalisation 3. Concerned with the slow progress of privatisation as well as the intervention on the business of SoEs (by previous government)
2000/2001 1. Policy to gradually abandon government involvement from commercial activities 2. Acceleration of privatisation process and economic and financial sector reforms to foster private sector development
2001/2002 1. Liberal and market-oriented economic reforms as the main strategy to reduce poverty in the country 2. Professionalisation of SoE boards 3. Control financial liabilities of the SoEs 4. Encouraging private sector investment to the viable SoEs
2002/2003 1. State-owned commercial banks under management contract 2. Continuation of privatisation and SoE reforms
2003/2004 1. Performance-based management system in the SoEs 2. Control undue political intervention in the management of SoEs 3. Limit long-term liabilities and promote financial discipline in the SoEs 4. Wider participation in privatisation through the stock market 5. Privatise both loss or profit-making SoEs 6. Complete the privatisation process of the nine SoEs started in
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previous years
2004/2005 1. Privatisation so as to attract private sector investment 2. Recruiting SoE managers through competitive process 3. Handing over some SoEs under management contract
2005/2006 1. Continue privatising selected SoEs 2. Privatise or liquidate those SoEs failing to operate under market conditions 3. Amendment to the Privatisation Act to ease the privatisation process
2006/2007 1. Continue liquidation process 2. Constitute a high level corporation reform committee
2007/2008 1. Institutional reform to expedite privatisation 2. Amendment to the Privatisation Act
2008/2009 1. Satisfied with the private sector investment, the Congress Government continued the privatisation poilcy 2. Maoist Government: policy to revert back (nationalise) some of the privatised SoEs; management reform was emphasised
2009/2010 1. Increase people’s ownership in the SoEs 2. Recruit SoE managers through competitive process
2010/2011 None
2011/2012 1. Focus on private sector development and SoE reforms 2. Constitution of Public Enterprises Management Board
2012/2013 1. Focus on SoE reforms rather than on privatisation
2013/2014 2. Performance contract with the Chief Executive Officer (CEOs) of the SoEs 3. Emphasis: SoE operation under management contract 4. Merger of similar SoEs 5. Divestment of SoE shares by the government and encouragement of their purchase among the general public
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2014/2015 1. Liquidate non-competitive and non-attractive SoEs 2. Amendment to the Company Act to ease the liquidation process 3. Operate SoEs under public-private partnership model 4. Capacity enhancement of the public enterprises through mergers
2015/2016 1. Liquidation of poorly performing SoEs 2. Adopt austerity measures
2016/2017 1. Merger of similar SoEs
Source: Author’s compilation.
Stating a clearly articulated preference for market-oriented competitive economic policies, the 1991 Budget Speech started privatisation with a target of privatising three SoEs and five government agriculture firms (MoF 1991a). Prior to the budget speech, the king, while addressing a joint meeting of both the houses of parliament, announced a policy to privatise several of the sick industrial and commercial public sector establishments (HMG 1991). In the early 1990s, the budget speech was taken as an ‘economic document designed to promote liberal and competitive economic policy of the government’(MoF 1993)149.
Although the first Communist government150 did not entirely reverse the policy, there were clear indications it was lukewarm. The new government decided to privatise only the loss-making public enterprises (HMG 1994c). With a strong base of trade unions, the ruling party could not go far beyond the interest of trade unions, mainly the ones affiliated with the party. However, the minority government was short-lived.151
The coalition government after that resumed the privatisation process. However, since the start of the new millennium, there was an indication of privatisation fatigue. The government was not satisfied with its achievements of the decade-long privatisation efforts. With the escalation of
149 Budget Speech for the fiscal year 1993/1994, p. 279 150 The majority government of Nepali Congress collapsed due to infighting between two major factions, widely known as the groups of ‘74’ and ‘36’. Parliament was dissolved for the mid-term poll. Following the mid-term poll in 1994, a relatively liberal Communist party, Nepal Communist Party (Unified Marxist and Leninist), formed a minority government as the largest political party in the parliament. 151 The minority government formed on 29 November 1994 dissolved the House of Representatives on 9 June 1995 in preparation for another mid-term poll. However, the Supreme Court reinstated the dissolved House of Representatives on 28 August 1995. The reinstated parliament passed a no-confidence motion on 10 September 1995 to oust the government. 169 the Maoist insurgency,152privatisation ceased to remain a priority agenda of the government (HMG 2001; MoF 2000; UNOHCHR 2012).
The king’s handpicked government153 was committed to complete the privatisation process initiated by the previous government (MoF 2003). The government reemphasised ‘popular capitalism’, promoting share distribution to the maximum number of Nepali citizens through the stock market.
Amidst the political instability and escalation of the Maoist armed insurgency, the restoration of peace, relief, rehabilitation and reconstruction, and socio-economic transformation came to the forefront sidelining the privatisation agenda (MoF 2004b). However, the royal government154 formally reaffirmed its commitment to the liberal economic policy and privatisation through its 2005 Budget Speech (MoF 2005).
After the 2006 democratic movement following the royal takeover in February 2005155, political interest on privatisation withered considerably. Even the finance minister, once considered as an architect of economic liberalisation and privatisation in Nepal, didn’t mention these words in his 2006 Budget Speech (GoN 2006; MoF 2006). The privatisation agenda remained stagnant as the government failed to propose any concrete course of action to sort out, solve or mitigate the problem.
With a complex philosophical foundation of eliminating all ‘forms and remnants of feudalism’ and ‘establishing socialism-oriented industrial capitalism’, the 2008 Budget Speech delivered by the then finance minister, who was considered to be a Maoist party ideologue, not only halted
152 The Communist Party of Nepal (Maoist) launched an armed insurgency against the government on 13 February 1996, following an ultimatum delivered to the government on 4 February with a list of 40 demands, consisting of a wide range of social, economic and political issues. Initially localised in the remote Mid-Western Region the insurgency spread throughout the country in a few years’ time. More than 13,000 people lost their lives during the insurgency period from February 1996 to November 2006. The insurgency formally ended with the conclusion of the Comprehensive Peace Accord between the Government of Nepal and the Communist Party of Nepal (Maoist), on 21 November 2006. 153 Following the resignation of Prime Minister G.P. Koirala on 19 July 2001 on account of non-cooperation from the palace and army, Sher Bahadur Deuba became the new prime minister on July 23; he dissolved the House of Representatives without any consultation or consent of his party. This caused new infighting within the Nepali Congress party, one of the oldest democratic parties in Nepal. This climaxed when one faction formed a new party, Nepali Congress (Democratic) under the presidency of then Prime Minister Sher Bahadur Deuba on 16 June 2002. The caretaker government formed after the dissolution of the House of Representatives on 22 May 2002 postponed the mid-term election on 3 October 2002. King Gyanendra immediately dismissed the Deuba government, exercising executive power himself. He formed a new government on 12 October 2003, nominating Lokendra Bahadur Chand as the new Prime Minister of Nepal. 154 King Gyanendra dismissed the Deuba Cabineton 1 February 2005, blaming the government for failing to hold parliamentary elections of the dissolved House of Representatives and establishing peace in the country. Declaring a state of emergency, the king took full control of the government by placing himself as the chair of the new Council of Ministers. 155 Major political parties in the parliament launched a joint movement against the direct rule of King Gyanendra on 22 May 2005. Later the Seven Party Alliance and Nepal Communist Party (Maoist) entered into a twelve point agreement to jointly launch effective movement against the king. The movement culminated in the reinstatement of the House of Representatives on 24 April 2006. 170 the privatisation process but also reversed it. The government decided to bring back some of the privatised enterprises (MoF 2008). A concept of a holding company was also introduced to bring all SoEs under a single umbrella, similar to the one successfully implemented in Singapore.
As the proponents of privatisation were losing enthusiasm to further the privatisation process, the opponents were cooling down their anti-privatisation sentiments. In 2011, the second Maoist finance minister didn’t opt to reverse the privatisation process as the first one did. However, inclined to economic nationalism, the finance minister was not genuinely interested in privatisation. He adopted a policy of disinvesting public enterprise shares to the general public (MoF 2011a).
The disinvestment policy of the Thirteenth Plan was not supported by the subsequent annual policies, programmes and budgets. The government, headed by the President of the Nepali Congress Party, which had introduced privatisation policy and processes in Nepal with great zeal in the early 1990s, adopted a policy to revive the sick public enterprises and establishments that had been closed for a long time (GoN 2014). While he was aware of the ‘mounting accumulated loss and unfunded liability’ and the current status of the public enterprises ‘on the verge of closure or, in a state of huge loss’(MoF 2014, p.5), he didn’t have any policy to privatise SoEs. With the introduction of public-private partnership in public enterprise management, privatisation gradually disappeared from the policy documents (GoN 2015b; MoF 2015b).
A number of other inquiry commissions, committees and taskforces also mentioned privatisation policy in their reports. The reports were not policy documents, but almost all of them had been formally endorsed by the governments promising their gradual implementation. Similarly, most of the members of such commissions or committees were from the inner circles of the ruling elites. For this reason, I argue that such reports are also important in understanding the dynamics of the privatisation process in Nepal.
A Public Expenditure Review Commission recommended the gradual privatisation of all SoEs except the ones contributing to social justice. The commission also recommended enacting privatisation regulations and including privatisation experts in the privatisation committee (PERC 2001). Similarly, a Financial Reform Taskforce recommended stopping government investment in production-oriented, commercial and financial public enterprises (FRT 2002).
While the privatisation agenda was gradually disappearing from the government’s policy documents, a high-level Corporation Reform Recommendation Committee asserted privatisation as the best solution for the sickly public enterprises (CRRC 2007). The committee
171 also recommended various sales options, leasing out, liquidation, closure, merger, and unbundling in accordance with the nature, status and market potential of SoEs.
Another high-level Government Budget Management and Expenditure System Review Commission recommended a multi-pronged strategy of policy reforms, ownership reforms, structural reforms, managerial reforms, financial reforms, behavioural reforms and reforms in the disinvestment system (GBMESRC 2010). Their report focused more on reforming SoE than privatisation.
An in-depth analysis of policy statements and documents for the last 26 years shows that even the highly committed government didn’t come up with a clear vision and well defined objectives of privatisation. For instance, the Eighth Plan document did not have clearly-defined objectives toward privatisation. The plan also contained several weak statements such as “necessary improvement programmes will be launched”, “evaluation will be made together with other necessary preparatory arrangements”, “necessary preparations and annual programmes will be formulated”, “necessary reform programmes will be conducted for other corporations”, “an appropriate reward and punishment…will be introduced”. Several normative statements of ‘should be’ policies can be found in the policy documents. For instance the Ninth Plan contains policy statements like: “The price of a corporation to be privatised should be determined in the competitive market environment”, “By seeking national consensus among the main political parties… [the] privatisation process will be pushed further in the best economic interests of the country”. Even the policy statements of annual budget speech that are supposed to be the ‘operational statements’ contained such weak statements.
There were several inconsistencies within the policy documents. Contrary to the policy of a rigorous assessment while selecting SoEs for privatisation, the Ninth Plan had an ambitious target of privatising 30 public enterprises without any study. Inconsistencies were found among the different policy documents. For instance the Eighth, Ninth and Tenth Plans had quite different objectives of privatisation. The Eighth Plan sought to increase production and productivity of the SoEs through efficiency enhancement, whereas the Ninth Plan focused on effectiveness and productivity of government resources. Again, the Tenth Plan had an objective of creating a vibrant, dynamic and competitive economy through privatisation and private sector development.
Policy documents also lacked coherence between the problem narratives and policy statements. Similarly, the policy matrix also lacked internal coherence. For instance, the policy matrix of the Eleventh Plan contained unrealistic and irrelevant risks and assumptions and lacked internal coherence. The Thirteenth Plan had some conflicting policy statements. On the one hand, it had a policy of maintaining uniformity in benefits and facilities among the public enterprises. On the
172 other, it stated that bonuses and other facilities had to be based on profit and work performance. In many cases annual policies, programmes and budget speeches did not support the corresponding periodic plans.
Now it is obvious that privatisation remained a priority agenda of the governments for more than a decade since it was introduced in 1991, except for a short break during the Communist minority government. The period between 2001 and 2006 was the period of ‘de-emphasis’, when the government’s priority shifted towards peace and security from public sector reforms. The period after 2006 emerged as a period of ‘abandonment’, including a short ‘policy reversal’ of privatisation.
6.3 The politics of privatisation
6.3.1 Institutional frameworks
6.3.1.1 Institutional set up
The Privatisation Act 1994 provided institutional framework for privatisation. Relatively short and straightforward, the Act covered a wide range of issues from the definition of privatisation, its objectives, institutional arrangements, procedure, and privatisation modalities to the dispute settlement mechanism. It defined privatisation as “involving private sector in the management, or to sell or lease it, or to transfer government ownership, or an act to infuse participation by any means, either wholly or partly, of private sector or of the employees or workers, or of all interested groups”(HMG 1994a, p.1). However, in common parlance, privatisation was conceived as the outright sale of the public enterprises.
Privatisation objectives outlined in the preamble of this Act were: “…increasing productivity of the SoEs through efficiency enhancement, reducing financial and administrative burden of the government and expanding private sector participation in the operation and management of these enterprises” (Section 3).
A high-level Privatisation Committee was responsible for the overall management of the privatisation process. Composition of this committee is presented as follows:
Minister or State Minister for Finance Chairman
Chairman, Finance Committee (a parliamentary Committee) Member
Two Members of Parliament nominated by the government Member
Member, National Planning Commission Member
Secretary, Ministry of Finance Member 173
Secretary, Ministry of Law, Justice and Parliamentary Affairs Member
Secretary, Ministry of Labour Member
Secretary of the concerned ministry Member
President, Federation of Nepalese Chamber of Member
Commerce and Industry
Joint Secretary, Ministry of Finance (Corporation Member Secretary
Coordination Division)
The committee could invite the Chief Executive Officer and trade union representatives of the concerned SoE and any distinguished economist in its meetings as and when it was necessary. This provided an avenue to make the privatisation process more participative. Similarly, the committee was able to constitute sub-committees involving experts to expedite the privatisation process (HMG 1994a, pp. 3-7). The committee commissioned studies before formulating privatisation programmes and processes. However, it could only recommend programmes, priorities or processes to the Cabinetwhich had the final authority to privatise SoEs.
A Public Corporation Directorate Board (PCDB) was constituted in 2011 to foster competitive work environment and promote performance-oriented work culture in the SoEs.156 Although the board was not specifically constituted for privatisation, it had a number of duties and responsibilities closely related to the disinvestment of SoEs. The board was required to furnish recommendations to the Ministry of Finance, including a detailed action plan for the operation, management or disinvestment of the SoEs. It recommended policy measures to the government based on its post-privatisation evaluation of erstwhile public enterprises. The board was also responsible for the compliance monitoring of privatisation agreements. It issued necessary directives to recover dues from the privatised enterprises. It could issue a black list of the wilful defaulters (individuals or enterprises) not complying with its directives (GoN 2011, pp.7-9).
The Office of the Prime Minister and Council of Ministers (OPMCM), Corporation Coordination Division of the Ministry of Finance, including the Privatisation Cell, line ministries and the concerned public enterprises were involved in the privatisation process.
156 The executive order was issued in the Nepal Rajpatra, additional issue 35 on 27 December 3011. The Nepal Rajpatra (Gazette) published by the Department of Printing is an authorised legal document of the Government of Nepal. 174
6.3.1.2 Privatisation process
The Privatisation Act 1994 detailed down the privatisation process. The Privatisation Cell in the Ministry of Finance (MoF) prepared a list of public enterprises to be privatised based on its own study or the information and suggestions from the parliament and other government agencies, line ministries, Public Corporation Directorate Board, or the concerned public enterprises. It recommended privatisation programmes and priorities to the Council of Ministers.157 Once it received Cabinetapproval along with the privatisation targets, the government published a notice in the NepalGazette.
A team of experts formed by the Privatisation Committee evaluated the enterprises to be privatised on the basis of asset value, market price of shares, financial status and future potentials of the enterprises. The Council of Ministers determined the modality and process for privatisation following the recommendations of the Privatisation Committee. The MoF prepared Information Memorandum and Bid Documents and invited proposals for privatisation through a public notice in a national newspaper providing the necessary details as per international practices. The notice included preconditions for getting necessary documents and procedures for submitting a proposal.
The Privatisation Act listed six criteria (section 10) to evaluate the proposals. These included: the attractive price, continuation of current business, retention of the existing workers’ and employees’ service, expansion of employment opportunity, managerial experience in the relevant field, the quality of business plan and the possibility of future investments. The Act clearly demonstrated the government’s intention to change the ownership and management of public enterprise without changing its business or shrinking employment opportunities. Similarly, the Act accords high priority to domestic investors in case two or more bidders are found identical.
The bidding process was based on a two envelope system158 whereby two separate technical and financial proposals are submitted. The proposals were opened in the presence of bidders’ representatives. Financial proposals were opened only when technical proposals were found to be satisfactory. The financial proposals of the bidders whose technical proposals were not found satisfactory were returned unopened.
157 Government decisions are taken at the Cabinet (Council of Ministers), minister and secretary levels. The Privatisation Act just mention ‘the Government of Nepal’ and doesn’t specify decision making level but in practice the final authority to privatise rests with the Council of Ministers. 158 The Privatisation Act does not specify the bidding system. According to the Ministry of Finance officials, during the early phase of privatisation, decisionsweremade on the basis of price offer leading to the closures of a number of privatised enterprises. For this reason the two envelop bidding system was introduced to minimise the risk of choosing wrong buyers. 175
There developed a practice of forming negotiation teams to assess the proposals. A team headed by the secretary of the concerned ministry negotiated the technical proposal whereas the financial proposal was negotiated by a team that included the finance minister along with the concerned minister. The negotiating teams submitted their findings to the Privatisation Committee. Based on the findings, the Committee submitted its report to the Council of Ministers for final approval. The privatisation process was finalised by signing an agreement that details the terms and conditions of privatisation, including the terms of payment to the government and the time schedule for handing over the enterprise to the buyer. The government, in accordance with section 11(4) of the Privatisation Act, was required to publish information on the terms and conditions of privatisation within one month from the day of agreement for public notice to ensure transparency of privatisation both in the process and the outcome.
6.3.1.3 Institutional analysis
The institutional structure of the Privatisation Committee was highly representative as it included the finance minister, two members of the parliament (MP), a member of the National Planning Commission (NPC), secretaries from four different ministries including the ministry concerned with the enterprise being privatised. It also included the President of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI). It could invite the CEO of the concerned enterprises, trade union representatives and economists in its meetings as and when necessary. However, the Committee was found less functional. The MPs were included in the Committee to get political support for privatisation. Unfortunately, the Committee became a breeding ground of unhealthy arguments among the ruling liberal democrats and the opposition members from the left, thusslowing down the privatisation process (FGB07).159 MPs’ involvement in the purely executive function of privatisation was hardly justifiable.
The Privatisation Cell, functioning as a Secretariat of the Privatisation Committee, was created in 1989 but is yet to be internalised in the permanent structure of the MoF. The 1991 ‘white paper’ on privatisation had a provision of two tier institutions, a high level Privatisation Commission headed by the finance minister and a technical committee headed by the Chief of the Corporation Coordination Division (CCD), Ministry of Finance. The technical committee used to provide technical backstopping to the Commission. However, it was not included in the Privatisation Act. Representatives from the Security Exchange Centre and Association of Chartered Accountants were also not included in the Act. With only one representative, the private sector was not well-represented in the Privatisation Committee. It did not ensure representation from the academic community. Bureaucratic in nature and dominated by political leaders and senior civil servants, this institutional approach to privatisation did not provide an
159 A senior joint secretary of the Ministry of Finance during a focus group discussion on 5 September 2014. 176 avenue for different perspectives as practiced in other countries. For instance, out of 16 board members of the Pakistan Privatisation Commission, most of them were from private enterprises and the business community, two of them were chartered accountants and a member from the academic community (Government of Pakistan 2015).
The ministers did not have much of a role until the privatisation proposal was submitted to the Council of Ministers for final approval. Institutional arrangements did not ensure inter- ministerial consultations, both at policy as well as operational levels as practiced in some countries.160 The Privatisation Act included some criteria for evaluating privatisation proposals, but lacked clear criteria for the selection of privatisation candidates. Institutional responsibilities were not well-defined. Even after more than two decades, no directives or rules were in place to fulfil such gaps. For this reason, too, privatisation remained a contentious issue for quite a long time.
The government’s business allocation rules were not clear about the roles, responsibilities and authority of the MoF and the line ministries with respect to public enterprise management and privatisation. For instance, the business of ‘public enterprises relating to industry’ lay with the Ministry of Industry. On the other hand, business relating to ‘the administration, policy formulation and coordination of public enterprises’, ‘regulation, control, coordination and direction of the state owned enterprises’ and ‘the Public Corporation Directorate Board’ were allocated to the MoF. This ministry is entrusted with the business related to privatisation, monitoring and regulation, which requires continuous cooperation and support from the line ministries as the SoEs operate under different line ministries (GoN 2015a).
The Corporation Coordination Division (CCD) of the MoF, was responsible for the administration, coordination and control, as well as privatisation, monitoring and regulation. But it did not have sufficient human resources, specifically the technical manpower, to accomplish the assigned tasks. It also lacked sufficient financial resources to expedite the privatisation process. The division was on the lowest priority of administrative functions in the MoF. Almost 90 percent of the budget allocated to SoE reforms was spent to settle the liability of the non- performing SoEs (FGB08).161
During the fieldwork for this research, civil servants were found to be less motivated to actively engage in the privatisation process. A retired secretary who also worked as a head of the CCD,
160 For instance in India there is a provision for Core Group of Secretaries on Disinvestment and Inter-ministerial Group to ensure effective coordination among the line ministries. For details see: GoI. 2007. "White Paper on Disinvestment of Central Public Sector Enterprises." New Delhi: Government of India (GoI), Ministry of Finance, Department of Disinvestment. 161 The head of Budget and Programme Division in the Ministry of Finance during a focus group discussion on 5 September 2014. 177 argued that civil servants were not interested in getting entangled with the contentious privatisation process. Similarly, in the absence of a performance-oriented culture, they were not penalised for poor performance. Thus they wanted to avoid privatisation as there was no incentive for taking the risk. Buck-passing was found to be a common problem where risk was individualised but benefits would go to the wider public (EI025).162
Complete and reliable information and database on the status of public enterprises was in dire need. Government institutions lacked confidence and trust in the information and databases of other government institutions. Frequent changes in leadership and other positions hampered institutional memory. According to a CEO of a SoE, 12 Chairpersons were changed in six years. Similarly, there were six general managers in three years (FGB03).163
In the absence of effective inter-ministerial coordination and the lack of effective deliberation practices, there was no uniform understanding of SoE reforms and privatisation among the reform-leading institutions. The MoF viewed public enterprises from a financial perspective such as profit potentials and possible liabilities, whereas the line ministries were more influenced by the past history, employment opportunities and other non-financial issues.
6.3.2 Actors, interests and incentives
Political executives, senior civil servants, SoE executives and trade unions, and the major development partners played prominent roles in the privatisation process. The civil society, the academic community, the media and even private entrepreneurs were less influential than the state actors during the privatisation process.
The first elected government after the restoration of multiparty democracy in 1990 was genuinely committed to privatisation. Although many of the political leaders after that government were not genuinely interested in privatisation, they wanted to show-off themselves as reform-oriented leaders and develop cordial relationships with the major development partners for sustained development cooperation. As privatisation was a priority agenda of the major development partners, including the all-powerful international financial institutions such as the World Bank and the IMF, none of the prime ministers – including the Maoist ideologue B.R. Bhattarai –revoked the privatisation policy, although the latter had tried to renationalise some of the privatised/liquidated public enterprises when he was the finance minister.
As privatisation didn’t have a positive image among the general populace, the governments could not go far beyond the public sentiment to pledge full-fledged support to privatisation.
162 An in-depth interview with a former secretary of the Government of Nepal on 16 June 2014 163 During a focus group discussion on 5 September 2014 178
Amidst the marked political instability and the fear of stepping down from the government at any time, political executives were more interested in maximizing short-term personal benefits and strengthening their influence in their constituencies rather than implementing privatisation policies that would forfeit their opportunities to appoint their supporters to the executive positions of the SoEs and grab personal benefits and facilities without any effort or risk.
Most of the time, political executives did not have much incentive to privatise SoEs, as they were enjoying the entities like their household business (ARC 1969). In the absence of an effective accountability mechanism, they also did not have much stake or risk associated with privatisation, as they were seldom held accountable for the poor implementation or non- implementation of policy reforms.
A few political executives who were genuinely interested in privatisation were attacked, even by their party leaders, on the grounds that they were abandoning their ideology of democratic socialism and moving towards pure capitalism. Similarly, the opposition parties used to attack them, charging that they sold-off the public assets for a bargain not worth their value.
Privatisation seldom created positive incentives to the senior civil servants, as it would lead to a loss of power, facilities, benefits and incentives. Many of the senior government officials were represented in the management boards and various other executive committees. The SoE executives used to please them with allowances and facilities in expectation of their administrative support and financial assistance (EI 019).164
Civil servants did not fail to utilise their strategic positions as a buffer zone between political parties and the SoEs. In many cases, they co-opted with the political executives to integrate their personal interests. They did not have anything to gain from privatisation; rather, they would lose the proverbial goose that lays the golden hen. For this reason, they were charged for encouraging unnecessary expansion of the SoEs rather than initiating, supporting and expediting the privatisation process (ARC 1969).
In the absence of a performance-based management system and direct accountability mechanisms, civil servants avoided any blame for the poor or non-implementation of privatisation policies. Similarly, lacking clearly defined roles and responsibilities, the senior civil servants were hardly held accountable for poor performance.
With excessive discretionary power on the concerned ministers for the operation and management of the SoEs, management executives could retain their positions until their political masters favoured them. Thus their time and energy was spent pleasing ministers and
164 An in-depth interview with the chairperson of the Public Enterprises Directorate Board Nepal was taken on 12 June 2014. 179 other influential political leaders and fulfilling the demands of trade unions, mainly the ones affiliated with the ruling party (GBMESRC 2010).
The government representatives in the management committee of the SoEs had little interest in privatisation. Focused on completing their tenure without any dispute or conflict, the senior executives including the Chief Executive Officers were interested in avoiding risks and uncertainties rather than managing or resolving them. For this reason too, the SoE executives, supposed to be the reform agents, hardly had any interest or incentives to launch far-reaching reforms such as privatisation (CRRC 2007).
Development partners, especially the international financial institutions (IFIs) such as the World Bank and the IMF and some influential bilateral donors such as the US and the UK, were genuinely interested in accelerating the pace of privatisation. Having economic liberalisation and privatisation as preconditions for their development assistance, the development partners encouraged, supported and pushed their privatisation agenda to aid-dependant developing countries like Nepal.
Due to the stalling privatisation process, government hesitance or policy reversals, donors used to suspend or cancel their support to the host countries. For instance, when a Communist government was formed in 1994, following the mid-term poll and the privatisation process was slowed down, the US government suspended its assistance to the privatisation programme (USAID 1996).
Some development partners, specifically the former Socialist countries, had reservations about the privatisation of SoEs established under their assistance. However, they did not strongly obstruct the privatisation process. Perhaps they did not believe that the SoEs would have been better-off without privatisation.
With a few business houses patronised by the ruling elites and royal families, the private sector was in a rudimentary stage by the time Nepal initiated the privatisation process in the latter part of 1980 (EI 005).165 It was focused on getting more concession, tax rebates or special privileges to better run the establishment rather than developing a more competitive private sector (EI030).166
With the advent of multiparty democracy in 1990 and the adoption of economic liberalisation policies, the private sector began to expand. However, it did not have the orientation, enthusiasm, expertise and experience to operate within a competitive environment, and thus it
165 An in-depth interview with a former secretary of the Government of Nepal on 28 May 2014 166 An in-depth interview with the head of Corporation Coordination Division of the Ministry of Finance on 19 June 2014. 180 was not much interested in privatisation. It could also be partly because the SoEs were not attractive for investment.
Guided by short-term commercial benefits rather than long-term vision of private sector development, the private sector did not have much interest in privatisation. Political instability, violent conflict and excessive trade union activism from the second half of the 1990s hindered private sector development in the country. Overall, the private sector did not have much stake, interest nor incentive in actively engaging in the privatisation process. However, recently private sector business associations have started to demand a level playing field, helping to ending the public sector monopolies.
Trade unions had the most to lose from privatisation. Organised along political party lines after 1990, they exerted pressure on government to stop privatisation. The intensity of their opposition depended upon the political party they were affiliated with. Trade unions affiliated with the Communists parties were more vocal and aggressive than the others. Most of the time they opposed privatisation in line with their parent party. The privatisation model also influenced their level of opposition. As privatisation started with asset and business sales, many of the SoE employees lost their jobs. Trade unions were not represented in the privatisation process, making them furious with the government.
They were afraid of losing jobs, as the SoEs were said to have been overstaffed. Grown and groomed in a non-performing culture and enjoying life-long service, they felt insecure with privatisation. They also had a feeling of being under the control of businessmen from the enterprises of public pride.167 Accustomed to widespread impunity, the notion of private entrepreneurs and managers exerting strict control appalled them.
In the absence of an effective deliberation mechanism, the rationales, benefits and challenges of privatisation were not properly communicated to and discussed with trade union members. Policy-makers and practitioners did not consider creating incentives for junior staff and trade union members. Perceiving huge risks without clearly spelt benefits and incentives, trade unions did not support the privatisation process.
Emergent civil society did not play much of a role in the privatisation process in the early 1990s. As it lacked both a direct stake and interest in privatisation, it was seldom proactive in the privatisation discourse (EI 021).168 Besides, the politically divided civil society viewed
167 Public service was generally regarded as prestigious profession. 168 An in-depth interview with a Joint Secretary of the Office of the Prime Minister and Council of Ministers on 12 June 2014 181 privatisation from different perspectives. Left-leaning groups vocal in anti-government movements, for example, did not support the privatisation process.
By and large, privatisation was confined to the government as the seller, and private businessmen as buyers. For this reason, too, it could not gain the support of academics. There was hardly any serious research conducted on privatisation. Even if there had have been, it would have been unlikely to impact the privatisation process, as there was no effective interface between the government and the academic community. The academic community had no interest or incentives to support or hinder the privatisation process. Despite a few sporadic comments on privatisation in the print media, they did not have a substantial influence on the privatisation process.
While the government displayed no strategic approach to utilise the media in promoting the benefits of privatisation, the media itself did not have any specific interest, orientation or capacity to influence the privatisation process. Mostly, the media was swayed by public sentiment rather than shaping and developing public opinion on privatisation. And while the media was often critical of the performance of SoEs, it seldom offered suggestions to improve the privatisation process. This can in part be explained by the fact that in Nepal, professional and investigative journalism is only now becoming vibrant, after the advent of a free and open media in 1990.
6.4 Implementation of privatisation policies in the post-liberalisation era
6.4.1 Implementation status
After the formulation of the 1991 policy paper on privatisation, the government initiated resolute efforts to privatise public enterprises. During 1992 and 1993 alone, seven public enterprises were privatised. Three more public enterprises were privatised in 1994 after the enactment of the Privatisation Act. Table 6.5 presents privatisation details for the first half of the 1990s.
182
Table 6.5 Details of enterprises privatized during 1990-1995 Sales Sale of Year of Mode of Price S.N. Name of Enterprise Shares Privatisation Privatisation (NRs. in percentage million)
Asset and Bansbari Leather and Shoe 1 1992 Business n.a. 29.854 Factory Sale*
Bhrikuti Pulp and Paper Asset and 2 1992 n.a. 229.800 Factory Business Sale
Harishiddhi Bricks and Tiles Asset and 3 1992 n.a. 214.830 Factory Business Sale
Nepal Film Development 4 1993 Share Sale 51 64.662 Corporation
5 Balaju Textiles Industry 1993 Share Sale 70 17.716
Raw Hide Collection and 6 1993 Share Sale 100 3.990 Processing Centre
Nepal Jute Development 7 1993 Liquidation n.a. n.a. Corporation
Nepal Bitumin and Barrel 8 1994 Share Sale 65 13.127 Industry
9 Nepal Lube Oil Limited 1994 Share Sale 40 31.057
Tobacco Development 10 1994 Liquidation n.a. n.a. Corporation
Note: *Except land and building
Source: Economic Surveys and Yellow Books, Ministry of Finance.
The privatisation process lost momentum when the majority government of Nepali Congress was forced to step down following the defeat of government policy in the parliament due to 35 dissenting members of the ruling party abstaining from the legislating process. Despite its policy of selective privatisation, the minority government of Nepal Communist Party (Unified Marxist and Leninist) did not privatise any SoEs during its tenure from 30 November 1994 to 12 September 1995. Privatisation was not its priority agenda. Privatisation resumed when a coalition government was formed under the leadership of the Nepali Congress Party following
183 the reinstatement of the dissolved House of Representatives by the Supreme Court. During 1996 and 1997, the government privatised six more public enterprises. By 2000, 17 SoEs were privatised. Table 6.6 presents privatisation details between 1996 and 2000.
Table 6.6 Details of enterprises privatized during 1996-2000 Sale of Sales Price Name of Year of Mode of S.N. Shares (NRs. in Enterprise Privatisation Privatisation (Percentage) million)
Nepal Foundry 1 1996 Share Sale 51 14.473 Industry
Raghupati Jute 2 1996 Share Sale 65 82.204 Mills
Biratnagar Jute Management 3 1996 n.a. n.a. Mills Contract
4 Nepal Bank Limited 1997 Share Sale 10 125.140
Agriculture Tools 5 1997 Share Sale 65 95.100 Factory
Bhaktapur Brick Lease (10 6 1997 n.a. 20.300 Factory years)
Nepal Tea Share Sale & 7 Development 2000 65 267.105 Lease* Corporation
Note: * *Plus NRs. 4 million per annum
Source: Economic Surveys and Yellow Books, Ministry of Finance
Three of the seven enterprises privatised during 1996-2000 eventually reverted to government ownership. For example, the private party undertaking management of Biratnagar Jute Mills on a five year contract gave up after only about sixteen months. Again it was handed over to another private party on a five year management contract, but this party also gave up after 10 months. Consequently, it was closed down in May 1999. Similarly, the Agriculture Tools Factory, sold to its workers, was closed down due to disputes among the partners. And the lessee of the Bhaktapur Brick Factory could not run the factory after two years. All three enterprises were privatised during 2001-2005. During this period seven enterprises were liquidated, one was dissolved and the remaining three went on management contract, share sale and asset and business sale. The following table highlights privatisation from 2001 to 2005.
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Table 6.7 Details of enterprises privatized during 2001-2005
Sale of Sales Price Year of Mode of S.N. Name of Enterprise Shares (NRs. in Privatisation Privatisation Percentage million)
Agriculture Project 1 2001 Liquidation n.a. n.a. Services Centre
Cottage Handicraft Sales 2 2002 Liquidation n.a. n.a. Emporium
3 Nepal Coal Limited 2002 Liquidation n.a. n.a.
4 Hetauda Textiles Limited 2002 Liquidation n.a. n.a.
5 Himal Cement Factory 2002 Liquidation n.a. n.a.
Management 6 Biratnagar Jute Mills 2002 n.a. n.a. Contract
Nepal Transport 7 2002 Dissolved n.a. n.a. Corporation
8 Butwal Power Company 2003 Share Sale* 75 874.200
9 Birjung Sugar Factory 2003 Liquidation n.a. n.a.
10 Argiculture Tools Factory 2003 Liquidation n.a. n.a.
Asset Sale and 11 Bhaktapur Brick Factory 2004 n.a. 14.500 Lease**
Note: *PlusUSD 1 Million, **Plus NRs 31.9 Million/10 years’ rent
Source: Ministry of Finance.
The government continued privatisation in 2006, selling the assets and business of two enterprises and liquidating two more. The government also sold 8.53 percent shares of the state owned Nepal Telecom Limited in 2008. Since then, the government has not privatised any public enterprises. Privatisation details from 2006 to date is presented in table 6.8.
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Table 6.8 Details of enterprises privatized during 2006-2015 Sale of Sales Price Year of Mode of S.N. Name of Enterprise Shares (NRs. in Privatisation Privatisation % million) Asset and 1 Lumbini Sugar Factory 2006 n.a. 78.600 Business Sale*
Nepal Resin and Asset and 2 2006 n.a. 110.100 Turpentine Limited Business Sale**
Agriculture Lime 3 2006 Liquidation n.a. n.a. Industry Limited
Nepal Drilling 4 2006 Liquidation n.a. n.a. Company
Nepal Telecom 5 2008 Share Sale 8.53 4,264.139 Company Limited
Note:*Plus NRs. 4.212 million per annum for rent (25 years), **plus NRs. 4.212 million per annum for rent (10 years)
Source: Ministry of Finance.
Ministry of Finance publications show that, so far, 30 public enterprises have been privatised since 1990. The government used different privatisation modalities like asset and business sales, share sales, liquidation, dissolution, management contracts and the lease on trial-and-error method. It started privatisation by selling assets and business of three public enterprises established under the technical and financial assistance of the Chinese government. Under this method, public enterprise is liquidated and liabilities are settled by the government before floating shares to the private entrepreneurs and the general public. As the government faced severe problems over liquidating and settling liabilities, it opted for share sales. Share sale was also not free of problems. For instance, 65 percent of the total shares of Agriculture Tools Factory was sold to the staff of the factory. The government gave preference to the workers hoping that they will be motivated for better performance. However, it was revealed that factory staff were not the real investors. The investors bought the factory under the veil of workers to take advantage of the concessionary bidding process. When disputes erupted among the real investors, the factory was closed down. Raw Hide Collection and Processing Centre is another interesting example, where the company was sold to a consortium of ten tanneries with a maximum of 17 percent share per member in a kind of cooperative method of privatisation. In the absence of collective entrepreneurship and team work, the company collapsed (Manandhar and Bajracharya 2000).
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Similarly, leasing out and management contracts were also cancelled at least two times as the entrepreneurs could not run the SoEs. Biratnagar Jute Mills and Bhaktapur Brick Factory are cases in point. In the case of Biratnagar Jute Mills, however, failure cannot be solely attributed to the management deficiency. A lack of skilled and competent staff, an absence of belonging and attachment of staff to the industry, and excessive trade union activism were all prominent reasons behind the continuous failure to efficiently run the industry. The industry continued to remain just a ‘playing ground of politics’ (MoF 2011b pp.131-132).
There was also the problem of sequencing privatisation. Nepal Jute Development Corporation, established to support and promote the jute industry, was liquidated long ago without making any alternative arrangements to support the jute mills. Similar cases were observed with the ailing Janakpur Cigarette Factory and the Tobacco Development Corporation, the latter liquidated as early as 1994. After 2000, the government mostly went for liquidation. That was partly because the government wanted to get rid of the bleeding enterprises as soon as possible. Similarly, liquidation would be easier to administer compared to other modalities. The government was blamed and heavily criticised for selling the state owned enterprises below their value; arguably this was the main reason for opting for liquidation and dissolution of the SoEs in the latter stages of privatisation. For instance, of the total 15 SoEs privatised between 2001 and 2006, 10 were liquidated or dissolved (See table 6.7 and 6.8).
With the increased influence of trade unions in national politics after the people’s second movement in 2006, privatisation became a sensitive political issue in Nepal. During the transition period from 2006 to September 2015, the government focused on constitution-making and reaching a political settlement. That could be a potential reason why privatisation didn’t go well. Similarly, as most of the governments in the post-republic era were headed by the left leaning political parties, privatisation was not a government priority. Nepali Congress, which emphatically initiated economic liberalisation and privatisation in the 1990s, gradually developed privatisation fatigue after 2006. Foreign aid donors stopped exerting pressure to expedite the privatisation process, partly because they recognised the constraints posed by the political context. The zeal and enthusiasm for reform in this area also withered because of the dismal results of economic liberalisation and privatisation in many developing countries.
6.4.2 Implementation analysis
An in-depth analysis of the privatised enterprises reveals that only a few cases of privatisation reached their logical end. A number of SoEs had sub-judice cases, even after 23 years of
187 privatisation. Some of the buyers disagreed on the amount payable to the government.169 Others had land encroachments170 and accounts adjustment issues.171 Consequently, the privatisation process did not complete for such a long time. The liquidation process was also very long and complex (MoF 2015a).172
Of the 30 enterprises privatised since 1990, 40 percent were either liquidated or dissolved. Business and assets were sold for six enterprises, and one was handed over under the management contract. Of the 11 enterprises privatised under the share sale modality, one enterprise sold just 8.53 percent of its total share. It can be argued that liquidation and dissolution ends government monopoly, opening-up an avenue to establish new enterprises. However, this cannot be regarded as healthy development. Putting privatisation modalities in a timeline, during the first decade of privatisation, from 1992 to 2000, of the 17 privatised enterprises, only two were liquidated. However, after 2000, two-thirds of the 15 privatised enterprises were liquidated or dissolved.173There are a number of reasons for choosing liquidation or closure of so many public enterprises.
Asset valuation remained contentious ever since the government started privatisation in 1992. During the 1990s, the government and political leaders were blamed for selling SoEs well below their value. The auditor general’s report also indicated significant undervaluation while privatising the SoEs.174 Major political parties did not have a common understanding and consensus on privatisation, even after decades of experience. Two of the three enterprises privatised in 1992 were sub-judice cases. A series of disputes erupted between the government and private purchasers in connection with valuation and condition of assets of the privatised SoEs (Manandhar and Bajracharya 2000).Worried of being blamed for selling the SoEs for below their value and of being too slow to effectively reduce the financial burden to government and of avoiding post-privatisation hassles, policy makers opted for liquidation and dissolution modality after 2000.
169 Bhrikuti Pulp and Paper Factory and Harishiddhi Bricks and Tiles Factory filed the cases against the government, disagreeing on the amount payable to the government. Both SoEs were privatised in 1992. 170 For example: Raghupati Jute Mills, Bhaktapur Brick Factory and Nepal Tea Development Corporation 171 There was a huge discrepancy between the assets details prepared by the government evaluators and the purchasers of Balaju Textile Industry, Raghupati Jute Mills and Nepal Resin and Turpentine Limited. 172 Liquidation process of Hetauda Textile Industry was yet to complete, even after 12 years’ time. 173 That includes reprivatisation of Bhaktapur Brick Factory, Agriculture Tools Factory and Biratnagar Jute Mills, which were reverted back by the government as the private entrepreneurs failed to run these factories. 174 The 1998 Annual Report of the Auditor General estimated on an average 29.29 percent undervaluation of eleven privatized public enterprises. 188
Accuracy, reliability and completeness of government data and information on privatisation could be questioned.175 However, the survey data, focus group discussions and elite interviews, along with other published data, confirmed that privatisation did not go as well as expected. A majority of the respondents of a field survey believed that privatisation policy was not efficiently implemented. Only 16.2 percent of the respondents agreed that privatisation was efficiently implemented. For a majority of the participants, privatisation policy was not successfully implemented.
Table 6.9 Implementation of privatisation policy (N=74) Statement Strongly Agree Neutral Disagree Strongly Don’t Agree Disagree Know Overall, implementation 0 12 13 41 7 1 of privatisation policy (16.2%) (17.6%) (55.4%) (9.4%) (1.4%) has been efficient
Overall, privatisation 0 14 13 40 6 1 policy has been (18.9%) (17.6%) (54%) (8.1%) (1.4%) successfully implemented
Source: Field survey during April-September 2014176 Practitioners argued that Nepal commenced privatisation without properly conceptualising and internalising the concept and objectives it entailed. Influenced by the global wave of economic liberalisation and privatisation, and encouraged by donors, policymakers plunged into privatisation without first preparing the groundworks for its implementation (FGB04).177 Policy implementation was simply considered a technical process that would automatically follow once the policy was decided.
Conceived principally as a divestiture of SoEs (as espoused by Margaret Thatcher in the UK and Ronald Reagan in the US) policymakers failed to contextualise privatisation from developing countries’ perspectives (Kanesalingam 1991 pp.10-11). They hardly considered the relevance, opportunities and challenges of privatisation in such countries. The state of private sector development, business ethics and societal culture, and governance and governability were not adequately considered. As a senior civil servant remarked, “People of Sirutar blocked the
175Neither the Annual Performance Review of Public Enterprises nor the Economic Survey indicates how many of the privatised enterprises reached their logical end and when. The government publications state the decision to privatise but not the actual privatisation. There are many discrepancies, errors and missing data. For example, the 2002 Economic Survey states that Sajha Transport was liquidated. The latest privatisation list doesn’t include it. The list shows that Birgunj Sugar Factory was liquidated in 2003, but the 2005 Economic Survey indicates that the third attempt of privatising Birgunj Sugar Factory also failed. In many cases, the government publications present the previous fiscal year’s status, stating that the latest updates were not available. 176 Survey details is attached in the annex. 177 Focus group discussion held on 5 September 2014. 189 construction of a 700 metre road for a year just for the vested interest of a few elites. The government remained a silent spectator. In this situation, how can you expect the privatisation process to be smooth and efficient where multiple actors perceive that it jeopardises their interests. Thus, privatisation has to be viewed as a part of a broader governance situation in the country”. (EI030) 178
Not only the implementation process, but also the policy content was problematic. It lacked specificity, consistency and coherence among different policy documents. Full of normative statements and ‘feel good’ policies (as discussed in Section 6.1.2), privatisation policies also lacked enforceability. Lack of an institutional capacity to design evidence and research-based policy was yet another weakness. In the absence of a thorough and complete diagnosis, all the SoEs were put in a single basket and labelled as non-performing enterprises. Similarly, reform policies were rarely updated in line with the changing context (EI063).179 Indicating that privatisation policy was primarily supply driven and lacked rigorous analysis, a former secretary remarked, “We start studying reforms after we adopt it” (EI019).180
Political context was reasonably favourable when privatisation was initiated. However, frequent changes in government, coupled with violent political conflict and the lack of a coalition culture gradually deteriorated the situation. There were 25 governments in the last 26 years since the restoration of multi-party democracy in April 1990. Political instability and frequent changes in government had a negative impact on policy continuity. Senior civil servants, including the secretaries and director generals were frequently transferred. Similarly, general managers of the SoEs were frequently changed. For example, one of the SoEs had 12 chairpersons and six general managers in six and three years’ time, respectively. For this reason, the senior executives were often engaged in retaining their power and positions rather than initiating or implementing policy reforms (FGB03181and EI068182).
The decade-long violent political conflict since 1996 and a prolonged transition thereafter had a negative impact on privatisation and private sector development in the county. Amidst the fast deterioration of law and order, the private sector was feeling highly insecure and, struggling for survival. The government was also struggling to demonstrate its presence in different parts of
178 An in-depth interview with the head of corporation coordination, Division of the Ministry of Finance on 269 June 2014. 179 An in-depth interview with a former vice chairman of the National Planning Commission on 25 July 2014. He is also one of the architects of post 1990 liberalization reforms when he was a Member of the National Planning Commission. 180 An in-depth interview with a former secretary of the Government of Nepal on 12 June 2014. Currently he is the chairman of the Public Corporation Directorate Board of Nepal. 181 A General Manager during a focus group discussion held on 5 September 2014. 182 An in-depth interview with a former general manager of one of the largest Commercial Banks in Nepal on 30 July 2014. 190 the country. Labour issues, coupled with the track record of poor performance, further deteriorated the image of the SoEs.
During the initial phases of privatisation, political executives in the reform leading institutions, pledged full-fledged support to the privatisation process. The prime minister, finance minister and the vice chairperson of the NPC demonstrated their genuine commitment towards economic liberalisation and privatisation (Paudel 2006). However, many of the political and administrative executives accustomed with patronising the SoEs for their personal benefits were not keen to privatise their milking cows. With the SoEs, they could appoint their henchmen as public enterprise executives, offer benefits to the party cadres and strengthen their position in their parties. They did not have any incentive to implement privatisation, fearing they would forfeit facilities and benefits. Moreover, as most of the SoEs were urban-based, fear of privatisation can be attributed to the potential impact at the ballot box (Shah 1991).
Although the left-leaning political parties did not explicitly denounce privatisation for fear of losing donor support to their government, they strategically obstructed the privatisation process. This was more evident after the 2006 political movement, when foreign aid donors’ interest in and enthusiasm for privatisation was gradually waning. For example, in 2008 the Maoist government reverted two SoEs, long ago privatised, to government control. In recent times, political obstruction to privatisation has become more pronounced.183
Civil servants, having no incentives to implement privatisation policies that would result in them losing power, prestige, facilities and benefits from the SoEs, were the silent killers of privatisation. As a senior civil servant remarked:
They don’t speak against reforms but spoil silently like termites when they feel that reforms jeopardise their personal interests. They are not enthusiastic to move ahead even if it does not harm them so long as they don’t find any benefit for them. Silent
183 In contrary to the policies outlined in the Budget Speech for the Fiscal Year 2014/15, the industry minister in the coalition government forwarded a proposal to the Finance Ministry to revive eight enterprises privatised long ago (http://www.myrepublica.com/portal/index.php?action=news_detailsandnews_id=88133 access: 24 March 2016). Similarly, another left-leaning industry minister publicly announced that his government would not privatise any of the public enterprises (https://thehimalayantimes.com/nepal/no-privatisation/ access: 4 May 2016). The industry minister argued that privatisation and economic liberalisation were two different things, and that not moving for privatisation did not necessarily mean being against an open market economy (http://np.karobardaily.com/2016/03/79414/access: 29 March 2016). He disclosed that the government was going to revive five more privatized public enterprises (http://nagariknews.com/economy/main-story/story/68647.html access: 27 April 16).
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spoilers are more dangerous and difficult to tackle than the vocal opponents. (EI042)184
Civil servants were the ones primarily responsible for the operational management of SoE reforms and privatisation. The line ministries did not have a complete list of the SoEs under their jurisdiction. Nor did the Ministry of Finance have complete, reliable and up-to-date data on the SoEs. There was a huge discrepancy between the loan and investment accounts of the Office of the Financial Comptroller General and the SoEs. Ministry of Finance publications have been quoting these discrepancies since 2006. By July 2015, such differences reached Rs. 10,332.4 and 4,869.2 million for share and loan investments respectively. Out of the 37 SoEs, 29 had such discrepancies (MoF 2016a). Even after a decade’s time, the loan and investment accounts were not reconciled.
Many of the privatisation decisions did not reach to the logical end because of the lapses and weaknesses in operational management such as timely reconciliation and adjustment of loan and investment accounts, property management and post privatisation monitoring and evaluation. All these operational issues had to be sorted out by the civil servants, but they did not, failing to facilitate the privatisation process and weakening the very foundation of privatisation.
Public enterprise executives and trade union officials had little positive contributions to the privatisation process. Engaged in appeasing the political masters and pleasing the politically strong trade union leaders, the SoE executives hardly had time and energy for SoE reforms and privatisation. The Ninth Plan document supports this argument:
The Management of the enterprises has tended to be oriented more towards administrative and political matters than towards business. As the higher management is appointed on the basis of political loyalty and commitment, decision-making process apparently lacks capability and efficiency. Moreover, there has been a marked decline in management accountability and responsibility. (NPC 1997)
Despite the ‘no redundancy’ provisions of the Privatisation Act, public enterprise trade unions made fierce attacks on and organised strong resistance to privatisation. Not assured of the improved conditions of the SoEs after privatisation, and less confident with the potential private owners that they would comply with the ‘no redundancy’ clause, in many cases, employees and trade unions opposed, resisted and obstructed the privatisation process (Manandhar and Bajracharya 2000). Besides the fear of retrenchment, they also had the fear of being made redundant and of having an excessive workload after privatisation. Many of them were worried of losing power and prestige of public service (World Bank 1991b).
184 During an in-depth interview on 7 July 2014. 192
With the strong backing of their parent political parties and their network with national and international trade union organisations, they used to exert strong pressure on governments to resist privatisation. For example, on February 28 2006, the International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM), in the name of its 20 million members, sent a letter to King Gyanendra to halt a government plan of restructuring Nepal Electricity Authority.185 Recently, the 12th World Congress of Trade Unions of Public Service Employees and Allied (TUI-PSEA) was held in Nepal from 13 to 14 February 2015 under the slogan, “Against Privatisation and Capitalist Reforms, Public Service for People” interpreting privatisation as the transfer of state monopolies to private monopolies and a neoliberal instrument to accumulate profits for the capitalists.186 Public Enterprises Employees Association of Nepal (PEEAN) as a co-organiser, the Congress conveyed a message that there was a strong backing of international trade unions against privatisation in Nepal as elsewhere.
With a genuine interest in privatisation, the major external development partners, both bilateral and multilateral, encouraged, supported and pushed the government to implement privatisation from the early 1990s, when the government commenced serious efforts to privatise public enterprises. During the initial phase of privatisation, the United Nations Development Programme (UNDP) and the World Bank extended support to devise privatisation policy, strategies and law. The United States Agency for International Development (USAID) also pledged technical support and assistance to implement the privatisation policy (USAID 1996). The Department for International Development (DFID) of the United Kingdom provided technical assistance to support the privatisation process from 1997 to 2003.187 The Asian Development Bank provided technical and financial assistance to the government to facilitate the government’s disengagement from public enterprise management and ownership under the Nepal Public Sector Management Programme (ADB 2008b).
With an assumption that privatisation would necessarily improve the performance of public enterprises, the IFIs such as the World Bank and the IMF pushed the government for swift privatisation, mainly through policy-based lending. For instance, the World Bank put forth a condition of privatising more than seven SoEs, including some of the largest enterprises such asNepal Telecommunication Corporation and Nepal Airlines Corporation, within three years. This was in order to remain eligible for a high case scenario of foreign aid (World Bank 1999,
185http://www.industriall-union.org/archive/icem/icem-letter-to-king-of-nepal-on-privatisation-of-nepal-electricity- authority access: 24 March 2016. 186http://www.wftucentral.org/xii-world-congress-tui-public-services-demand-social-functions-service-people- workers/ access: 29 April 2016. 187 Technical assistance included a residential advisor at the Ministry of Finance who helped the government to strengthen Privatisation Cell in the ministry and to improve privatisation procedures (http://www.adamsmithinternational.com/explore-our-work/south-asia-asia-pacific/nepal/support-to-the-privatisation- unit-of-nepal/ access: 5 May 2016). 193 p.30). However, all this assistance, encouragement and policy conditions did not result in significant and sustainable outcomes. Arguably, all these diluted the government’s ownership and accountability towards the SoE reforms and privatisation.
Brought up ina state-directed mixed economy and a relatively close society, and protected and patronised by the royal palace, Nepal’s private sector during the early 1990s hardly exhibited any entrepreneurship and a corporate culture. Prone to seek benefits from the public sector rather than developing competitiveness, the private sector preferred transactional business involving low risk and high profitability. It lacked a long-term vision and capacity to compete in the market, and thus it was not keen to purchase the SoEs. For this reason, some privatised enterprises did not run well (EI008).188
Institutional bottlenecks were yet another inhibiting factor for the partial or poor implementation of privatisation policy. In the absence of a dedicated institution responsible for privatisation in the permanent structure of the government, privatisation became a transitional management of the SoEs. The Privatisation Cell created in the early 1990s, was nowhere in the formal institutional structure of the government. Privatisation was rarely a priority of the Ministry of Finance. The ministry was engaged in releasing the budget to the SoEs, and hearing grievances of both the management and of the trade unions of the SoEs. The ministry also lacked reasonably competent human resources. Civil servants were interested in avoiding privatisation as it would generate a number of hassles, difficulties, conflicts and challenges. Senior officials in the line ministries were not interested to speed-up the privatisation process. The elites in the ministries didn’t have any interest, motive, incentive or enthusiasm to expedite the privatisation process.
Most of the members of the Privatisation Committee were ex-officio members from the civil service. They used to avoid meetings likely to deal with complex, difficult and vital decisions as they could be summoned by the Commission for the Investigation of the Abuse of Authority. They were determined to retain the status quo instead of making changes happen. The president of FNCCI, the only private sector representative in the Privatisation Committee, usually came from a large business house who did not have much idea and expertise to influence the privatisation process. The members of the parliament, who were included in the Privatisation Committee to acquire political support for privatisation, made the committee dysfunctional (FGB08).189
Institutional supremacy, the tendency of buck-passing and the absence of a strong accountability enforcement mechanism made coordination among the reform leading institutions difficult.
188 An in-depth interview with a former minister and finance secretary of the Government of Nepal on 30 May 2014. 189 A senior joint secretary in the Ministry of Finance during a focus group discussion on 5 September 2014. 194
With the prevalence of a feudal culture and dominance of hierarchical networks of relations, and the absence of an open, frank and two-way communication, a healthy deliberation process rarely took place in the civil service. For this reason, both the making and implementation of policy reforms were hardly participative. This syndrome was noticed during the focus group discussions among the different layers ofcivil servants from different ministries. Similarly, with the existence of a non-performing culture, institutional performance was highly dependent on leadership quality (EI019).190 Institutional memory, data and information management was found considerably weak and unreliable. All these hampered the privatisation process in Nepal.
The enthusiastic young political leaders initiated privatisation without any serious study of the socio-economic and political context, reform readiness and the politics of privatisation. Past experiences and the potential risks were rarely considered. Poor performance was just attributed to the ‘lack of political commitment’ and ‘faulty preparatory programme’ ignoring other important actors and factors (NPC 1992). Privatisation programmes and targets were announced without necessary groundworks, which left reforms hanging in limbo. Neither it could move forward nor could it afford reversal. As a result, privatisation remained a contentious issue for quite a long period.
There was no clear-cut vision and uniform criteria to select the SoEs for privatisation. Periodic plans in budget speeches contained different selection criteria. However, in practice, none of the criteria was fully complied with. The government never explained or justified why it selected specific SoEs for privatisation but not others. For example, the government never explained why the national print media was put into the priority list of privatisation in the 1996/97 Budget Speech (FGB01).191
In the absence of a clear framework, modality and workable action plan for privatisation, the Privatisation Committee carried out very little in the way of an implementation analysis. Nor did the Committee specify responsibility and accountability routes. Resource requirements and the associated risks were not duly considered while enlisting the SoEs for privatisation. Deliberation and communication also remained weak throughout the privatisation process. Lacking strategic communication, the Privatisation Committee could not mobilise broader support for privatisation. It also hampered the effective coordination among the reform leading institutions as well as the key actors and stakeholders of privatisation. With a limited consultations among a few senior civil servants and development partners’ representatives being mostly from their head office, the real problems and challenges of privatisation were not identified. As there was no effective stakeholder analysis, the opinion makers were hardly
190 An in-depth interview with a former secretary of the Government of Nepal. 191 The head of the Corporation Coordination Division of the Ministry of Finance during a focus group discussion on 5 September 2014. 195 differentiated from the crowd (EI025).192 Consequently, institutional and national interests were sidelined to prevail on individual and group interests, leading to a slow and confused privatisation process.
6.5 Implications for the reform objectives
Privatisation proceeded relatively well during the period of majority government in the 1990s. With the ardent advocates of economic liberalisation and privatisation in the key positions of a homogeneous government, in 1992 and 1993 alone, seven public enterprises were privatised. During that period the government had an impression that the financial burden was decreasing, production and productivity was increased, and privatisation had made a creditable contribution to the development of the country’s private sector (MoF 1995).
Privatising 16 SoEs under different modalities – from asset and business sales to the lease and management of contracts – the government claimed that privatisation during the Eighth Plan period (1992-1997) accrued revenue contribution and increased government savings that would otherwise go to the unproductive enterprises in the form of share and loan investment or grants. During that period the government had a net income of Rs. 289.6 million from privatisation proceeds incurring Rs. 435 million expenses to pay liabilities of the privatise d SoEs (NPC 1997).
The Ninth Plan document painted an optimistic portrait of privatisation, claiming that it improved performance of the SoEs in terms of capital investment, production, technological advancement, employment generation and private sector participation through share purchases. Further, it stated that privatisation success helped the government forge political consensus on privatisation, resulting in a more favourable environment for it. However, available data, information and evidence do not support this claim. Obviously, the government had some sort of relief with privatisation during its initial phase. However, these hopes did not last, because privatisation did not reach its intended end for quite a long time. For example, Bansbari Leather and Shoe Factory, privatised in 1992 under asset and business sale modality, closed down shortly afterwards. However, it was deregistered only after 15 years of privatisation (MoF 2007).
Initially there was an indication that some of the privatised enterprises were doing well, with an expansion in production capacity, some innovative products and enhanced operational efficiency. For example, the Bhrikuti Pulp and Paper Factory was shown to be expanding. Soon it was found with a huge amount of commercial debt. Recently, the factory management was
192 An in-depth interview with a former secretary of the Government of Nepal who also worked as a head of the Corporation Coordination Division of the Ministry of Finance. 196 lobbying for government approval to plot the land for sale. Some of the other privatised enterprises also approached the government for a permission to build apartments (EI030).193
The majority of the participants of a field survey disagreed that privatisation enhanced the efficiency of public enterprises (table 6.10). The survey was inconclusive with regard to the reduction in financial burden and contribution to private sector development. This was because the proportion of participants who agreed was not significantly different from those who disagreed. A large number of participants were neutral on these aspects. However, a majority of the participants disagreed that privatisation had led to sustainable outcomes.
A high proportion of neutral opinion can be interpreted as the absence of any study or evaluation report on the privatised SoEs since a brief report was released by the government in 1999. This also indicates that detail information was not widely disseminated except in a few newspaper stories.
Table 6.10 Impact of privatisation (N=74) Statement Strongly Agree Neutral Disagree Strongly Don’t Agree Disagree Know Privatisation enhanced 11 18 37 7 1 efficiency of public (14.9%) (24.3%) (50%) (9.4%) (1.4%) enterprises Privatisation significantly 20 23 25 4 2 reduced financial burden (27%) (31.1%) (33.8%) (5.4%) (2.7%) of the government Privatisation have 23 31 15 5 0 significant contribution on (31.1%) (41.9%) (20.3%) (6.7%) private sector development in the country Privatisation policy have 8 26 31 8 1 sustainable outcomes (10.8%) (35.1%) (41.9%) (10.8%) (1.4%) Source: Field survey during April-September 2014
Of the 30 privatised enterprises, 12 were liquidated or dissolved and seven were closed down. Only five of the remaining 11 SoEs were operating in profit in July 2015 (MoF 2016a). Thus, there was hardly any possibility of efficiency enhancement. Practitioners were extremely critical of the highly politicised, non-performing enterprises (FGB08).194 All these confirm that the first objective of increasing production and productivity of the SoEs through efficiency enhancement was defeated.
193 An in-depth interview with the Head of the Corporation Coordination Division of the Ministry of Finance on 19 June 2014. 194 Focus group discussion on privatisation held on 5 September 2015. 197
Privatisation was also expected to reduce the financial and administrative burden of the government. Yet despite the fact that about half of the total SoEs were privatised, state investment in them did not come down as expected. Table 6.11 and figure 6.1 clearly demonstrate the increasing trend of loan and share investment in the SoEs from fiscal years 1990/1991 to 2014/15.
Table 6.11 Government investment in public enterprises
Fiscal Loan Share Growth Total Year Investment Investment (Percentage) 1990/91 15,584.20 6,303.20 21,887.40 2001/02 52,968.80 23,429.90 76,398.70 249.1 2010/11 95,170.00 92,190.00 187,360.00 145.2 2011/12 101,240.00 102,410.00 203,650.00 8.7 2012/13 106,501.70 107,663.80 214,165.50 5.2 2013/14 111,681.70 115,814.50 227,496.20 6.2 2014/15 129,161.80 126,160.30 255,322.10 12.2 Amount: Nepalese Rupees in Million
Source: Economic Surveys and Yellow Books, Ministry of Finance.
As the table demonstrates, total investment in the SoEs increased significantly in the last 24 years. From about 22 billion rupees of Fiscal Year 1990/91, it surged to more than 255 billion in 2014/15 (MoF 2016a). This data may be contested, as it was based on 37 public enterprises, whereas the auditor general’s report pointed out that government had share investments in 107 public entities (OAG 2015a). There was no composite list providing a clear picture of all these entities. Besides, the list of privatised enterprises did not follow any standard criteria. Several inconsistencies were found in government data and information. Nevertheless, it is obvious that the government investment in the SoEs was not reduced, even after more than two decades’ privatisation efforts.
198
Figure 6.1 Government investment in public enterprises
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00 1990/91 2001/02 2010/11 2011/12 2012/13 2013/14 2014/15
Loan Investment Share Investment Total
Source: Economic Surveys and Yellow Books, Ministry of Finance.
Indeed, the government had to pay a huge amount of money to settle the liabilities of privatised enterprises. By 2014/15, Rs. 5488.19 million was paid to 15 enterprises.195 As table 6.12 demonstrates, the government paid 7.8 million rupees to settle liabilities of the SoEs that were liquidated in 2003 (MoF 2016a). However, based on the trend of the SoE performance in the past, it can be argued that the situation would have been even worse without privatisation.
195 Butwal Spinning Mills is not included in the privatisation list. 199
Table 6.12 Government Liabilities of Privatized Public Enterprises Upto S.N Name of the Public Enterprise 2014/15 Total 2013/15
1 Himal Cement Company 430.2 0.00 430.20
2 Bhaktapur Brick Factory 206.23 0.00 206.23
3 Birgunj Sugar Factory 1067.95 3.66 1071.61
4 Agriculture Inputs Factory 249.81 1.84 251.65
5 Nepal Resin & Turpentine Limited 180.81 0.00 180.81
6 Lumbini Sugar Factory 508.97 0.00 508.97
7 Agriculture Lime Industry Limited 82.59 0.00 82.59
8 Nepal Coal Limited 8.39 0.00 8.39
9 Nepal Transport Corporation 497.75 0.00 497.75
10 Hetauda Textile Industry 536.04 0.00 536.04
11 Cottage & Handicrafts Sales Emporium 81.03 0.00 81.03
12 Nepal Tea Development Corporation 119.16 0.00 119.16
13 Butwal Spinning Mills 472.25 2.30 474.55
14 Biratnagar Jute Mills 1038.63 0.00 1038.63
15 Nepal Bitumin & Barrel 0.59 0.00 0.59
Total 5480.4 7.80 5488.20
Notes: The amounts in Million (NRs)
Source: Ministry of Finance
The SoEs continue to create a huge amount of unfunded liabilities. Ultimately, the burden falls on the national treasury. By July 2015, such liabilities were Rs. 25.8 billion. During the fieldwork, it was found that the Ministry of Finance was paying such liabilities under political pressure.196 Many of the privatised enterprises did not pay their dues to the government. For instance, 22 of the privatised enterprises had NRs. 3.22 billion dues as amortisation by the government. This did not include 11 other entities having no evidence of bond (OAG 2015a p.45). All these reinforce the argument that privatisation did not reduce the financial burden, as had been expected.
196 Budget and Programme Division, Ministry of Finance. 200
The Ministry of Finance had to furnish answers to the courts, even after more than two decades of privatisation. Officials at the ministry, and even the finance minister, had to engage with the mushrooming trade unions of the SoEs to discuss their demands. Lacking orientation and capacity to hold discussions and dialogues with the highly politicised trade unions, the SoE management and the line ministries used to forward trade unions’ demands to the Ministry of Finance (EI065).197 Moreover, with many cases regarding disputes over land encroachment, account adjustments and property management, the government’s administrative burden increased significantly.
Whether or not privatisation contributes to wider participation in the ownership and operational management of the SoEs largely depends on the privatisation modality. In Nepal, asset and business was sold for six SoEs, 12 were either liquidated or dissolved, one was handed over as management contract and the remaining 11 were privatised under share sale modality. Hence 18 of the 30 privatised SoEs had some sort of private sector participation. In all cases, assets and business was sold in blocks, allowing too little public participation. Only four of the 11 enterprises under share sales modality allowed wider participation, as six enterprises were sold to the corporate groups in block shares (Manandhar and Bajracharya 2000 p.115-116). Moreover, in a number of cases a very small proportion of share was distributed. For example, only a 10 percent share of the Butwal Power Company and 3.53 percent of Nepal Telecom198 was sold to the general public (MoF 2004a). This shows that privatisation did not have a substantial impact on private sector development in the country. A number of factors can be attributed to this situation.
The government started with the outright sale of the SoEs without making necessary groundwork for privatisation. It did not consider restructuring the SoEs to attract private sector investment. From this hast beginning, the initial privatisation process did not go well, creating a negative image of privatisation. The state of private sector development, the business environment, labour relations and the political situation were also not favourable for private sector participation. Excessive trade unionism discouraged the emergent entrepreneurs to invest in the SoEs. The government offered policy without providing an accompanying policy space and a conducive business environment. The country also lacked basic infrastructure for private sector development. In the absence of good road networks, a regular and reliable power supply, easy access to markets and quality service delivery, mere investment notice did not attract private sector investment. There was also a problem in conceptualising economic liberalisation and privatisation. The proponents took economic liberalisation and privatisation as the end of
197 An in-depth interview with a senior under secretary looking after the central budget operations at the Ministry of Finance 198https://www.ntc.net.np/publication/annualreport/annualreport_060-61_to_064-65.pdf access: 10 May 2016 201 the state, rather than a more effective state. The country also lacked a strong regulatory framework (EI084).199
To sum up, contextual constraints, institutional bottlenecks, procedural flaws and actors’ non- performance, non-cooperation and resistance to privatisation hindered its objectives and achievements.
6.6 Conclusion
Highlighting the genesis and growth of public enterprises in Nepal, this chapter showed how public enterprises, once considered the engine of modernisation and growth, turned out to be a perennial economic burden for the country. While describing the evolution of privatisation policy and focusing on the major drivers of privatisation policy, it was found that the major external development partners including the World Bank and the IMF played critical roles in pushing the government to adopt a privatisation policy in Nepal. However, the idea of privatisation was conceived as early as the 1960s, before privatisation was popularised in the developed countries. Before the 1990s, pragmatic factors, along with the encouragement and pressures from the World Bank and the IMF, were the key driving forces of privatisation policy. However, in the post-liberalisation era, in addition to the pragmatic factors and the pressures from external development partners, he ecological as well as the ideological factors were prominent in driving the government to adopt a massive privatisation programme for the country.
A thorough analysis of periodic plans, budget speeches and other policy documents for the last 26 years revealed that many of the policy documents were full of normative feel-good policies without any clear workable action plan. Even the highly committed government could not come up with a clear vision, well-articulated policy statements and well-structured action plans. Policy inconsistencies among different policy documents and incongruities between policy statements and implementation practices were clearly visible. The privatisation agenda remained a priority for the government in the 1990s except for the nine months’ of the left- leaning minority government. From 2001 to 2006, privatisation was not on government priority, as political settlement remained the first and foremost priority of the government. If this period is termed as the period of ‘de-emphasis’ the period after 2006 may be termed as ‘abandonment’ of privatisation policy.
Based on available data and information, this chapter cast a light on the problems associated with privatisation, in so doing highlighting the gravity of the issues in the country. It also
199 Finance Minister Dr. Ram Sharan Mahat, during an in-depth interview on 18 August 2014. Dr. Mahat was the Vice Chairperson of the National Planning Commission while initiating massive economic liberalisation and privatisation in the country. 202 analysed the institutional frameworks and arrangements for privatisation where civil servants were found to be dominant. In the absence of privatisation experts and the inclusion of the members of parliament including an opposition member in the Privatisation Committee, the institutional framework and arrangements were found less functional. The Privatisation Act 1994, though concise and straightforward, was found to be insufficient in detailing down the complex processes of privatisation, thus signifying the need of a privatisation regulation and procedural guidelines. Comprehensive, reliable and updated database as well as institutional memory was strikingly lacking for the logical end of privatisation.
With the exception of a few advocates, political leaders and senior civil servants did not have genuine interests and incentives for privatisation. Instead, they demonstrated a fear of forfeiting benefits, facilities and power over the public enterprises. In the meantime, there was no risk of non-implementation. The excessively politicised senior management of the SoEs were not supportive of the privatisation process, as they were engaged in pleasing their political masters to retain their positions. Interestingly, the private sector also did not show any interest in privatisation. Trade unions were antagonistic, vocal and decisive ‘spoilers’ of privatisation. They resisted the most, as they held an extremely low view of privatisation. Political and bureaucratic executives demonstrated verbal commitment but silently obstructed the privatisation process. In most cases, development partners were the ones with a genuine interest in privatisation. However, they had a limited role in implementation and they did not have any risk of poor implementation. Consequently, in the Nepal’s post-liberalisation era, privatisation did not go well. Both quantitative and qualitative tools confirm these research findings.
Lacking clear, strong, evidence-based and consistent policy contents, along with scant workable implementation plans, an absence of necessary groundworks while initiating privatisation, and the institutional weaknesses and bottlenecks were all inhibiting factors of privatisation in Nepal. Advocates could not create a critical mass to support the reform agenda. Political and bureaucratic executives paid lip service to their commitment to privatisation, allowing the process to remain in limbo. Contextual and institutional factors were also responsible for the slow and inefficient implementation. And there was the problem of sequencing. However, political leaders’ genuine commitment, civil servants’ ownership, honest engagement with and constructive support for and facilitation of senior management teams for the SoEs would definitely improve the situation.
As the initial momentum of privatisation of the 1990s did not last long, the privatisation process was not built on success as an iterative process. My field survey, focus group discussions and elite interviews confirmed these findings. The field survey was not conclusive with regards to the financial and administrative burden and the contribution for private sector development. However, the focus group discussion, elite interviews and the available data and information
203 confirmed that privatisation did not make a significant contribution in reducing the administrative and financial burden of the government. Neither did it enhance production and productivity of the SoEs, nor did it make significant contribution to private sector development. These findings are put in a broader perspective in chapter 8.
204
Chapter 7 Anti-corruption reforms in the public service
This chapter conducts a thorough review of policy initiatives to fight corruption in Nepal during the country’s post-liberalisation era. I view corruption and anti-corruption reforms from multidimensional perspectives to uncover the associated, and deeply entrenched, socio-economic and political problems. Identifying the key drivers of anti-corruption reforms in Nepal, I locate the interests and incentives of the key policy actors to examine their roles in anti-corruption reforms. Finally, I examine the extent to which anti-corruption reforms contributed in improving public service delivery and controlling corruption in the country. I support my arguments with data and information acquired through a field survey, a focus group discussion and elite interviews, along with the critical analysis of relevant policy documents. I use three recent case studies of political, police and bureaucratic corruption to provide an insight into the current state of corruption in the country. While recognising the impact of individual interests and incentives on anti-corruption reforms, I argue that socio- economic and political factors shaping such interests and incentives are equally important.
7.1 Contextualising anti-corruption reforms in Nepal
Corruption has been a characteristic of Nepalese society for centuries.200 It was so deeply entrenched that even ordinary people used to pay bribes without necessarily knowing that they were committing acts of corruption. For instance, condemned people used to pay money in advance to be given a merciful killing201 when they were executed, without realising that they were bribing the person actually executing them (Manandhar 1986, pp.263-273).
Anti-corruption laws were codified for the first time in the legal code of 1853. During that period, corruption was understood simply as the misuse of public property. However, there was no demarcation between the public property and the property of the rulers. The law was applicable only to the common people. No one could stop the rulers from extracting the state resources for personal gain (Gellner 2007). Therefore, the prime motive behind introducing stringent clauses against corruption was not to establish corruption-free society but to prevent leakages of public resources and properties for future extraction.
200 The following excerpt from King Prithvi Narayan Shah, who unified several principalities to build modern Nepal, delivered in December 1774 in front of a large gathering of courtiers, administrators and members of the royal family, shows that corruption has long been entrenched in Nepal. A loosely translated version of his celestial advise is presented below: Persons, who give and take bribes, in fact, both of them corrupt the justice. It is not considered sin to confiscate all the property and even execute them for such a crime. They are the big enemies of the King.
201 During the dictatorial Rana regime, political opponents were brutally executed. Many people were executed for treason in 1882 by the Rana rulers for allegedly plotting a conspiracy against the Rana prime minister. Many of them paid some money to the person in charge of the actual execution to be killed mercifully. 205
Nepal’s legal code was considered advanced for that period. It defined corruption incorporating a number of corrupt activities such as bribery and gift to the public officials, identified corruption-prone zones and specified the appeal process for the victims of corruption or of deviant behaviour of public servants. Penalties were based on the amount involved in corruption, and the maximum imprisonment period was prescribed as fourteen years, based on the type and extent of the crime (Dhungel 1979).
Institutional measures to control corruption started with the enactment of the 1952 Corruption Prevention Act and the establishment of the Department for Prevention of Corruption. As the act did not cover a wide range of corruption issues, the 1957 Civil Service (Corruption Prevention) Act was enacted. Again, the Corruption Prevention Act 1960 was enacted integrating the existing laws related to corruption and widening the scope, definition and punishment for the corrupt activities (ARC 1992b). The burden of proof was shifted to the prosecutor. The maximum period for imprisonment was increased to eight years (Dix 2011). A Special Police Department was established to investigate and prosecute corruption cases, replacing the Department for Prevention of Corruption. In 1975, the second amendment to the 1959 Constitution of Nepal made a provision for an all-powerful Commission for the Prevention of Abuse of Authority (CPAA) for the investigation, prosecution and adjudication of corruption cases (Karki 2015).
Despite these legal provisions, very few high-profile cases were filed before 1990. People used to speculate that the CPAA was established to supress the political opponents of the party-less Panchayat regime (Manandhar 2015). A number of public servants were dismissed from the service during the Panchayat regime. It was believed that some of them were dismissed for being corrupt. However, official charges were not made clear, as the regime could dismiss the civil servants arbitrarily (Dhungel 1979, pp.93-94). Despite the constitutional provision enjoyed by the CPAA, in practice no cases of corruption could be filed without the express consent of the king or the Royal Palace Secretariat. In fact, the monarchy itself thrived on corruption. State assets and property was misused to buy support for the Panchayat regime. Consequently, corruption was institutionalised during the Panchayat regime (Manandhar 2015).
Being an aid-recipient developing country meant that the global trend of anti-corruption reforms in Nepal had significant influence, specifically in the post-liberalisation era (1990 onwards). The majority of the participants of my survey ranked the recommendations of external development partners as the most important source of ideas behind the anti-corruption reforms in Nepal. Of the 83 respondents, 53 or 63.9 percent viewed aid-donor recommendations as the most important source of anti-corruption reforms. Similarly, ecological pressure was found to be the most important driving force for anti-corruption reforms in the country.
206
Table 7.1 Drivers of anti-corruption reforms (N= 83)
Three Most Important External Development Periodic Plan/ External Consultant’s Sources of Idea Partners’ National Policy Report Recommendation (options 10 plus)
Three Most Important Ecological Pressure Populist Financial Pressure Driving Forces Pressure
(options 5 plus)
Three Most Important External Development Foreign Experts Senior Civil Servants Actors to Influence the Partners Reform Agenda
(options 8 plus)
Source Field survey during April-September 2014
As noted already, anti-corruption measures were not new to Nepal. A number of administrative reform commissions/committees had already discussed anti-corruption reforms by the time it was popularised by international development agencies in the 1990s. Various commission/committee reports had highlighted corruption issues after parliamentary democracy was established in 1951. The 1952 Administrative Reorganising Committee urged the government to take immediate action against corrupt officials, stating that corruption was widespread in government service. While defining corruption in a broad way, ranging from monetary gratification to nepotism and favouritism in public service delivery, the committee emphasised better pay and perks, screening of public servants based on integrity records and merit-based recruitment to reduce corruption in the country (ARC 1952).
The 1965 Report of the Administrative Power Decentralisation Commission also indicated pervasive corruption in government organisations specifically in the courts (APDC 1964). Acknowledging the hard-to-change legacy of the feudal regime in the civil service and focusing on discipline, professional integrity, impartiality, procedural transparency and neutral competence in civil service, the third report of the 1968 Administrative Reform Commission emphasised the implementation of a code of conduct for civil servants (ARC 1970). Similarly, the 1975 Administrative Reform Commission urged the government to move beyond administrative investigation and punishment and implement promotional programmes along with the institutional, legal and procedural reforms in order to address the pervasive corruption deeply entrenched in society. A fast track Administrative Court was recommended to expedite corruption cases. The Commission also recommended mandatory imprisonment for those involved in corruption, both receivers and givers (ARC 1976). However, the government’s 207 policy documents (periodic plans, annual policies and programmes and budget speeches) hardly reflected the recommendations until parliamentary democracy was restored in 1990.
Recognising corruption not only as an administrative problem but also an indicator of social, economic and political anomalies, and realising the fact that corruption was already institutionalised in the country, the 1991 Administrative Reform Commission recommended a wide range of preventive and curative measures for anti-corruption reforms (ARC 1992b). After the political change in 1990, the interim government recognised the severity of the corruption problem in its budget speech for the fiscal year 1990/1991, which stated:
People have been suffering from the scorch of rent seeking, black market and corruption due to the lack of political commitment to fight against corruption, absence of responsive public authorities and the ascendency of unaccountable power centres.(MoF 1990)
However, subsequent governments did not accord much priority to anti-corruption reforms. In 1998, an administrative taskforce was constituted to furnish recommendations on the government’s organisational structure, training and corruption. The taskforce recommended a separate entity under the executive to deal with improper acts related to corruption. It recommended the government establish a Corruption Control Department under the Office of the Prime Minister and Council Minister. It urged the government to maintain update property details of all public servants, a broadening of the definition of ‘public position’ and a strengthening of anti-corruption bodies (ART 1998). The 1999 Corruption Control Recommendation Committee, headed by a member of parliament, also urged the government to broaden the definition of corruption. The committee recommended the enactment of an impeachment law, the establishment of a National Vigilance Centre under the Office of the Prime Minister and Council of Ministers, the establishment of a special court to fast-track corruption cases, the enactment of a transparency act and the provision of compulsory audits to the annual income and expenditure of all political parties (CCRC 1999).
Despite the proliferation of official reports, the government’s newfound commitment to corruption control was evident only after the involvement of foreign aid donors’ involvement in governance reforms. A large number of bilateral and multilateral donors were involved in various projects and programmes on corruption control and governance reforms in Nepal in the new millennium (Dix 2011). Corruption control became a government priority when the conditionality-based Governance Reform Programme was commenced in 2001. Most of the reform agenda, except a few such as anti-money laundering and whistle-blower protection, had already been recommended by the earlier commissions/committees. The main difference at this
208 time was that the agenda came through the foreign aid donors with colourful slides (EI032).202 Some of the participants of my elite interviews argued that the government launched the anti- corruption reforms primarily to improve its image in front of the foreign aid donors (EI 028203; EI 047204).
Practitioners mainly the focus group discussants shared similar views on the anti-corruption reforms.205 They argued that both the political leaders and civil servants were reactive. Senior civil servants simply waited for an order from their political masters, whereas political leaders were waiting for the green light from donors. Stakeholders were hardly involved in designing the reforms. If involved at all, both the government and the donors would seek inputs that were convenient for them but not necessarily what was needed. The 2016 Nepal Country Report stated that donor agencies and the diplomatic counterparts had exerted significant influence on policy making in Nepal but noted that the “Nepali state has been happy to accept whatever is on offer, rather than seeking to align development support with well-articulated priorities of its own” (BTI 2016, p.35).
To sum up, the idea of an anti-corruption mission had been articulated for many decades. However, it was only activated and promoted by the external development partners. They used the opportunity to shape the reform agenda in line with the global trend of anti-corruption reforms. Despite the long history of legal codes ostensibly designed to control corruption, anti- corruption reforms in Nepal remained in its dormancy.
7.2 Adoption of anti-corruption policies in the post-liberalisation era
After the political change in 1990, the interim government highlighted the severity of the corruption problem through the 1990/1991 Budget Speech. However, subsequent governments did not accord priority to anti-corruption reforms for about a decade. Although the 1992 report of the ARC was not strictly speaking a policy document, it proposed comprehensive policy measures including preventive, curative and promotional measures. Major preventive strategies included the simplification of administrative procedures, the adoption of liberalisation and deregulation policies and the promotion of moral education. The curative strategies emphasised law enforcement, technical audits, information networking among the anti-corruption agencies and legal action for public officials amassing property beyond their means. The report
202 A secretary of the Government of Nepal who was involved in the design and initial phase of implementation of Governance Reform Programme. An in-depth interview was taken on 21 June 2014. 203 An in-depth interview with an anti-corruption activist and freelance expert in public sector governance was taken on 19 June 2017. 204 An in-depth interview with a news editor and author of two books and several articles on corruption issues with special focus on Nepal. 205 A focus group discussion on anti-corruption reform was organised in Kathmandu on 29 August 2014. 209 recognised corruption as a major socio-economic and political problem. However, the Eighth Plan (1992-1997) focused on administrative corruption rather than initiating a systematic reform agenda.
The government adopted an anti-corruption strategy for the first time in 2003. The proactive strategy included both preventive and prosecution measures. Recognising election financing as the root cause of corruption, it introduced financial grants to the nationally recognised political parties based on the votes they received in the previous election. The strategy emphasised financial discipline and fair and competitive public procurement to improve public expenditure management in the country. It also proposed a Fiscal Transparency Act. It discouraged monopolistic behaviour and instead promoted competition and efficiency in the economy.
With the objective of ensuring effective public service delivery and building an ethical and well- cultured Nepali society by controlling all forms of corruption, the government introduced a further comprehensive anti-corruption strategy in 2009206 and action plan consisting of 13 strategies, 38 working policies and 168 activities (CSVTF 2007). Major strategies included legal reform in line with the UN Convention Against Corruption, reforms to political parties, administrative reforms, financial management reforms, regulatory reforms, improvement in foreign aid management, the promotion of anti-corruption policies and a results-oriented monitoring system. A sectoral action plan was prepared in 2010, covering 34 government institutions to expedite implementation of the anti-corruption strategy (OPMCM 2010). A separate anti-corruption strategy and action plan was prepared in 2012 to implement the UN Convention Against Corruption that focused on further preventive measures to control corruption, emphasising the criminalisation of corruption, seeking international cooperation for the return of property, the exchange of information and technical cooperation (OPMCM 2012).
A thorough analysis of periodic plans and annual budget speeches is necessary to gain a complete picture of the anti-corruption reform initiatives since the early 1990s. A list of anti- corruption reform policies incorporated in various plans is presented in the table below:
206 The strategy was approved by the government on 30 January 2009. 210
Table 7.2 Periodic plans on anti-corruption reforms Periodic Major policies and programmes Remarks plans
Eighth Plan 1. Enforcement of legal measures Focused on administrative (1992-1997) against corruption corruption, and lacks specific course of action 2. Institutional strengthening of anti-corruption agencies
Ninth Plan 1. Procedural reforms for a clean Focused on administrative (1997-2002) and corruption-free administration corruption, and lacks specific course of action 2. Focus on transparency, accountability and financial discipline for effective development management
3. Rationalise discretionary power to control corruption
Tenth Plan 1. Formulation of a national anti- More comprehensive and specific (2002-2007) corruption strategy and action plans policies but still focused on for each ministry administrative reforms to reduce abuse of authority, revenue leakage 2. Institutional strengthening of and corruption anti-corruption agencies
3. Introduce legal provisions for anti-money laundering and whistle blowing against corruption
4. Develop a mechanism to assess assets and properties of administrative and political authorities
5. Increase awareness and advocacy against corruption
211
Eleventh Plan 1. Adopt both preventive and Anti-corruption seen as a part of (2007-2010) curative strategies to control administrative reforms and no clear corruption linkages among the anti-corruption strategies, action policies and 2. Enhance Capacity of CIAA and programmes NVC
3. Focused on ending impunity through effective enforcement of anti-corruption laws
4. Discourage illegal amassment of wealth and formulate an act to control money laundering
Twelfth Plan 1. Emphasise transparency, e- Mention a few points on e- (2010-2013) governance and procedural reforms governance and international commitment but lacks specific, clear, 2. Implement international consistent and coherent anti- commitment to fight against corruption policies and strategies corruption
3. Enforce anti-corruption policies, rules and regulations to overcome the situation of impunity
Thirteenth 1. Adopt preventive, punitive and Broader perspectives and multi- Plan (2013- promotional strategies pronged strategies to fight against 2015) corruption; relatively well-articulated 2. Initiate procedural reforms to anti-corruption policies and strategies control administrative corruption but still lacks quantifiable and 3. Broaden the scope of anti- measurable evaluation criteria corruption agencies to bring non- governmental sectors on board of anti-corruption reforms
4. Adoption of multi-pronged strategies ranging from moral education to institutional strengthening
5. Promotion of lean, strong and responsible judicial administration
212
Fourteenth 1. Criminalise corruption as a UNCAC focused strategies; policy to Plan (2015- social crime bring non-governmental sector on 2017) board of anti-corruption reforms; 2. Implement UNCAC ‘zero tolerance’ against corruption 3. Promote international co- operation to fight against corruption
4. Update the national anti- corruption strategy and action plans
5. Develop institutional capacity to investigate and convict the corruption cases
Source: Author’s compilation.
The Tenth Plan adopted a far more comprehensive approach to anti-corruption reforms than previous plans. It brought anti-corruption policies and programmes in line with the Governance Reform Programme (2001-2007).207 And it included some major anti-corruption reform measures within the Public Sector Management Programme (2003-2006)208 such as formulation of a comprehensive anticorruption strategy.
The Eleventh and Twelfth Plans also focused on administrative corruption whereas the Thirteenth Plan adopted a broader approach to include private and non-governmental sectors under the domain of anti-corruption agencies. The Fourteenth Plan focuses on the implementation of the UN Convention against Corruption which requires massive legal reforms.
As budget speeches were the operational plans of national policies and programmes, the following table provides an overview of anti-corruption policies for the last 26 years:
Table 7.3 Budget speeches on anti-corruption reforms Budget speech Major policies and programmes
1990/1991 1. Highlighted serious anomalies such as illegal commission, the black market and corruption and its devastating impact on ordinary people’s lives and living standards
2. Political commitment, public accountability and control of unconstitutional, illegal and irresponsible power centres
207 The programme was implemented under the loan assistance from the Asian Development Bank. A civil society support component was financed by the Swiss Development Agency. 208 This programme was also implemented under the loan assistance from the Asian Development Bank. 213
1994/1995 1. Focused on institutional reforms to enhance responsiveness and accountability in public service ending the practices of corruption and illegal commission
2. Control revenue leakage and improve resource mobilisation
1998/1999 1. Policy to extend management audit to more districts in order to enhance public accountability, address administrative anomalies, control corruption and ensure good governance
2. Promote a ‘right-based’ approach to good governance as a campaign to improve public service delivery and control corruption through an effective grievance handling mechanism
1999/2000 1. Emphasised transparent, accountable and corruption-free governance
2. Reduce policy corruption through improved revenue administration and public expenditure reforms
3. Constituted a Corruption Control Recommendation Committee (CCRC)
2000/2001 1. Committed to implement the recommendations of the CCRC
2. Reduce administrative discretion and enhance transparency and accountability in governmental as well non-governmental organisations
3. Legal reforms to control corruption
4. Introduce a mandatory system to declare property by all the public officials to discourage illegal amassment of property and confiscate the property having no legitimate source
2001/2002 1. Highlighted the urgency to control corruption, leakage and other economic anomalies
2. Gradual implementation of Public Expenditure Review Commission report
3. Institutional strengthening of CIAA through an amendment to the 1991 CIAA Act 1. Demonstrated firm commitment to prepare a comprehensive anti- 2002/2003 corruption strategy by mid-October 2002
2003/2004 1. Adopted a policy to impose strict financial discipline and promote transparency in public expenditure management enacting a fiscal transparency act
214
2. Introduced a system to provide financial grant to the nationally recognised political parties to discourage unhealthy fund-raising, illegal transactions, conflict of interest and forceful donation
3. Institutional strengthening of National Vigilance Centre and an improvement in the procurement laws
4. Enhance public accountability through public audit at the local level
2004/2005 1. Reiterated commitment for a separate procurement act and a new fiscal transparency act
2. Introduced a provision of monthly disclosure of income and expenditure of all government offices including the local bodies along with a physical progress report in the case of District Development Committees and development projects.
2005/2006 1. Emphasised both preventive and curative measures against corruption
2. Committed to legal reforms in order to expedite implementation of the UN Convention against Corruption (UNCAC)
2006/2007 1. Initiated electronic correspondence among the ministries on a pilot basis
2. Emphasised participative and transparent policy making process
3. Policy to publicise budget, activities and targets of the national priority projects and the income and expenditure of the local bodies
2007/2008 1. Policy to identify corruption prone sectors to focus anti-corruption reforms
2. Launch a ‘zero tolerance’ against corruption campaign participating civil society and non-governmental organisations, among others
2008/2009 1. Assertion “Corruption is rampant in various forms and from the lowest to the uppermost level of the pubic machinery. Everyday general public are forced to be smacked by corruption.”
2. Public procurement reforms to control collusion, extortion and hooliganism in tender management
3. Continued the policy to identify corruption prone areas and agencies
4. Provision to establish Department of Money Laundering Investigation
2009/2010 1. Assertion corruption is growing in the form of culture in Nepali society
215
2. Institutional strengthening of anti-corruption agencies
3. Continued the policy of ‘zero tolerance’ and demonstrated commitment to implement the strategic plan against corruption
4. Improve accounting and financial information system upgrading public sector accounting standards
2011/2012 1. Reiterated the policy of ‘zero tolerance’ against corruption emphasising effective implementation of the national strategy against corruption
2. Emphasised effective public service delivery through IT based transparent and responsible governance introducing the concept of service delivery with compensation mechanism on piloting basis 1. Reiterated the policy of ‘zero tolerance’ against corruption emphasising 2012/2013 effective public service delivery through integrated service centres
2013/2014 1. Emphasised institutional strengthening of anti-corruption agencies along with a provision for new regional offices of the CIAA
2. Expedite actions against the corrupts in line with a policy of ‘zero tolerance’
3. Demonstrated commitment to implement the National Action Plan for the UNCAC
2014/2015 1. Legal reforms in line with the UNCAC
2. Institutional strengthening of CIAA as a leading anti-corruption agency
3. Emphasis on good governance and the rule of law to end impunity
2015/2016 1. Institutional strengthening of anti-corruption agencies for the effective implementation of national policies against corruption
2. Implementation of performance based management system to discourage the non-performers and encourage the good performers
2016/2017 1. Emphasis on transparent state system; capable, corruption free and well- disciplined public service and capacity development of anti-corruption agencies
2. Intensive monitoring against improper conduct and corrupt activities adopting the policy of ‘zero tolerance’ against corruption
Source: Author’s compilation.
The table shows that there were no specific proactive anti-corruption reform policies announced in the 1990s. This could be partly because the government then viewed anti-corruption reforms
216 purely from economic terms. Reducing the role of state monopoly in economic activities involving the non-state actors would necessarily reduce the level of corruption. Similarly, economic liberalisation was believed to enhance competitiveness in the economy, reducing the opportunity for corruption. Another potential explanation could be the government’s over- reliance on legal remedies against corruption. It may also have occurred because of the country’s over-dependence on foreign aid whereby government was accustomed to waiting for donor’s advice.
The government accorded high priority to anti-corruption reforms after the Nepal Development Forum was held in Paris in April 2000. Civil service reform and elimination of corruption were now two top priorities of the government in the package of reforms presented to the international development partners. Similarly, anti-corruption reform was among the key areas of reform stipulated by the Asian Development Bank in its conditionality-based lending, underscoring the government’s priority agenda after 2000.
An in-depth analysis of the periodic plans and budget speeches shows that in many cases there was no clear link between the periodic plans and the budget speeches. For instance, the policies and programmes of the Eighth and Ninth Plans were not supported by the budget speeches for the corresponding years. Similarly, many of the policies and programmes mentioned in the periodic plans were not enforced or effectively implemented. Even the relatively well-crafted Eighth Plan included euphemistic statements such as: “special measures will be strictly enforced to control corruption”, “all units involved in curbing corruption will be strengthened” (NPC 1992) and “legal and institutional reforms will be carried out in line with the spirit of the concerned international conventions” (NPC 2010). Recently there has been a tendency to articulate a policy of ‘zero tolerance’ in all government’s policy documents. However, the concerned authorities responsible for implementing the anti-corruption policies were unclear about the exact meaning of ‘zero tolerance’ and the course of actions to achieve it.209
A thorough analysis of the periodic plans, budget speeches and anti-corruption policies and strategies for the last 26 years clearly indicates policy deficiencies of Nepal’s anti-corruption reforms. Many of the policies were found to be idealistic and ‘feel-good’ policies. Most of the time policies were formulated to satisfy the aid donors and thus sustainability was found to be a major deficiency in the anti-corruption reforms. Policy makers preferred to make public statements rather than focusing on implementation. Besides problems with the policy content, structural issues were also found to impede progress as well as consistency and coherence among the policies, strategies and action plans were lacking.
209 During my fieldwork in 2014 I asked this question to the senior officials of anti-corruption agencies. Almost all them gently smiled and told that they did not think it on that perspectives. 217
7.3 Dynamics of anti-corruption reforms in Nepalese perspectives
7.3.1 Institutional frameworks for anti-corruption reforms
7.3.1.1 Legal frameworks
Nepal’s legal framework against corruption is based on a recent history of sequential laws, institutional procedures and constitutional amendments. The Commission for the Investigation of the Abuse of Authority Act 1991 is a procedural Act that specifies the functions, duties, powers and working procedures of the national anti-corruption commission. The Special Court Act 2002 authorises the government to establish a special court to process special types of legal cases including corruption in an expeditious, prompt and effective manner. Given the pervasive nature of corruption, there are dozens of laws relating to corruption. Some of the important laws include: Judicial Council Act 1991, Political Parties Act 2002, Money Laundering Prevention Act 2008, Revenue Leakage (Investigation and Control) Act 1995, Audit Act 1991, Public Procurement Act 2007, Competition Promotion and Market Protection Act 2006, Army Act 2006, Good Governance (Management and Operation) Act 2007, Right to Information Act 2007, Financial Procedures Act 1999 and Civil Service Act 1993.
Prevention of Corruption Act 2002 is the most comprehensive and powerful anti-corruption law in the country. It is applicable to all Nepalese citizens, including public servants residing anywhere outside Nepal (Section 1). The Act defines corruption offences very broadly enlisting a wide range of corrupt activities (Chapter 2). It also provides a provision to establish a National Vigilance Centre to effectively prevent corruption in the country (Section 37).
The Constitution of Nepal 2015 now provides an overarching institutional and legal framework for controlling corruption in the country. Article 51 (k) directs the state to adopt effective methods in controlling corruption and irregularities in all sectors, including politics, the judicial sector, administration and the social sector. It provides for a Commission for the Investigation of Abuse of Authority to conduct investigations into corruption by any person holding public office (article 238). It also provides a separate Judicial Council to investigate corruption or abuse of authority (article 153) and other various types of Courts (article 300) and the appointment of an Attorney General (article 157).
7.3.1.2 Anti-corruption agencies and oversight mechanism
Nepal has adopted a ‘multiple agency’ approach to controlling corruption, with a large number of institutions involved in the process. The Commission for the Investigation of the Abuse of Authority (CIAA) is an independent apex constitutional body primarily responsible for the investigation and prosecution of corruption cases. It is basically an anti-corruption law enforcement agency. However, it also conducts preventive and promotional programmes against 218 corruption. The National Vigilance Centre (NVC), under the leadership of Prime Minister, is yet another prominent anti-corruption agency responsible for conducting preventive and promotional programmes against corruption. It also carries out oversight functions through regular monitoring, surveillance and surprise checks of government organisations. The Special Court has been entrusted to hear corruption cases filed by the CIAA. It also hears appeals against the final decision of the CIAA. It has also been hearing cases relating to anti-money laundering since 2009 when the government expanded its jurisdiction through an executive order published in the Nepal gazette (Supreme Court 2017). Its verdict can be appealed to the Supreme Court. Besides these major anticorruption agencies there are a large number of sectoral agencies directly or indirectly involved in the battle against corruption. The following table provides details of anti-corruption agencies and oversight mechanism in Nepal.
Table 7.4 Anti-corruption and oversight agencies in Nepal Agency Type Role
Commission for the Investigation of Constitutional body Investigation and Abuse of Authority prosecution
National Vigilance Centre Executive department Preventive and promotional
Special Court Judiciary Adjudication (trial)
Supreme Court Judiciary Adjudication (appeal)
Judicial Council Constitutional body Investigation and prosecution
Department of Money Laundering Executive department Investigation and Investigation prosecution
Department of Revenue Investigation Executive department Investigation, action or prosecution
Office of the Auditor General Constitutional body Auditing and reporting
Office of the Attorney General Constitutional body Prosecution
Investigation Committee (Army Act) Executive committee Investigation
Special Court Marshal (Army Act) Special court Adjudication
Public Account Committee Parliamentary committee Oversight/direction
Good Governance and Monitoring Parliamentary committee Oversight/direction Committee
219
Administrative Court (Civil Service Special court Adjudication (appeal) Act)
Revenue Tribunal Tribunal Adjudication
Foreign Employment Tribunal Tribunal Adjudication
Public Procurement Review Expert Committee Review, hear and decide Committee
Financial Information Unit Central bank Custodian of information/Intelligence
Office of the Financial Comptroller Executive department Budgetary control General /internal check
Central Arrears Collection Office Executive office Recovery of government arrears
National Information Commission Special commission Transparency through right to information
Source: Author’s compilation.
7.3.1.3 Institutional analysis
The proliferation of such a large number of anti-corruption agencies since 1990 caused functional overlapping and confusion. It has also made intra-agency coordination more challenging among the anti-corruption agencies (CIAA 2013; Karki 2015). The private and the non-governmental sectors were both outside the scope of the CIAA. The already narrow mandate of the CIAA was further squeezed by the new Constitution of Nepal 2015, which curtailed its power to investigate improper conduct.
Like other constitutional bodies, the CIAA also lacked functional independence. Constitutional independence was undermined by the political parties in power, unduly politicising these constitutional bodies. The CIAA was without leadership for a long time. When it had an energetic leadership it quickly turned out to be a one man show, something that was not sustainable. As a result, the CIAA has struggled in its persistence and lack of consistency, and its interface with the media and civil society has been problematic.
During my fieldwork for this research, interagency coordination among the anti-corruption agencies was reported as a severe problem. A superiority complex among some organisations, a legacy of power-oriented feudal culture and the absence of deliberative practices have made interagency coordination worse. Senior civil servants who were supposed to be responsible for
220 implementing anti-corruption reforms reported that they were not even consulted or informed when the government was preparing the 2009 Anti-corruption Strategy and Sectoral Action Plan that they were supposed to implement (EI031210; EI030211; EI025212). However, a senior civil servant in the Office of the Prime Minister and Council of Ministers (OPMCM) admitted that the concerned agencies were supposed to prepare their own anti-corruption action plans by themselves under the guidance of the OPMCM. Requests were then sent to all the central level government offices, asking them to prepare a draft of their anti-corruption action plan. Training workshops were held but many staff did not participate in them (EI020).213
With frequent personnel transfers, institutional memory was problematic, especially in the resource stricken low profile institutions such as the National Vigilance Centre. For instance, the NVC had 14 different chiefs in 12 years (Koirala et al. 2015). Low profile institutions like the NVC could hardly command cooperation and compliance for their policies and decisions. For this reason the focus group discussants tagged NVC as a ‘paper tiger’.214
The Special Court was treated like a temporary office. A close observation of office setup, physical facilities and resource availability showed that the court was not a governmental priority. Judges were deputed at the mercy of the Supreme Court. The staff had a very limited opportunity to get exposure on anti-corruption policies and practices. Corrupt forces had a very strong network that created effective obstacles, even to the Supreme Court, while finalising some of the high profile corruption cases.215
The Judicial Council lacked human resources, and a willingness and ability to investigate and prosecute corruption cases among the judiciary. In the last 20 years of its existence, the Council had hardly filed any corruption cases against sitting judges. Its organisational structure was dysfunctional. The Council had too many other businesses including the appointment and transfer of judges at different courts. They were also hesitant to file cases against their colleagues. Action was taken against a few corrupt judges. Some of them were asked to resign but no punitive actions were taken against them (International 2009).
The Department of Revenue Instigation and the Department of Money Laundering Investigation (DMLI) had similar structural problems. Both departments were under the Ministry of Finance.
210 An in-depth interview with a secretary of the Government of Nepal was taken on 21 June 2014. 211 An in-depth interview with a joint secretary in the Ministry of Finance was taken on 19 June 2014. 212 An in-depth interview with a former secretary of the Government of Nepal was taken on 16 June 2014. 213 An in-depth interview with one of the secretaries of the Office of the Prime Minister and Council of Minister was taken on 12 June 2014. 214 Focus group discussion on anti-corruption reforms was conducted in Kathmandu on 29 August 2014. 215http://nepal.ekantipur.com/news/2017-04-30/20170430173318.htmlAccess: 1st May 2017. 221
Many of the revenue-related corruption cases took place in the Custom and Tax offices within the same ministry. The same staff could be transferred to either one of these offices. The DMLI also risked a conflict of interest and the leaking information, as it could file cases only after gaining consent from the Office of the Attorney General.
Parliamentary oversight mechanisms did not function as expected for two main reasons. First, the government barely implemented any of their decisions that were made. Secondly, in many cases their decisions were not based on evidence or serious study. Members of parliamentary committee would participate meetings without any preparation. Sometimes the committees faced difficulty in making decisions as the members’ views were not consistent.216 More importantly, the formal institutions of accountability had limited impact on anti-corruption reforms, as the informal institutions and practices were found more influential than the formal ones (Dix 2011).
7.3.2 Actors, idea, interest and incentives
We need to examine the ideas, interests, motives and incentives of key actors to understand corruption as a dynamic socio-economic and political process. In Nepal, external development partners were the key actors to drive and design anti-corruption reforms in the post- liberalisation era (see: Table 7.1). During the 1990s, the government was focused on economic liberalisation and new public management-oriented reforms. The Eighth Plan (1992-1997) briefly touched upon corruption issues, but did not come up with a specific reform agenda. Anti- corruption reforms as a systematic policy agenda came to the fore only after the Nepal Development Forum was held in Paris in April 2000 (ADB 2001). The government was not keen to embrace such policies, but as an aid-recipient country, it had material incentives attached to their acceptance. Foreign aid donors pressured the government to announce policies, and so accordingly anti-corruption reform was symbolically presented as the government’s top priority issue in front of the major development partners. In short, the development partners were the idea generators, facilitators and sponsors of anti-corruption reforms. The government was only interested in these reforms thinking that it would enhance their image among the international development community, who primarily wanted to ensure that their aid money was properly used.
Civil servants did not show much interest incentives in adopting anti-corruption reforms. However, they were the key actors for implementation. As the reform agenda was attached to conditionality-based governance and public sector reform programmes, the senior civil servants were focused on completing the conditionalities rather than achieving the intended results. In
216 The issue was raised in a Public Accounts Committee decision on 10 July 2015. 222 this sense the political leaders and civil servants had a superficial interest in promulgating anti- corruption reforms to comply with the tranche conditions of conditionality-based lending from the Asian Development Bank. However, the intensity of interest was not high. Occasionally, political interest in corruption control was heightened as a means to thrash one’s political opponents, not to clear up the political system (Thapa 2006).
Political leaders, civil servants, police, lawyers and judges were all perceived to be corrupt in my interviews and focus group discussions, although not everyone under these categories were corrupt. However, persons having keen interest in anti-corruption reforms, both in words and actions, were very limited.217 The private sector, often characterised as a victim of corruption, was also found to be uninterested in anti-corruption reforms. For instance, the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) implemented an anti-corruption project for the first time during 2004 and 2005 under the financial assistance of the UK Department for International Development (DFID). The umbrella organisation did not continue a single activity of anti-corruption reform when the donor support was terminated (Manandhar 2015). There could be three potential reasons. First, the private sector was yet to become professionalised to move beyond personal ventures to more accountable interests in business. They were more interested in addressing their personal issues and challenges rather than engaging in developing the business environment. Second, as the private sector was still beyond the purview of anti- corruption agencies, they did not care much about corruption in the private sector. Third, since they could transfer the burden of corruption to others, they were not much worried about it.
A civil society-led anti-corruption movement commenced in Nepal only after the establishment of Transparency International Nepal in 1995. Since then, there has been a proliferation of non- governmental organisations (NGO) working in the area of anti-corruption awareness and advocacy. Most of them were donor funded and as such there was always an issue of sustainability. In practice, the main interest of the NGOs was to continue donor assistance to support their programmes. However, it is difficult to generalise all the NGOs. As a former finance minister and a prominent civil society leader remarked:
The civil society, with its growing number of donor-financed NGOs has not escaped allegations of corruption either. The NGO sector is much maligned in Nepal for various reasons. However, as is the case with government offices and officials, not every one of them is corrupt(Pandey 2005).
That said, Transparency International Nepal did tremendous work in the area of anti-corruption reforms. Its survey and research reports, along with some booklets on various aspects of corruption in Nepal, were noteworthy. The academic community did not have much interest in
217http://www.myrepublica.com/feature-article/story/35824/politicians-bureaucrats-seen-as-most-corrupt.html access: 22 February 16 223 serious research on corruption and anti-corruption reforms except publishing some newspaper articles covering news and opinion on corruption issues.
With the emergence of a vibrant media in the private sector, along with the phenomenal growth of community radio stations, Nepali media began to exert growing influence after 1990. However, a recent study carried out for BBC Media Action found that fights against corruption were not effective, because the issue was heavily politicised. So, although the large network of community and commercial FM radio stations has been highly acclaimed worldwide, these companies were found to be socially divisive, promoting factional interests and captured by the local elites.218 Similarly, the media was now allegedly influenced by group allegiances, owners’ interests and the reporters’ vested interest with some variations across the media.219 However, the phenomenal growth of the media now offers different sources of information and varied perspectives on governance issues in the country.
7.4 Implementation of anti-corruption reforms
7.4.1 Implementation of policy initiatives
In the 1990s, the government approached anti-corruption reforms normatively from an economic perspective. It was believed that market-oriented, open and liberalised economic policies would necessarily reduce corruption in the country. The government focused on promoting the roles non-state actors play in the public sector. However, the recommendations of the 1992 report of the ARC were not seriously considered as measures to control corruption. There were no significant anti-corruption reform initiatives in the 1990s except the enactment of a few acts such as Commission for the Investigation of Abuse of Authority Act and the Judicial Council Act and the formation of a 1999 Corruption Control Recommendation Committee (CCRC) headed by a member of parliament.
However, Nepal commenced serious anti-corruption reforms in the new millennium. In 2002, the government constituted the Judicial Property Investigation Commission, headed by a former Supreme Court judge, to investigate disproportionate property of the public officials since 1990. Of the 30,500 public officials listed in the commission report, 80 public officials, including some senior political leaders, were found with unlawfully amassed property; 602 officials were named for further investigation (Koirala et al. 2015). The CIAA initiated a series of actions based on the report. A landmark decision of the Supreme Court on September 24 1996 encouraged the CIAA, by authorising it to prosecute the politically appointed persons, and the
218http://kathmandupost.ekantipur.com/news/2016-09-27/not-all-bad-news.htmlaccess: 23 October 2016 219http://kathmandupost.ekantipur.com/printedition/news/2013-05-25/corruption-drama.html Access: 22 February 2016 224 members of the parliament, without prior consent of the prime minister or the speaker (Karki 2015).
The periodic plans and annual budget speeches over the last 26 years focused on the institutional strengthening of the anti-corruption agencies, legal reforms to address the emerging corruption issues, financial discipline and control, identification of corruption-prone zones, a ‘policy of zero tolerance’ and implementation of the UN Convention Against Corruption (UNCAC). From 2000, external development partners supported at least 18 projects, primarily to improve governance and strengthen anti-corruption agencies (Dix 2011). A number of new laws covering public procurement, competition promotion and market protection, right to information, anti-money laundering and operation and management of good governance were enacted. The ‘policy of zero tolerance’ was repeatedly reiterated in the annual budget speeches but never developed into operational statements.
The government initiated a number of anti-corruption reforms through the Governance Reform Programme (2001-2007) and the Public Sector Management Programme (2002-2006) under conditionality-based lending from the Asian Development Bank. A number of laws, such as the Prevention of Corruption Act, Special Court Act, Political Parties Act, Impeachment Act and an amendment in the CIAA Act were enacted to fight against corruption. A national anti-corruption strategy was announced for the first time in 2003 (MoF 2003). Most of the policies relating to public expenditure management were implemented. The National Vigilance Centre was established to effectively implement preventive measures against corruption. A legal provision requiring all civil servants’ to declare income and property was implemented. However, the policy to provide financial grants to the nationally recognised political parties and the enactment of the Fiscal Transparency Act was not implemented.
Promulgation of the 2009 Anti-corruption Strategy and Action Plan was a key milestone of Nepal’s anti-corruption reforms. The 2003 anti-corruption strategy, though called a comprehensive strategy, included a few policy statements, and was not a complete and well- structured strategy. The Strategy and Action Plan against Corruption 2009 and the Sectoral Action Plan 2010 were the first comprehensive anti-corruption policies covering 34 institutions in Nepal. I chose three key institutions to assess implementation of the anti-corruption strategy and action plans. The Office of the Prime Minister and Council of Ministers (OPMCM) was chosen as a reform leading institution. The Commission for the Investigation of Abuse of Authority (CIAA) was selected as an independent commission primarily responsible for the investigation and prosecution of corruption cases. Similarly, the National Vigilance Centre (NVC) was chosen as a statutory government body for the implementation of preventive measures against corruption.
225
Out of the 24 main activities of the OPMCM, only three activities were fully implemented, leaving five activities partially implemented and the remaining ones not implemented. Implementation was weak especially for the activities requiring a high level political commitment. Senior civil servants also resisted some of the measures such as performance contracts as they were not confident of getting fully-fledged support from the politicised junior staff that could potentially penalise them as non-performers. They were also hesitant because they did not have anything to reward or punish the civil servants (EI085).220
All the 29 tasks associated with the 17 main activities of the CIAA were regular tasks. Only three main activities were fully implemented. Activities such as ‘implementing anti-corruption laws resolutely’ were found too abstract to implement. The NVC also did not have a good track record of implementation, as only three activities were fully implemented. Similarly, seven activities were partially implemented. Like the CIAA, NVC also had some abstract activities.
Implementing agencies reported their reservations about not being consulted in the formulation process. They had a feeling of being left out or being imposed upon by the OPMCM (EI031; EI032).221 However, senior officials at the OPMCM argued the concerned organisations had been requested to prepare a draft action plan for themselves before the plans were widely discussed in the workshops (EI020).222 Whatever the rights or wrongs of this process, it clearly indicates that coordination problems were pronounced among the key anti-corruption agencies.
Anti-corruption experts concluded that many action plans were too ambitious to implement (TIN 2012; UNDP 2014). Activities requiring new laws were difficult to implement. Acquiring consent, approval or cooperation from different ministries, especially when the civil servants did not have positive interests in the new laws, was extremely difficult. In the absence of a diligent work culture, basic infrastructure and conceptual clarity on some issues such as performance contracts and conflict of interest, implementers were confused. The contemporaneous unstable political situation also attributed to the poor implementation of the action plan.
7.4.2 Institutional performance
A close examination of work performance of the key anti-corruption agencies provides a valuable insight into the implementation of anti-corruption reforms. As discussed in section 7.3.1, a large number of institutions were directly or indirectly involved in anti-corruption
220 An in-depth interview with the chief secretary of the Government of Nepal was held on 18 August 2014. 221 In-depth interviews with the secretary and a senior joint secretary of the Commission for the Investigation of Abuse of Authority was held on 21 June 2014. 222 An in-depth interview with a secretary of the Office of the Prime Minister and Council Ministers was held on 12 June 2014. 226 reforms. For the purpose of my research I chose four key institutions covering prevention, investigation and prosecution and adjudication for institutional performance assessment.
The National Vigilance Centre
The basic objective of National Vigilance Centre (NVC) was to prevent corruption by creating public awareness against corruption and effectively controlling corruption related activities. The major functions of NVC included receiving and resolving complaints against public offices, conducting surveillance, surprise checks and inspections in corruption prone places, conducting technical audits and monitoring property and income details of public officials.
The following table presents the total number of complaints received and resolved by the NVC since its establishment in 2002.
Table 7.5 Number of complaints received and resolved by NVC
Fiscal Year Received Resolved
2002/03 52 5
2003/04 153 94
2004/05 189 67
2005/06 161 70 2006/07 123 150
2007/08 146 79
2008/09 288 94
2009/10 474 205
2010/11 587 465
2011/12 787 870
2012/13 1159 1218
2013/14 1269 1452
2014/15 973 1098 2015/16 772 686
Source: Annual reports of the National Vigilance Centre, Kathmandu.
The table clearly shows that during the initial phase of six years the NVC had limited progress both in terms of complaints received and resolved. Over the next six years it had significant improvement in its performance. Yet after the 2015 Earthquake its performance declined.
227
Technical audits were another important function of the NVC. The following figure depicts the trend of technical audits performed by the NVC for the last 14 years.
Figure 7.1 Number of technical audits by NVC
120 104 100
77 80 62 57 60 50 44 36 40 31 23 20 16 13 0 0 0 0
Source: Annual reports of the National Vigilance Centre, Kathmandu.
Figure 7.1 shows that the number of audits carried out by the NVC fluctuated. Donor support and performance incentives to staff partly explain these fluctuations. Overall weak performance can be attributed to the lack of basic infrastructure, technical human resources and frequent transfer of leadership. In the previous 15 years a total of 19 Chief Executives headed the NVC (NVC 2016).
The Commission for the Investigation of Abuse of Authority (CIAA)
The CIAA was primarily responsible for the investigation and prosecution of corruption cases. The following table shows the general trend of complaints received and resolved in the last 26 years.
Table 7.6 Number of complaints received and resolved by CIAA Fiscal Year Received Resolved 1990/91 564 0 1991/92 1069 581 1992/93 1050 618 1993/94 1020 526 1994/95 1003 636 1995/96 1085 711 1996/97 1501 750
228
1997/98 1606 920 1998/99 1313 861 1999/00 859 498 2000/01 1261 698 2001/02 2522 2015 2002/03 3966 2481 2003/04 3732 3188 2004/05 4759 3709 2005/06 4324 3353 2006/07 3564 2976 2007/08 2732 2135 2008/09 4149 3303 2009/10 4295 3067 2010/11 6145 3904 2011/12 8839 5466 2012/13 11289 6672 2013/14 22602 12892 2014/15 31213 21648 2015/16 24691 16694 Source: Annual reports of the CIAA.
The table depicts three distinct phases of the CIAA’s performance. During the first phase (1990- 2001) CIAA maintained a low profile with a limited jurisdiction. There was also some confusion about its role in the absence of an updated anti-corruption law prior to 2002. Mainly for this reason its performance remained stagnant during this period.
Following the appointment of a committed and competent leadership in 2001, and the promulgation of the Corruption Prevention Act 2002, its performance increased sharply along with the expansion in its jurisdiction, role and image until 2006 when the Chief Commissioner’s tenure was over. In the third phase (2006-2013) its performance increased but at a slow pace and with some fluctuations. There was a sharp increase in the CIAA performance with a new leadership in 2013. However, in 2015/16, case registrations and resolutions both declined. The following table demonstrates a similar trend in both prosecution and departmental action. As shown in the table, only a small number of resolved cases were prosecuted or sent to the concerned office for departmental action.
229
Table 7.7 Number of prosecution and departmental action by CIAA Fiscal Year Resolved Prosecution Departmental Action 1990/91 0 0 0 1991/92 581 1 0 1992/93 618 5 5 1993/94 526 6 10 1994/95 636 1 2 1995/96 711 2 8 1996/97 750 22 12 1997/98 920 6 19 1998/99 861 12 10 1999/00 498 5 12 2000/01 698 26 12 2001/02 2015 61 18 2002/03 2481 147 25 2003/04 3188 98 38 2004/05 3709 113 39 2005/06 3353 114 45 2006/07 2976 115 29 2007/08 2135 65 28 2008/09 3303 47 29 2009/10 3067 32 12 2010/11 3904 65 5 2011/12 5466 123 14 2012/13 6672 93 80 2013/14 12892 168 83 2014/15 21648 303 112 2015/16 16694 144 52 Source: Annual reports of the CIAA
The Special Court and the Supreme Court
The Special Court presided over trial cases specifically related to corruption. The following figure depicts the number of cases registered and resolved by the Special Court in the last five years. The number of outstanding cases increased except a slight decrease in 2015/16 mainly because of the sharp decline in the new registrations. Resolution rates improved over the last two years. However, the average performance rate was around 42 percent.
230
Figure 7.2 Case registration and resolution by Special Court
600 523 500 472
400
325 319 313 300 267 244 219 228 204 210 187 200 159 143 141 138 126 129 121 100 78
0 2011/12 2012/13 2013/14 2014/15 2015/16
New Registration Total Cases Resolved Outsatnding
Source: Annual reports of the Supreme Court
Resolution of corruption cases by the Supreme Court was considerably low compared to the Special Court. The following figure depicts the resolution rate by the Supreme Court for the last five years. Although it has improved in the last two years, the outstanding cases consistently rose. On average, the Supreme Court’s performance rate was as low as 19.7 percent. By law the Special Court and the Supreme Court are required to clear a case within six and three months respectively. However, in practice it took years in both cases.
Figure 7.3 Adjudication of corruption cases by the Supreme Court
900 800 764 700 661 590 600 545 545 523 480 493 500 422 400 363 300 182 174 200 138 100 58 52 0 2011/12 2012/13 2013/14 2014/15 2015/16
Number Cases Resolved Outstanding `
Source: Annual reports of the Supreme Court
231
All these show that policy intent alone is not sufficient to fight against corruption. Leadership and the reform context is vital to put the spirit of policy statements into action. Institutional image, motivation and the morale of civil servants was also found to be important for anti- corruption measures. Like donor dependency, excessive dependence on energetic leadership may indicate that reforms have not been adequately institutionalised. In such situations, leadership makes a huge difference. A performance review of the Special Court and the Supreme Court shows that anti-corruption initiatives did not pay sufficient attention on the importance adjudication in anti-corruption reforms.
7.4.3 Implementation analysis
Despite the long history of anti-corruption laws, together with a series of policy initiatives to fight against corruption and continuous efforts of multitude of anti-corruption institutions, Nepal’s performance of anti-corruption reforms was found weak. During my field survey for this thesis, a majority of respondents believed that implementation of anti-corruption policies was poor. Implementation of the anti-corruption policies was neither efficient nor successful. Some 63 percent of participants disagreed that most of the anti-corruption agenda were implemented. Similarly, a large number of participants (65 percent) reported that implementation was not efficient. About two thirds of the respondents (61.4 percent) believed that anti-corruption reforms were not successfully implemented. The table below highlights the poor implementation of anti-corruption reforms in Nepal in the post-liberalisation era.
Table 7.8 Implementation of anti-corruption reforms (N=83) Statement Strongly Agree Neutral Disagree Strongly Don’t Agree Disagree Know
Most of the anti- 1 12(14.5 18 47 5 corruption policy %) (1.2%) (21.7%) (56.6%) (6%) agenda were implemented
Overall, anti-corruption 1 8 20 47 7 - policy was efficiently (1.2%) (9.6%) (24.1%) (56.6%) (8.4%) implemented
Overall, anti-corruption 1 8 22 44 7 1 policy was successfully (1.2%) (9.6%) (26.5%) (53%) (8.4%) (1.2%) implemented
Source: Field survey during April-September 2014
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Agreeing on these general trends of poor implementation, participants in a focus group discussion argued that the key implementers did not have a genuine commitment to implement anti-corruption reforms, as they were not involved in the design and formulation stages of the reforms. 223 Anti-corruption reforms were donor-driven yet they demand much time. Indicating the weak commitment towards anti-corruption reforms one of the participants remarked: ‘whatever is done for implementation is not because we are genuinely committed to do so but because we ought to do it’ (FGC06).224 Both the government and development partners focused on getting the legal and institutional frameworks right without paying due attention to implement and functionalise institutions. The practioners argued that political instability, the absence of visionary leadership, the lack of proper sequencing of reform activities and policy continuity were also problematic.
The success or failure of anti-corruption reforms depend on how reforms are approached (Klitgaard 2006; Manion 2009). An extensive review of the policy documents and a close examination of practices in the last 26 years found that Nepal’s approach to anti-corruption reforms was highly centralised and focused on anti-corruption agencies. This outsider approach failed to grasp the symptoms, underlying causes and consequences of corruption in the country. Consequently, anti-corruption efforts were concentrated only on visible instances rather than treating the roots of corruption. Elite interviewees agreed with this view, arguing that anti- corruption agencies targeted the processes more than the intention (EI008225; EI028226; EI033227). For instance, when airport officials were widely criticised for taking bribes, the anti- graft body directed them to mandatorily wear ‘pocket-less’ pants to control bribery.228Similarly, Nepal’s anti-corruption approach was more reactive than proactive or interactive. Major anti- corruption strategies were primarily focused on punishment than behaviour modification. Making news and creating a fear psychosis among the general public secured the primary motive of the anti-graft body.
A lack of genuine commitment and will power on the part of political executives was another prominent factor in the poor or partial implementation of anti-corruption policies and strategies after 1990. The emergence of multiple power centres, a lack of a well-developed political culture and the unhealthy competition to grab state power and resources increased the extent and
223 The focus group discussion on Anti-Corruption reforms was held in Kathmandu on 29 August 2014. 224 A senior joint secretary at Ministry of Peace and Reconstruction. 225 An in-depth interview with a former minister, finance secretary and vice chair of Poverty Alleviation Trust was held on 30 May 2014. 226 An in-depth interview with an anti-corruption expert and activist was held on 19 June 2014. 227 An in-depth interview with a Joint-Secretary was held on 23 June 2014. 228http://www.telegraph.co.uk/news/worldnews/asia/nepal/5685207/Nepal-bans-pockets-to-stamp-out-bribe-taking- at-airport.html 6 February 2016 233 intensity of corruption after 1990. The major political parties and their leaders were found to be corrupt on several occasions.229Political corruption flourished even after the political change in 2006.230The leaders who promulgated political change failed to change themselves. Political leaders and the parties began to protect the corrupt and criminals to win elections. Anti- corruption agencies also became politicised (MHHDC 1999). The media reported that the prime minister exerted enormous pressure on the CIAA chief not to expedite a huge corruption scandal against his party.231All these factors further complicated the anti-corruption drive within the country.
Nepal’s bureaucracy was also highly politicised. It encouraged indiscipline and a non- performing culture in civil service. Corruption became pervasive at the service delivery level.232 As in other developing countries, reforms did not make much of a positive impact at election times as voting seldom focused on the governance reforms. Instead, unpopular reforms could decrease popular support. This developed symbiotic relations among the political leaders and bureaucratic executives, proving a major setback to anti-corruption reforms. Highly corrupt political leaders also sought to appoint their loyal supporters to the major anti-corruption agencies. As the president of Transparency International Nepal remarked:
Government lawyers are transferred and deputed to the CIAA based on their connections and linkages with the powerful political leaders or senior civil servants who get benefits from them or at least feel secured of the anti-graft body. (EI018)233
Patron-client relations were deeply entrenched into Nepali society. Informal relations prevailed above the formal system of governance where formal rules were applied only partially. The informal patronage system bred corruption by promoting unauthorised transactions in public affairs ultimately worsening the governance situation of the country. In many cases, informal power prevailed over the formal power and authority. The public service was highly influenced by these patron-client relations. As a former secretary argued: reward and punishment were based on personal connections rather than performance. The corrupt were honoured rather than
229https://www.globalintegrity.org/research/reports/global-integrity-report/global-integrity-report-2006/gir-notebook- 2006-nepal/access: 14 May 2017; https://womennewsnetwork.net/2013/06/07/political-corruption-nepal/ access: 17 April 2017
230http://kathmandupost.ekantipur.com/news/2012-10-21/cantonment-corruption.html access: 23 May 2017;http://www.myrepublica.com/news/6917/access: 25 April 2017 231 See Section 7.5 in this chapter for further details of the Cantonment corruption scandal. Also see: http://kathmandupost.ekantipur.com/news/2016-09-20/ciaa-move-to-probe-cantonment-corruption-at-umls-behest- dahal.html access: 3 May 2017 232 Nepal Corruption Report, retrieved from http://www.business-anti-corruption.com/country-profiles/nepal access 29 March 2017 (last updated July 2016) 233 An interview with the former Secretary of the Government of Nepal, a former Chairperson of the Council of Retired Public Servant and the President of Transparency International Nepal was held on 11 June 2014. 234 criticised (EI005).234 As such, anti-corruption initiatives were bound to encounter strong opposition and resistance.235
Policymakers and the key implementers did not share positive interests, stakes or incentives. As a former chief secretary argued, political leaders used politics as a business to misuse public resources and properties. There was an unholy nexus between the political leaders and the civil servants to indulge in corrupt activities. The secretaries facilitated the ministers not to improve ministerial performance but to magnify their opportunities for corruption (EI006).236On the other hand, neither the election system helped the common populace hold political leaders accountable nor could they make their voice heard. Consequently, people continued to accept corruption as a ‘necessary evil’ (EI037)237. The policy elites tended to deemphasise or even sabotage reforms that could threaten their personal benefits. Genuinely committed reformers were forced to remain themselves on the defensive.
It was believed that the non-corrupt officers were more vulnerable than the corrupt ones. The corrupt often strategically used their skills, networks and money as a shield to protect themselves from potential action. Campaigns against corruption, threatening the interests of political power, powerful public servants, criminal gangs and thugs, anti-corruption activists and their families, had to face serious threats and harassment. For this reason, people preferred to turn a blind eye to corruption instead of filing a case against it (EI028).238Nepotism and favouritism in public institutions, the deteriorating law and order situation and the prevalence of impunity also explain people’s indifference towards corruption control.239
Conflicts of interest were yet another impediment to anti-corruption reforms. This became particularly apparent in the policymaking process when business tycoons were included in the legislature-parliament under the provision of proportional election system in 2008. This factor was evident in a number of bills, including the Bank and Financial Institution Bill, Man Mohan Health Academy Bill and Education Bill. For instance, members of parliament holding substantial shares, or even the chairperson’s position of different commercial banks, were able to change the provisions of the original bill that imposed limits on the tenure of chairperson and
234 An in-depth interview was held on 27 May 2014. 235http://www.economist.com/blogs/banyan/2011/05/aid-and-corruption-nepalaccess: 7 May 2017. 236 An in-depth interview was taken on 28 May 2014. 237 An in-depth interview with former chief election commissioner and secretary of the Government of Nepal was held on 1 July 2014. 238 An in-depth interview with an anti-corruption expert and activist was held on 19 June 2014. 239http://www.usip.org/publications/strengthening-justice-and-security-in-the-himalayasaccess: 7 May 2017.
235 chief executive officers. Some of them were involved in a sub-committee to improve the bill. It defeated the central bank’s corporate governance initiatives.240
As Wills (2014) has recently argued, strong and functional public accountability mechanisms, coupled with committed and competent leadership and well-coordinated anti-corruption efforts, were necessary to address the complex and intractable corruption problem in Nepal. However, public office bearers were not held accountable for their wrongdoings. They did not have any sense of fear. For instance, more than 22,000 public servants did not submit their property details during the fiscal year 2014/2015, mandatory as per the Prevention of Corruption Act 2002. Impunity was taken for granted (EI016).241 The main reason for this impunity was the grey area between the political authority and senior civil servants (EI025).242 Corruption at the higher level of authority was rampant and the corrupt enjoyed impunity. Very few high profile corruption cases were presented in full after 1990. There was an informal political consensus to ignore corruption at the higher level of politics.243
Politicisation of the judiciary also became serious after 1990. There were frequent interventions from the executive and corruption within the judiciary flourished. Government attorneys and private lawyers placed obstacles in the way of finalising corruption cases and civil servants’ co- opted with the private lawyers to postpone corruption cases.244 Moreover, the cumbersome and slow procedures in the courts, were all found to be some of the important limitations on Nepal’s Judiciary to fight against corruption (EI010).245
In the 1990s, many corruption cases were either acquitted or awarded nominal fines. For instance, the Supreme Court acquitted 14 out of 22 cases decided during the period 1991 to 2001. Two cases were partially convicted (NKP 2001, c.f. Khanal et al. 2007). During that period, fines could be as low as Rs.150 in Krishna Prasad Prasad Pant et al, vs. His Majesty’s Government (NKP 1991, c.f. Khanal et al. 2007). The interpretation of anti-corruption laws created latitude to impose either imprisonment or fines, making the Supreme Court a safe haven for the corrupt (Khanal et al. 2007, p.30).
240http://baahrakhari.com/np/business-finance/bafiya-news/ access: 7 June 2016 and, http://setopati.com/bichar/49041/access: 30 June 2016 241 An in-depth interview with a former secretary and an expert in public sector reform was held on 6 June 2014. 242 An in-depth interview with a former secretary was held on 16 June 2014. 243http://indianexpress.com/article/opinion/columns/next-door-nepal-unseeing-corruption-/2892336 4 July 2016 244http://nepal.ekantipur.com/news/2017-04-30/20170430173318.htmlaccess: 1st May 2017;http://epaper.ekantipur.com/nepal/2017-06-04/1access: 5 June 2017
245 An in-depth interview with a senior news editor was held on 14 June 2014. 236
The Special Court was widely criticised for its controversial decisions to acquit high-profile corruption cases purely on technical grounds, such as the elapse of time since case registration or due process in filing the cases. The Supreme Court had to quash the verdicts and direct the Special Court to reopen the cases (Manandhar 2015). The case clearance rate of both the Supreme Court and the Special Court was found to be very low (see: Figure 7.2 and 7.3).
The working style, approach and the level of professionalism and integrity of the anti-corruption agencies such as the NVC and the CIAA directly influenced the implementation process. Both the focus group discussants and the elite interviewees reported that preventive measures such as awareness programmes, surveillance, supervision and monitoring were conducted simply to complete the annual programme and submit progress reports. As an anti-corruption expert and activist argued, awareness and monitoring programmes were a form of hardship leave for the bureaucrats at the centre – and a feast for the field level staff. People at the local level would join solely to celebrate the programmes (EI028).246 Focus group discussants argued that egoistic behaviour of the CIAA leadership hindered the inter-agency collaboration and partnerships to expedite implementation of the anti-corruption reforms.247 The CIAA chief was also criticised for individualising the CIAA and systematically taking revenge on the civil society members who opposed his appointment. The CIAA chief and some of the commissioners were also criticised for abusing their stature and authority to pursue their personal interests. They allegedly misused their position to exert pressure on medical colleges to admit their family and relatives violating the merit principles.248
Oversight mechanisms such as the Public Accounts Committee of the parliament had their own limitations. First, very few of their suggestions or instructions were complied by the government. The quality of their reports or findings were often questionable. Parliamentarians had a tendency of attending the committee meetings without any preparation. In many cases, their input was illogical and their views often inconsistent. Sometimes it was found difficult even to make committee decisions. The supreme democratic institution also had serious issues about its own ethics and integrity, as a former chairperson of the Public Accounts Committee who iswidely acclaimed for his ethics and integrity remarked:
When I was elected as the Chairperson of the Public Accounts Committee, a former chairperson congratulated me for the new position. I told that I was worried of dealing the complex and challenging issues of the Committee. He kept on saying that I was lucky enough that time as I suffered a lot for long time without having any lucrative position. He told that briefcases of money would come to me without making any efforts or bearing risks. I felt as if I fell down from a dreadful fall.
246 An in-depth interview was taken on 19 June 2014. 247 Focus group discussion on anti-corruption reform was conducted in Kathmandu on 29 August 2014. 248http://setopati.com/bichar/46002/ Access: 7 May 2016 237
Immediately after taking Oath of Office, the corrupt began chasing me asking my home address and inquiring my family details and, what not? (EI095)249
A thorough review of the implementation of anti-corruption plans, policies, programmes and strategies over the last 26 years showed that there were problems with the policy content. In many cases, the policymakers merely copied anti-corruption rhetoric from the reports of the international experts, without fully grasping the intent (MHHDC 1999). In the absence of two- way communication and effective policy deliberation mechanisms in the public sector, the implementers at the field level spent years without fully grasping the policies they were supposed to be implementing (EI033).250Yet another reason for the poor or partial implementation of anti-corruption reforms was the absence of a critical mass to support for the reforms (EI079)251that required a ‘revolution of mindsets’ with a new vision, a fresh value system, positive attitude and work culture, professional competence and change in orientation (Pant 2015).
7.5 Implications and outcomes of the reform objectives
Nepal’s anti-corruption reforms focused on two basic objectives: improving public service delivery and reducing corruption. I examined anti-corruption reforms in Nepal for the last 26 years using documentary sources with the help of a questionnaire survey, a thematic focus group discussion and elite interviews. Performance was assessed with the help of available data on corruption perception and governance indicators. Some recent corruption cases were highlighted to substantiate discussion and analysis.
In a questionnaire survey carried out for this research, more than 70 percent participants reported that anti-corruption reforms did not result in improved public delivery. A majority of the participants (62.6 percent) believed that the reforms did not reduce the level of corruption in the country. Transparency, however, was found to have significantly improved in the public service over the last 26 years. However public accountability had not improved. The following table highlights the impact of anti-corruption reforms in Nepal.
249 An in-depth interview conducted on 27 August 2014. 250 An in-depth interview with a joint secretary of the National Planning Commission conducted on 23 June 2014. 251 An in-depth interview with a former minister for foreign affairs and home affairs and former chief secretary of the Government of Nepal conducted on 13 August 2014. 238
Table 7.9 Impact of anti-corruption reforms (N= 83) Statement Strongly Agree Neutral Disagre Strongly Don’t Agree e Disagree Know
Anti-corruption reforms 1 45 19 12 2 4 had significant (1.2%) (54.2%) (22.9%) (14.5%) (2.4%) (4.8%) contribution in improving transparency in the public service
Anti-corruption reforms - 17 13 46 6 1 had significant (20.5%) (15.7%) (55.4%) (7.2%) (1.2%) contribution in improving public accountability in the country
Anti-corruption reforms 1 11 9 53 6 3 had significant (1.2%) (13.3%) (10.9%) (63.9%) (7.2%) (3.6%) contribution in improving public service delivery in the country
Anti-corruption reforms - 18 11 44 9 1 promoted result-oriented (21.7%) (32.5%) (33.7%) (10.8%) (1.2%) culture in the public service
Anti-corruption reforms 2 19 13 41 7 1 promoted ethics and (2.4%) (22.9%) (15.7%) (43.4%) (8.4%) (1.2%) integrity in the public service
Anti-corruption reforms 17 11 47 5 3 reduced corruption in - (20.5%) (13.3%) (56.6%) (6%) (3.6%) the country
Anti-corruption reforms 1 9 16 40 13 4 had sustainable 1.2%) 10.8%) 19.3%) 48.2%) 15.7%) 4.8%) outcomes
Source: Field survey during April-September 2014
239
Three international references are relevant to draw here in line with the findings of the survey above. First, the Transparency International’s most recent corruption perception index shows that Nepal’s efforts to combat corruption has not been encouraging for over a decade. As the Figure below indicates, Nepal’s corruption perception score remained almost stagnant in the last 13 years.
Figure 7.4 Corruption Perception Index for Nepal
160 146 131 131 140 126 130 116 120
100 90
80
60
40 28 31 29 27 29 25 22 20
0 2004 2007 2010 2013 2014 2015 2016
Rank Score
Source: https://www.transparency.org/ access: 13 May 2017
The second one is the World Bank initiative to measure cross-country indicators of governance, known as Worldwide Governance Indicators, shows that corruption in Nepal has notdecreased in the last 20 years. Nepal’s score and rank for 1996 was -0.01 and 60.49 respectively. In 2015, it declined to the score of -0.55 and rank 35.58 respectively.252
The third international reference to describe Nepal’s governance concentrates its findings around the factors that are either detrimental or facilitative in doing business. The report known as Global Competitiveness Report (GCR) shows that corruption still remains one of the most problematic factors for doing business in Nepal. As the Table 7.10 highlights, corruption does not seem to have been decreased in the last nine years.
252http://data.worldbank.org/data-catalog/worldwide-governance-indicators access: 13 May 2017 Note: Governance score ranges from -2.5 to +2.5 and percentile rank ranges from 0 to 100 with higher values corresponding to the better results. 240
Table 7.10 Most problematic factors for doing business in Nepal GCR 2008-2009 GCR 2012-2013 GCR 2016-2017
Government Instability Government Instability Government Instability
Policy Instability Corruption Inadequate Supply of Infrastructure
Corruption Inefficient Government Corruption Bureaucracy
Inefficient Government Policy Instability Inefficient Government Bureaucracy Bureaucracy
Inadequate Supply of Restrictive Labour Regulations Policy Instability Infrastructure
Source: World Economic Forum, the Global Competitiveness Report 2008-9, 2012-13 and 2016-17
Building upon the findings of the survey (Table 7.9) and some of the international references that describe Nepal’s state of governance, anti-corruption reform is further analysed through the case studies below:
Case 1: Cantonment corruption: the revolutionary ‘paper armies’253
The political party that waged armed struggle for ten years to bring transformational changes to the country and the one having an extensive anti-corruption agenda when it began its armed revolt against the state, was found to be engaged in an infamous cantonment embezzlement scam. Of the 19,602 UN verified Maoist combatants 2,432 were found absentee combatants. The Maoist leaders received salary and allowances on behalf of the fake combatants for many years. They never allowed the government to handover the salary and allowances directly to the combatants. The party publicly accepted that they invested 40.5 million rupees siphoned off from the salary and allowances of the combatants. Thus the issue is not whether there was corruption or not but the extent and intensity of corruption. Following the pressures from the dissatisfied Maoist combatants and other party cadres, the party constituted probe commissions at least two times but never disclosed facts and figures of corruption. There was a media speculation that the Maoist supremo had a deal with then Chief Commissioner of the Commission for the Investigation of Abuse of Authority before his appointment which tarnished the image of the anti-corruption body.
253 Source: http://kathmandupost.ekantipur.com/news/2012-10-21/cantonment-corruption.html access: 23 May 2017; http://www.myrepublica.com/news/6917/access: 25 April 2017 241
Case 2: The Sudan embezzlement scam of police corruption254
The Sudan embezzlement scam represented one of the worst corruption cases involving the Nepal Police force. The Commission for the Investigation of Abuse of Authority (CIAA), a constitutionally legislated anti-corruption body, filed cases against a large number of senior Police officers, including three retired Police Chiefs and seven other retired officers, a local agent of armoured vehicle and other spare parts suppliers and a British supplier. The investigation took about one and half years before the CIAA brought the case to the Special Court on 7 June 2011.
The parliamentary investigating committee found significant irregularities and serious lapses, carelessness, inefficiency, misappropriation and embezzlement of state funds by the Police authorities while procuring the 1960 model armoured vehicles and other spare parts for the United Nations-African Union Mission in Darfur. The committee claimed 304.4 million Nepali rupees (equivalent to USD $48.3m) had been embezzled and directed the government and the concerned agencies to take stern action against the culprits. On 13 February 2012 the Special Court convicted three former Police Chiefs along with the supplier and the local agent, finding them guilty of embezzlement and imposing fines and imprisonment. A further 31 police officers were acquitted. The CIAA appealed these sentences to the Supreme Court. In its final verdict in April 2017, the Supreme Court affirmed the decision of the Special Court in connection with the supplier and the local agent and imposed further fines and imprisonment on the former Police Chiefs, the Assistant Inspector Generals of Police and their deputies. The Supreme Court raised concerns over the indifference and carelessness of the relevant institutions and authorities for their failures to withhold payments, warn concerned staff or take legal action when the news of embezzlement came out, even after the parliamentary committee submitted its report.
Case 3: Corruption in the post-earthquake rescue and relief255
Nepal’s devastating earthquake in April 2015 caused around nine thousand deaths and injured more than 22 thousand people in 31 out of 75 districts. Half a million houses and thousands of government buildings, including schools, were severely damaged. While millions of dollars was raised in cash and kind throughout the world for rescue services, relief and support, this also
254 Source: http://www.supremecourt.gov.np/web/assets/downloads/faisala_2074_01-17.pdf access: 7 May 2017 and http://www.haveeru.com.mv/corruption/40251 access: 5 February 2016 255Source: http://ciaa.gov.np/images/publications/1448954407studyreport2072.pdf access: 3 May 2017; http://www.huffingtonpost.com/kishor-panthi/questions-about-nepal-ear_b_10929518.htmlaccess: 23 October 2016and http://kantipur.ekantipur.com/news/2016-03-19/20160319104406.html access: 19 March 2016
242 became an opportunity for corruption, financial irregularity, forgery, misuse, fraud and embezzlement.
Many state and non-state actors siphoned funds and relief materials and embezzled large amounts of support, taking advantage of relatively weak and poorly resourced public institutions that were struggling to coordinate rescue and relief programmes in an extremely difficult situation, made worse by hundreds of post-earthquake tremors. These crimes included civil servants engaged in misusing relief materials, committing financial irregularities and creaming benefits from the procurement of goods and services. In the absence of a complete, integrated and reliable database, exacerbated by an absence of local government for one and a half decades, many fake victims received relief support. A number of non-governmental organisations allegedly engaged in disseminating false propaganda and misusing the relief support. Even the World Food Programme was found to have supplied low grade rice to people in remote areas. International non-governmental organisations spent huge amounts on non-core activities, including consultancies and overhead expenses. The media disclosed several financial irregularities committed by public servants. Political leaders were also found engaging in misappropriating relief funds and materials.
Against this backdrop, the Public Accounts Committee of the Legislature-Parliament summoned the relevant public officials, including Ministers and Secretaries, to explain the situation and address the issues. The Commission for the Investigation and Abuse of Authority found several anomalies, weaknesses, irregularities and fraud in the procurement and distribution of relief materials such as tarpaulin sheets and the supply of gabion boxes that were significantly below the volumes paid for. Bills and invoices were found to have been fabricated. A tarpaulin supplier publicly announced that he paid one million to the civil servants of the Kathmandu District Development Committee while supplying relief materials. The anti-graft agency has filed cases in the Special Court against those accused of corruption.
These are just a few representative cases where senior member of the political parties, police and bureaucracy were involved in corruption. There are several such cases in the judiciary and other anti-corruption agencies. All these facts, figures and case studies show that corruption has not been reduced – let alone eliminated – in post-liberalisation era Nepal. There was almost a consensus among the focus group discussants and the elite interviewees about the severity of corruption problem in Nepal. One of the elite interviewees was emotional when he was saying: Corruption has increased by thousand percent. There is no fear of being caught or punished. There is a very strong network of corruption (EI067).256
256 An in-depth interview with an academician and private entrepreneur was held on 30 July 2014. 243
In Nepal, corruption overtly undermines public service delivery. In a recent survey conducted by Transparency International Nepal in 13 public service delivery offices of 12 districts covering 2,330 respondents, two thirds of respondents (61%) reported that they had to face different corrupt practices to get their work done from the service delivery offices. Almost half (48%) of the respondents found politics as the main actor promoting corruption in the country (TIN 2016). Another survey recently carried out by a national daily among more than one thousand citizens in 32 districts had similar findings. Even the anti-corruption agencies themselves were reportedly corrupt (as claimed by 27 percent of the respondents).257
A comprehensive citizen survey carried out by the U.S. Institute of Peace found that people did not feel it necessary to report crimes, lodge complaints or file cases in government institutions, as they did not have trust in state institutions. Many of them sought unofficial ways to settle disputes.258
At least five retired secretaries I interviewed reported that they had to pay bribes to obtain public services. Three of the journalists had similar experiences. People were paying bribes even to pay taxes. As a senior joint secretary remarked:
Corruption is so deeply ingrained in society that tax payers are not assured of their tax payments unless tax officers accepted their bribes. A business person used to come to my office time and again. On day he offered five thousand rupees to get assured that his work was genuinely done. Corruption has become like a culture in public service delivery. (EI033)259
On the one hand, the ethical dimensions of governance were found to have deteriorated (EI004)260, on the other public office bearers were not held accountable for their wrong doings. They did not have any fear as impunity in crossing the line (EI016).261 This shows that the objective of improving public service delivery was not achieved. On the whole, anti-corruption reforms did not achieve its objectives of improving public service delivery and reducing corruption in the country.
7.6 Conclusion
Empirical evidence and a close observation of recent corruption cases allow us to conclude that pervasive corruption has become a serious challenge to Nepal. There was almost a consensus
257http://www.myrepublica.com/feature-article/story/35824/politicians-bureaucrats-seen-as-most-corrupt.html access: 22 February 16 258http://www.usip.org/publications/strengthening-justice-and-security-in-the-himalayasaccess: 17 April 2017 259 An in-depth interview was taken on 23 June 2014. 260 An in-depth interview with a senior freelance consultant and a retired civil servant was held on 26 May 2014. 261 An in-depth interview with the Member Secretary of the 1991 Administrative Reform Commission and a former Secretary of the Government of Nepal was held on 6 June 2014. 244 among the participants that corruption had increased in the post-liberalisation era. With poor, partial or distorted implementation, reform objectives were clearly not achieved. Transparency had somewhat increased, however, in the absence of public accountability, it could not be considered functional.
An in-depth analysis of anti-corruption reforms in the last 26 years found that reform policies primarily focused on administrative, legal and institutional reforms. The main objectives of anti- corruption reforms as stipulated in the law, plans and policy documents was to control corruption and improve public service delivery in the country. However, the anti-corruption reform approach did not match to the reform objectives. A highly centralised anti-corruption reform could not control corruption and improve public service delivery at the local level. Over- reliance on a number of new public management oriented economic approaches was yet another weakness of the anti-corruption reforms in Nepal. It could reduce public officials’ opportunity to engage in corrupt activities to some extent. However, individual incentives or a simple cost- benefit analysis could not address Nepal’s the nested, pervasive and systemic web of corruption.
The adoption of a multi-agency approach and the proliferation of anti-corruption policies, laws and agencies specifically in the new millennium, made internal coordination, cooperation and among the anti-corruption agencies a daunting task to the reform leading institutions. The presence of multiple anti-corruption agencies not only created confusion in their roles and responsibilities but also made it difficult to hold them accountable.
Nepal’s case showed that if the key domestic policy actors were not genuinely interested in implementing reforms, external intervention or support was ineffective in inducing positive change. In Nepal’s highly centralised state, political leaders and top civil servants were the key policy actors in the anti-corruption reforms, but they hardly had any stake, interest or incentive to implement the reforms. Instead reforms could hamper the symbiotic relations and provide opportunities for corrupt behaviour. Thus they were not interested to engage genuinely in the reform process. Consequently, the vibrant media and civil society hardly had any meaningful influence in the implementation of anti-corruption reforms.
In Nepal, policy transfer through conditionality-based lending helped political leaders manage internal resistance during the implementation process. However, when the lending was terminated and the programmes ended, almost all the reform infrastructures and achievements crumbled as the implementers took the view that they were merely working for the donors while the donors funded the initiatives.
245
As societal development struggled to catch up with political developments, there was a fusion of democratic structure and feudal value system that became the breeding ground of corruption and impunity. Similarly, equal and unhealthy state-society relations not only promoted corruption but also resisted anti-corruption reforms. The prevalence of nepotism and favouritism promoted a non-performing culture and gave officials a sense of impunity which also hindered the reforms process.
It is generally believed (in the West) that transparency fosters accountability. However, where the regime is not accountable, transparency alone cannot create effective pressure for reforms. Similarly, where reforms do not have any impact on election or when personal relations or connectivity rather than work performance counts for performance evaluation of public servants, it is extremely difficult to make the political leaders and the civil servants genuinely committed to reforms.
To sum up, implementation of anti-corruption reforms depends on a large number of social, economic and political factors along with a number of contextual and institutional factors. Failing to consider this reality is just ‘reinventing the wheel’ in the name of reforms.
246
Chapter 8 Research findings and discussion
Synthesising the key research findings across the three earlier cases: civil service rightsizing, privatisation of public enterprises and anti-corruption reforms, this chapter addresses the research sub-questions in detail to provide a broad picture of governance reforms in the post-liberalisation era (1990-2015). The research findings are discussed in light of the analytical framework developed in chapter two. The results are verified with methodological as well as data source triangulation. I compare my findings with other relevant scholarly research. I discuss the key concepts of policy transfer and reform readiness to explain and interpret governance reforms in Nepal after 1990. I illustrate how an independent constitutional body is politicised, egoistic individualism is developed, and the power and authority of public officials is misused to take personal revenge against opponents. I discuss how the corruption network strategically diffuses anti-corruption reforms. Finally, I introduce the concept of ‘Goffmanian frontality’ to the politics of making and implementation of governance reforms in aid- dependant developing countries like Nepal. 8.1 Synthesis of the key research findings
My thesis has examined the adoption of governance reforms in Nepal in the post-liberalisation era (1990-2015) through three case studies: civil service rightsizing; privatisation and public enterprise reforms; and anti-corruption reforms in the public service. This sub-section of the chapter synthesises my research findings across the three cases to provide a broad picture of governance reforms in Nepal after 1990, with summarised findings on each research sub- question shown in sub-section 8.2.
I used texts and context, perceptions and perspectives, and ideas and interactions as an evidential basis to support the arguments. Primary data was collected from a questionnaire survey, three thematic focus group discussions (civil service rightsizing, privatisation of public enterprises and anti-corruption reforms) and 100 elite interviews representing a wide range of policy actors. Periodic plans, budget speeches and other policy documents of the 25-year period from 1990 to 2015, relevant to the case studies, along with the reports of the reform commissions since 1951, provided necessary data, information and evidence.
The survey findings, focus group discussions, elite interviews – along with repeated governmental policy recommitments and other government publications – allowed me to conclude that governance reforms were not successfully implemented in the post-liberalisation era. The following table records elite perceptions of the implementation of governance reforms across each of the three case studies as discussed in Chapters 5, 6 and 7.
247
Table 8.1 Elite perceptions of the implementation of governance reforms Reforms Success Failure
(Percentage of (Percentage of respondents) respondents)
Civil Service Rightsizing (N=88) 13.6 86.4
Privatisation of Public Enterprises (N=74) 11 89
Anti-corruption reforms (N=83) 9.8 90.2
Source: Field survey during April-September 2014.
As the table shows, elite perceptions were overwhelmingly that implementation did not proceed well in all three reform cases. Bureaucratic politics was found to be the key inhibiting factor for the poor/partial implementation of civil service rightsizing. Lack of commitment, reform unreadiness and the complexities of the privatisation process, coupled with an excessive trade union activism, constrained privatisation in Nepal. The adoption of punishment-oriented approaches that emphasised institutional and legal reforms to tackle systemic corruption was yet another flaw for anti-corruption reforms.
The key impediments to successful implementation were each slightly different across the cases. The conceptually nebulous ‘rightsizing’ policy was distorted by senior and mid-career civil servants during implementation. The main issue with privatisation was that in many cases it failed to reach its intended outcome. Serious anti-corruption reforms, started late in comparison to the other two reforms, had poor or partial implementation as they lacked societal pressure and effective accountability enforcement mechanisms. In other words, while civil service rightsizing was a case of implementation failure, the other two could be categorised as having been failed to implement.
All three cases faced problems over conceptual understanding and the translation of objectives into action. In the absence of clearly articulated and measurable indicators, the rightsizing targets were widely regarded as little more than a hunch. None of the policy actors were clear about the criteria for fixing the retrenchment targets and the optimum size of the civil service for Nepal. Although the 1992 Privatisation Act had clearly defined privatisation objectives, in reality its modalities were inconsistent with its objectives. For instance, one of the main objectives of privatisation was to contribute to private sector development in the country. However, many former public enterprises were either liquidated or dissolved. In the case of anti-corruption reforms, lacking clearly identified and well-analysed corruption problems,
248 reform initiatives focused on creating laws and institutions and adopting punishment-oriented anti-corruption strategies.
The arbitrary approach to civil service retrenchment was a major setback to wider civil service reforms in Nepal. It created a huge rift between political leaders and public servants. On the other hand, privatisation suffered from a hasty start and slow implementation. Privatisation commenced without any preparatory works and solid legal frameworks, leading directly to early failures. Anti-corruption reforms adopted a centralised approach that focused on punishment by the anti-corruption commission. This contrasted with the reform objectives seeking improvements in public service delivery by field officers.
In the absence of stakeholder commitment to the governance reforms, both the political leadership and the senior civil service were never genuinely committed or interested in reform agendas. The reform rhetoric in the policy documents displayed ‘isomorphic mimicry’, an instinct for survival that would provide external legitimacy to the government and also more development aid from the international development community. In the meantime, donor pressure to ‘act politically’ was found counterproductive as it further eroded public accountability in the country.262 Similarly, the lack of reform readiness and inefficiency of reform leading institutions were among the prominent constraints that hindered successful implementation of governance reforms in Nepal. Furthermore, the incongruities between the quest for political change versus the long-standing administrative traditions and feudalist societal culture created a tendency towards the status quo without any substantial reforms. Consequently, none of the reforms achieved their objectives.
As the reforms lacked effective policy deliberation, strategic communication and participative management, the key implementers did not own the reform agenda and had little genuine commitment to implement reforms. Implementers also lacked critical enforcement power to constantly follow-up the reforms. The socio-economic and political context influencing state- society relations, the political bureaucratic interface, state donor dynamics and the governance situation were found crucially important for the successful implementation of governance reforms in an aid-recipient developing country like Nepal. With frequent changes of government, and in the absence of well-developed political culture, policy instability remained an issue. Although policy reversal seldom took place, policy reforms were frequently deemphasised, creating confusion among the key implementers. In the absence of political
262 International development partners were increasingly concerned about the political barriers and impediments in domestic politics and the power relationships impacting on the development outcomes. They argue that ‘thinking politically’ or ‘talking politically’ was not sufficient to improve development outcomes. Thus, they recommend that some external interventions were necessary to improve domestic politics so as to improve the overall culture of governance and achieve the development outcomes. 249 consensus for continuous commitment to the reform agendas, limited progress was made to transform the civil service.
The worldwide governance indicators263 for the last 21 years reinforce the findings that governance reforms in Nepal did not achieve significant improvements in the post-liberalisation era.
Table 8.2 Worldwide governance indicators for Nepal
1996 2000 2005 2010 2015 Indicators Score Rank Score Rank Score Rank Score Rank Score Rank Voice and Accountability -0.12 47.60 -0.30 41.83 -1.19 12.98 -0.48 33.18 -0.43 33.50 Political Stability and Absence of Violence/Terrorism -0.15 42.03 -1.23 14.01 -2.11 1.93 -1.59 7.11 -0.93 16.19 Government Effectiveness -0.41 40.00 -0.50 37.07 -0.84 22.44 -0.86 21.05 -1.04 13.46 Regulatory Quality -0.55 40.00 -0.56 37.07 -0.50 22.44 -0.74 21.05 -0.79 13.46 Rule of Law -0.19 46.89 -0.33 42.11 -0.83 24.40 -1.01 16.11 -0.70 26.92 Control of Corruption -0.01 60.49 -0.54 33.17 -0.63 33.17 -0.65 30.00 -0.55 35.58 Source: http://data.worldbank.org/data-catalog/worldwide-governance-indicators access: 13 May 2017
8.2 Implications in relation to the research questions
The intellectual motivation for this thesis was to examine the adoption of governance reforms in Nepal in the post-liberalisation era (1990-2015). I have employed a broader political economy framework based on an extensive review of the literature on political economy analysis, state- society relations, political regime theory, the political bureaucratic interface, and state donor dynamics, along with a number of theories on agenda-setting, the adoption, implementation and evaluation of policy reforms to answer the key research question: What were the key factors that contributed to or inhibited the adoption of governance reform policies in Nepal in the post- liberalisation era (1990-2015) and to what extent were the reform objectives achieved?
Based on the overarching research question, the following research sub-questions were designed:
(1) Where and how did the various reform agendas originate?
263 The time series data presents cross-country aggregate governance indicators for over 200 countries. The data is based on the perception of diverse group of respondents representing over 30 individual data sources. Despite the critiques on a number of its limitations such as lacking theoretical rigour, being too complex and using less published data sources, these indicators are useful to provide an overview of a country’s quality of governance. The governance score ranges from -2.5 to +2.5 and percentile rank ranges from 0 to 100 with higher values corresponding to the better results. 250
(2) To what extent were the reform policies adopted as government policy and implemented?
(3) How did the key policy actors actually interact with each other in the making and implementation of governance reforms?
(4) What were the outcomes in terms of the reform objectives?
In the following sub-sections, I summarise my findings with regard to the research sub- questions as mentioned above.
8.2.1 Where and how did the various reform agendas originate?
The first research sub-question discusses the reform drivers both in terms of idea generation and agenda-setting with evidence drawn from the various reform commission reports, government’s policy documents, donors’ reports and the in-depth interviews with the persons actually involved in the reform process.
In the case of civil service rightsizing, turbulent regime change became the key driving force to initiate reforms. Political leaders initiated rightsizing reforms in the Nepalese civil service for four main reasons. First, political leaders had little trust and confidence in the senior civil servants groomed in the party-less Panchayat system. Thus, they wanted to bid them farewell at the earliest opportunity. Second, civil servants did not have a positive image among the general public. Overloaded with increasing popular expectations, leaders sought to give the impression of change by initiating administrative restructuring. Third, the leaders who had just come into power had little vision and foresight beyond administrative restructuring. Fourth, the leaders wanted to please the foreign aid donors by integrating civil service rightsizing into economic reforms. However, the rightsizing agenda was primarily donor-driven. The major rightsizing agenda were drawn from the World Bank and the Overseas Development Assistance reports submitted to the 1991 Administrative Reform Commission in August 1991 and March 1992 respectively.
The embrace of privatisation as an idea in Nepal can be traced to the 1960s when the 1968 ARC recommended the government to ‘reduce the number of public enterprises’, ‘transfer the public enterprises to non-government sector’ and ‘liquidate the public enterprises’. Although the word ‘privatisation’ was not yet coined, the terms used in the report were no less than what we understand by privatisation today. As the measures were recommended in response to the deteriorating condition of the public enterprises, pragmatic factors were the main driving force to introduce this concept in Nepal. However, privatisation as an active policy agenda was driven by the World Bank and IMF through the Structural Adjustment Programme in the 1980s. After the political change of 1990, it became a major component of the economic reform agenda.
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Thus, in addition to the pragmatic factors, ecological as well as the ideological factors were also important in pushing for the adoption of privatisation policy in the post-liberalisation era.
Nepal adopted legal codes prohibiting corruption in the 1850s. However, anti-corruption reforms as a policy agenda only started in the 21st century when foreign aid donors started involving themselves in governance reforms. Specifically, the government accorded high priority to anti-corruption reforms after the Nepal Development Forum held in Paris in April 2000. Global ecological pressures were the main driving force for the adoption of anti- corruption reforms in the country. Initially, the anti-corruption reform agenda was guided by bilateral and multilateral donors. Recently, intergovernmental organisations such as the United Nations and international non-governmental organisations such as the Transparency International have been increasingly influential in shaping the agenda for anti-corruption reforms in developing countries like Nepal.
Overall, the catalyst for reform in all three cases originated from domestic commission/committee reports. However, the reform agendas were largely guided by the external development partners. Nevertheless, the reform agendas were rarely shaped unilaterally by the development partners. In reality, agendas were an outcome of triangular mediation between political actors, senior civil servants and development partners. With the repository of knowledge and power of the purse coupled with the weak negotiation capacity of the government, the development partners usually prevailed during the agenda-setting process.
8.2.2 To what extent were the reform policies adopted as government policy and implemented?
The second research sub-question addresses the adoption and implementation of governance reforms in all three cases, which has been answered by examining the policy documents, evaluation reports and literature review. Implementation analysis has been carried out with the help of elite interviewees and thematic focus group discussions.
Civil service rightsizing reforms were found to have been adopted without any clear conceptualisation or diagnosis of the problems with the civil service. None of the policy actors were clear about the right size for the Nepalese civil service. Alternative policies were not considered. Rightsizing targets were arbitrarily fixed mostly based on the vacant positions rather than any specific scientific criteria and functional analysis. There was no public debate on these reforms and the rightsizing policy was not properly disseminated among the civil servants. Instead, in many cases the reform proposals, specifically the legal reforms, were kept confidential.
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Implementation of the rightsizing policy was biased against senior civil servants. Many of them were forcefully retired by the government. Implementation relied on fear psychosis. The government was demoralised when the Supreme Court reinstated many of the civil servants filing cases against the government. Later the civil servants were left alone to implement the rightsizing policy. Civil servants distorted implementation mainly on two fronts. First, they reduced mostly the junior field level staff to meet the restructuring targets, keeping senior positions intact. Second, they recruited several of ‘their’ people, mostly on a contractual basis, when the permanent positions were abolished. Implementation of the rightsizing policy was evidentially poor, partial and distorted.
With publicly committed objectives, privatisation was conceptually clearer than the rightsizing reforms. However, implementation began without the government considering the reform readiness, and in particular the parlous state of private sector development in the country. Similarly, privatisation was started without preparing basic infrastructure and groundworks for implementation. By the time the privatisation law came into force, six of the public enterprises were already in the process of privatisation. The government did not have the required databases and information for privatisation. If at all, there were several discrepancies between the government’s treasury accounts and the concerned enterprises. As a result of poor planning, privatisation began inauspiciously and unsurprisingly resulted in multiple failures. There were a few instances of declared policy reversal when the government decided to renationalise some of the public enterprises. Privatisation was characterised by both privatisation failures as well as failure to privatise. Consequently, few of the privatisation cases reached their intended end (the successful transfer to the private sector operating profitably). For this reason, many cases were found sub judice in the court even after 20 years of privatisation. Despite the fact that there was no substantial policy reversal, privatisation fatigue set in after the new millennium with no privatisation cases attempted after 2008.
In the absence of specific anti-corruption policies or strategies, the battle against corruption was fought solely on the execution of anti-corruption laws for a long time. Implementation of the first comprehensive anti-corruption strategy adopted in 2003 was found to be remarkably poor, mainly due to the lack of high level political commitment. Implementation of the 2009 Anti- corruption Strategy and Action Plan was also not satisfactory for a number of reasons. First, the key implementing agencies did not whole-heartedly own the strategy and action plan. Second, many of the implementing agencies suffered role ambiguities. Third, implementing agencies were not clear about some concepts they were expected to administer. For instance, the National Vigilance Centre was unclear about the way to implement ‘conflict of interest’ in public agencies. Fourth, many of the activities requiring high level political commitment such as the appointment of political advisors and their code of conduct, were not implemented. According
253 to interviewees, the strategy and action plan was also too ambitious to fully implement. Policymakers were more concerned about covering everything related to corruption in the policy documents than prioritising and implementing the main components. Fifth, a number of policies were merely ‘feel good’ policies which were difficult to implement. Sixth, the performance and enthusiasm of reform-leading institutions’ was heavily reliant on effective leadership. Seventh, the prevalence of neo-patrimonialism and feudalistic hierarchy was found to be yet another important inhibiting factor for anti-corruption reforms. Eighth, the centralised outsider-led approach to anti-corruption reform was found difficult to implement. Ninth, coordination among the multiple agencies proved extremely difficult. Finally, governance problems such as transition management, impunity and the poor performance of the oversight agencies were also responsible for the poor or partial implementation of anti-corruption reforms.
Overall, implementation of all the three cases was found to be partial and poor. Of the key inhibiting factors, bureaucratic politics emerged as prominent for the implementation of the rightsizing policy. Excessive politicisation of the public enterprises and the increasing trade union activism were the key inhibiting factors for privatisation. Similarly, an absence of genuine commitment from the highest level of political authority and the prevalence of patrimonial culture in the society were found crucial for the poor and partial implementation of anti- corruption reforms. Moreover, in the absence of implementation accountability, reform leading institutions were found eager to adopt reforms but hesitant during implementation.
8.2.3 How did the key policy actors actually interact with each other in the making and implementation of governance reforms?
The third research sub-question addresses the role of the key policy actors in the making and implementation of governance reforms in Nepal, which has been answered by examining the interests, incentives and roles of the key policy actors in the policy process. Elite interviews with the persons actually involved in the reform process or persons having a close watch on it helped recount how the actual interactions took place among the key policy actors. Periodic plans and annual budget speeches along with other relevant policy documents and reports of both the government and development partners helped verify political leaders’ words and actual commitments to the policy reforms. In-depth interviews with various non-state actors helped understand interactions from different perspectives.
Political leaders in the government, senior and mid-level civil servants and the major external development partners each played decisive roles in the implementation of civil service rightsizing reforms. Political leaders in the government during the early 1990s maintained a keen interest in it. They implemented it as a part of economic liberalisation and NPM-oriented reforms. They were for smaller government and an increased role for the non-state actors in the
254 governance and development process. They were also interested in replacing the senior civil servants allegedly having traditional anti-reform mindsets and hangovers from the previous non- democratic regime by a new breed of young, energetic and innovative leaders in the civil service who would provide unflinching support to the government.
In general, civil servants were not in favour of rightsizing reforms as they stood to lose power, prestige and even their own jobs. However, in reality civil servants at different career levels had varied interests in rightsizing reforms. The senior civil servants such as secretaries were not interested in rightsizing as it had no incentive for them; rather, it presented a threat for their jobs. However, they did not voice opposition as that would have tagged them as anti-reformists. Many of them pledged support to the government to implement the rightsizing reforms in order to gain an image of capable reform agent (see the discussion below on ‘Goffmanian frontality’). The mid-career civil servants had more interest in the retrenchment policy as it would provide them better opportunities for promotion. For this reason they co-opted with the political leaders to promptly implement retrenchment in the civil service. Junior civil servants and the trade union activists strongly opposed the civil service rightsizing reforms as it would massively cut civil service positions especially at the junior levels.
External development partners were keenly interested to promote the rightsizing reforms as a part of economic liberalisation and NPM-based reforms. Their draft reports presented to the 1991 ARC, the minutes of their meetings with the senior government authorities and the 1992 ARC report showed that they had a decisive influence on policy design. However, their role was found to be less prominent during implementation. Non-state actors such as the private sector, non-governmental organisations and civil society did not have much interest in the rightsizing reforms.
Political and bureaucratic executives, trade unions and external development partners were the key actors to influence privatisation. Many of the political and bureaucratic executives played dual roles by demonstrating verbal commitment while silently obstructing the privatisation process. They wanted to project themselves as reform agents, anxious to please the development partners and secure development cooperation. However, in reality they were not interested in expediting the privatisation process for a number of reasons. First, privatisation did not have a positive image among the general public. Second, they would forfeit the benefits, facilities and privileges they were enjoying from the public enterprises. Third, they did not like to be entangled in unnecessary hassles, disputes or conflicts that privatisation was likely to create. The trade unions were antagonistic to the privatisation process, as it could lead to them losing members, and they would face pressure to improve their performance under private ownership. With close ties to political parties and a huge network of trade unions within and outside the
255 country, they could effectively influence the privatisation process. In fact, the trade unions were found to be the most vocal and decisive ‘spoilers’ of the privatisation process. The emergent private sector brought up under the patronage of the ruling elites and the royal families did not have sufficient orientation, enthusiasm, expertise and experience to operate in a competitive environment and thus did not have much influence in the privatisation process.
With anti-corruption reforms, the key actors were found to be political and bureaucratic executives, the executives of the anti-corruption agencies, members of the civil society and the major development partners. Judges, prosecutors and members of parliament also played significant roles in anti-corruption reforms. For their part, the media, professional associations and the academic community had a significant role in exposing corruption cases and exerting pressure on the concerned authorities for the implementation of anti-corruption reforms.
Political and bureaucratic executives did not have much interest and incentives to implement anti-corruption reforms. For this reason, most of the anti-corruption strategies requiring high level political commitment were not implemented. The civil servants had lukewarm interest in the anti-corruption reforms while implementing the conditionality-based governance reforms. However, the main motive was to comply with the loan tranche conditions for budgetary support from the Asian Development Bank. For this reason the level of interest in anti- corruption reform was not high. However, the major development partners had a keen interest in supporting anti-corruption reforms for two main reasons. First, they wanted their aid money optimally utilised and not misused. Second, they believed that a rise in corruption in South Asia, including Nepal, would lead to increased terrorist activities.
Political and bureaucratic executives demonstrated double standards while implementing anti- corruption measures. Political leaders often delivered sharply-worded critiques in public speeches against corruption. However, many political leaders were found neck-deep in corruption. The bureaucratic executives had a similar tendency. The civil servants trained in Western countries publicly denounced corruption. However, they rarely demonstrated courage to reject bribes or take action against the bribe-givers. Such lack of courage to expose corruption was also evident in the media, academia and wider civil society. Moreover, the political leaders had a tendency to take revenge on their political opponents using anti-corruption tools and techniques; a tactic that was also evident even among executives in the anti-corruption agencies.
Reform policies were typically designed through a trilateral interaction between the political leadership, senior civil servants and the major development partners. In the hierarchical society of Nepal, political leaders and the civil servants rarely had frank and critical debates on policy issues. Interaction between the political leaders and the donors was also usually one-sided. The donors shared their information and experience in other countries before they presented the
256 reform agenda. As most of the political leadership (with exceptions) had little idea about governance reforms, the meetings were rarely genuinely engagements. Donor-civil servant discussions focused more on legal and procedural issues than the core policy issues. In the absence of knowledge on the subject matter and the lack of negotiation skills, civil servants simply opted to endorse the drafts prepared by the development partners. Implementation was mostly left to the civil servants who were supposed to coordinate all the other actors involved in the reforms. During implementation, both the development partners and the civil servants were focused more on the compliance of conditionalities attached with the development assistance than on substantive issues or reform results. In the absence of a deliberative culture and practices there was less scope for many of the policy actors and stakeholders to influence the reform process – be it endogenously supported or sponsored by external development partners. When latitude was provided, many of them were not well-prepared to contribute to the discussions. If they encountered difficulties during implementation, they merely complained that reform policies were externally imposed.
8.2.4 What were the outcomes in terms of the reform objectives?
The fourth and final research sub-question addresses the impact of governance reforms for achieving their objectives. This has been answered by analysing the findings of my field survey, focus group discussions and elite interviews and; examining the policy documents and evaluation reports for the last 26 years.
Civil service rightsizing was initiated in the early 1990s with the objective of improving public service delivery by making public administration more efficient, effective and economical. However it did not achieve the reform objectives for a number of reasons. First, the partial and poor implementation failed to achieve the expected results. The initial decline in the number of civil service positions was not sustained for more than a couple of years. Second, reductions in the civil service positions did not produce financial savings as the redundant positions remained funded. Third, there was a phenomenal growth in the contractual appointments when permanent positions were abolished. Fourth, the rightsizing policies were distorted during the implementation process. The civil servants at the centre massively cut the street-level civil service positions to meet the retrenchment targets, having a detrimental impact on public service delivery. Fifth, the structural reforms did not pay attention to behavioural factors. Sixth, the public service delivery functions were not transferred to the non-government sector as it was expected during the design phase.
Moreover, implementation was not the sole problem. There were serious flaws and lapses while designing the rightsizing reforms. First, the policy makers were not clear about the right size of civil service for Nepal. Second, alternatives to the rightsizing reforms were hardly considered.
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Third, whereas the crux of the problem was the poor performance of civil servants, solutions were sought, mainly by reducing numbers. As a result, the reform neither ensured efficient, effective and economical public administration nor improved service delivery in the public sector.
Privatisation had three main objectives: to enhance production and productivity of nominated public enterprises, reduce the administrative and financial burden on the government and contribute to private sector development in the country. My research findings show that none of the reform objectives were achieved.
Of the 30 public enterprises privatised in the heyday of the policy, 12 were found liquidated or dissolved, 7 were closed and only 11 remained in operation. Out of these 11 public enterprises in operation only 5 were operating profitably. This clearly shows that privatisation did not enhance the production and productivity of public enterprises. The focus group discussants and the elite interviewees reported that the initial impression of expansion in production capacity, innovation and operational efficiency was later found illusive.
As the financial and administrative burden on the government increased, the second objective of privatisation was not achieved. Despite the privatisation of a large number of public enterprises, loans and share investment by the government kept rising. Public enterprises were also discovered to have created a huge amount of unfunded liabilities which ultimately fell back to the government. The government continued to have to pay substantial amounts of money to settle the liabilities of the enterprises privatised since the early 1990s; by fiscal year 2014-15, the amount reached Rs. 5,488.2 million. Even after 20 years of privatisation, the Ministry of Finance was still furnishing answers to a series of questions posed by the courts. Political and administrative executives had to spend a lot of time and energy dealing with trade union issues over both public and even the privatised enterprises. However, a fair analysis of privatisation outcomes needs to consider counterfactuals as well. There is no evidence to support the arguments that these enterprises would have been better off without privatisation. Nonetheless, if these enterprises were perpetually loss-making entities, the withdrawal of state financial support could be considered a plus by some commentators.
Privatisation was expected to promote wider participation in the ownership, operation and management of public enterprises. However, the privatisation modality did not allow wider participation in privatisation. Of the 30 public enterprises privatised, only 11 were sold under share sales modality, of which only four enterprises allowed wider participation. The remaining six were sold to the corporate groups in block shares. As a result, a very small proportion of the shares were sold to the wider public. This shows that privatisation did not have significant contribution for private sector development in the country.
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Privatisation suffered from a hasty start and a slow implementation, leading to a succession of failures rather than demonstrative successes. Procedural complexities and flaws, the operational inefficiency of public servants, a highly volatile political context, strong resistance from trade unions and the absence of genuine commitment on the part of political and bureaucratic executives were some prominent reasons for privatisation failures.
Anti-corruption reform was guided by two main objectives: improving public service delivery and controlling corruption. Transparency International’s Corruption Perception Index and Global Corruption Barometer, Worldwide Governance Indicators and my own field survey show that corruption increased in Nepal in the post-liberalisation era. Focus group discussants and the elite interviewees confirmed this finding, which was validated by some recent corruption cases. As discussed in Chapter 7, increased corruption directly hit public service delivery. There was some agreement that transparency had improved with the right to information legislation, a vibrant media and the emergence of an open society. However, in the absence of public enforceable accountability, transparency did not prove to be functional. The concept of e-governance was introduced but it was not widely used to the level to influence public service delivery. In the absence of elected local governments which lasted for about two decades after liberalisation, service delivery deteriorated further. As a result, anti-corruption reforms neither improved service delivery nor helped reduce corruption.
Overall, governance reforms did not achieve their objectives across all areas investigated. Implementation remained a serious challenge in all cases. However, the crux of the problem in each case was slightly different. The rightsizing reforms were distorted, privatisation was left in limbo for quite a long time and there was a mismatch between the approach and objectives of anti-corruption reforms. There were frequent hues and cries against the powerful elites who were accused of benefitting their business cronies while privatising the state owned enterprises. Despite these accusations, none of them were ever convicted of corruption.
8.3 Discussions: Fitting findings to a broader context
In this section, I discuss how reform readiness influences the adoption and implementation of governance reforms in aid-recipient developing countries like Nepal. It presents two recent cases from Nepal to demonstrate how even well-designed institutional frameworks and committed and capable leadership are constrained by the broader societal context. It compares the findings with other academic researches. The section concludes by introducing the concept of ‘Goffmanian frontality’ to explain and interpret the complex politics of public sector governance reforms.
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While recognising the fact that no ‘one size fits all’, it is equally important to understand that there are certain common factors that play vital roles in the implementation of governance reforms. Reform unreadiness is among the most prominent factors in wielding influence over the reform process.
Reform readiness does not simply denote preparatory works to initiate governance reforms. As Figure 8.1 depicts, reform readiness involves layers of factors covering political, social, administrative and ecological factors. At the core of reform readiness is critical mass, commitment, capacity, coordination, culture (work) and communication. All these factors depend on the state of political development, administrative tradition and societal culture which are governed by ecology, network, governance and regime. Thus, reform readiness is problematic as many of the factors are beyond the control of policy-makers. However, these factors need to be considered while designing governance reforms or devising strategies for successful implementation.
There is a tendency of limiting external influence in policy-making to coercive or voluntary transfer. I argue that we need to go beyond the donor pressure analogy to understand the politics of policy-making. Earlier studies on governance reforms in Nepal mostly equate external influence in policy reforms as straight coercive policy transfer (Adhikari 2011; Gautam 2011; Paudel 2009). However, in practice such a straight coercive or voluntary policy transfer (see Chapter 2) rarely takes place. Usually a series of discussions and negotiations takes place before the reform agendas are finalized. Therefore, the recipient sovereign countries have an opportunity to put their views or make amendments to the reform agenda during the negotiation process, although the donors always have the upper hand during the negotiations. However, the failure to put forward local views or suggestions should not be interpreted simply as coercive policy transfer, because policy agenda are rarely imposed unilaterally but agreed upon during a series of joint meetings.
Schnell (2015) found that mimicry (isomorphic or other) facilitates learning and iterative adaptation which helps minimise domestic resistance to conditionality based policy reforms. My research confirms the findings to this point. However, I argue that this contribution is unsustainable once the donor assistance to the particular project or programme is terminated.
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Figure 8.1 Reform readiness
Source: Author’s construct
It is often argued that a strong legal framework, vibrant governance institutions and dynamic leadership are the sine qua non for effective governance reforms. However, in a thoroughly corrupt country, all these can be misused to promote egoistic individualism. I present a recent case to support my arguments. The second case highlights how an informal network of vested interests can systematically launch fierce resistance against proposed reforms.
Case 1. The claw of vengeance264
The position of the Chief Commissioner of the Commission for the Investigation of Abuse of Authority (CIAA) was vacant for about seven years, for a number of reasons. The Constitutional Council responsible for recommending appointments to Constitutional bodies was virtually defunct after the dissolution of Parliament in February 2005, until Parliament was restored in April 2006. Filling the position was not a government priority; and there was media
264Source: http://setopati.net/opinion/13375/Shades-of-fear-and-revenge/ access: 27 April 2016; http://kathmandupost.ekantipur.com/news/2013-05-09/breaking-down-371360.html access: 22 February 2016
261 speculation that the major political parties were not genuinely interested in making an anti-graft body active as it could affect their own interests.
In May 5 2013 the caretaker government headed by then Chief Justice recommended Lok Man Shingh Karki, a former Chief Secretary, for the Chief Commissioner’s post. His recommendation was controversial, being called a ‘black day for democracy’, as he had been found by the Rayamajhi inquiry to be involved in suppressing the 2006 pro-democracy movement. The Commission had disqualified him from being appointed to any government positions in the future. He was also on the list of the Lamsal Commission that was set up to probe the illegal accumulation of wealth and property by public officials after 1990. An alliance of 33 political parties led by the Communist Party of Nepal (Maoist) warned the government not to appoint him as the Chief Commissioner. A dharna (sit-in) was staged in front of the central secretariat of the government and protestors picketed the offices of the two major political parties, the Nepali Congress and Nepal Communist Party (Maoist Centre).
Despite widespread dissent, the government appointed Karki as the new Chief Commissioner on May 8 2013. The Communist Party of Nepal (Unified Marxist-Leninist), the second largest party in the parliament, called his appointment unlawful, undemocratic and against the spirit of the 2006 political movement. The Nepal Bar Association stated that Mr. Karki didn’t possess ‘high moral character and honesty’ for that position. Human rights activists staged protests against his appointment while he was taking the oath of office with the President.
Once installed, Karki systematically took revenge by orchestrating a series of anonymous complaints or exerting pressure on government organizations to launch attacks against his opponents as well as exerting pressure on government organizations to assist his cause. He ordered the Revenue Investigation Department to raid a prominent law firm. He summoned a senior journalist and a prominent campaigner on corruption charges. Karki’s acts of vengeance generated chaos among his opponents and cowed political leaders who might have spoken against him. The Supreme Court had to warn him time and again to refrain from acting out of sheer vengeance.
Genuinely committed leadership is often emphasised for the successful implementation of governance reforms. However, a strong and committed leadership may be helpless where the larger society is corrupt. The following case shows how even a chief justice of the Supreme Court can be victimised by the nexus of deeply-entrenched systemic corruption.
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Case 2: Perils of being non-corrupt265
Sushila Karki, the Chief Justice of the Supreme Court, had long been known for her firm convictions against corruption. Many defendants and their lawyers, whose corruption cases were pending in the Supreme Court, initiated a series of obstacles to prevent her from becoming Chief Justice and later sabotaged her efforts to finalize their corruption cases, delaying their cases until her mandatory retirement in June 2017. The Attorney General, the leadership of the Bar, lawyers and even civil servants refused to cooperate with her.
The Attorney General was said to have been implicated as one of the main culprits in the notorious Sudan Scam. He tried to delay the case, at times not sending the government lawyers because of faked illness, or requesting that the case be removed from the list. The media reported that he led a judicial strike against the Chief Justice and encouraged government lawyers to boycott the bench for four days for the first time in Nepal’s judicial history.
Aware of, and occasionally warned of the power of politicized corruption to ruin their professional careers, Nepal’s Justices were often pragmatic in postponing or avoiding final decisions. Relatively clean Justices would be harassed by allegedly corrupt political leaders. Politicized civil servants with connections to corrupt political leaders excised court applications or erased court records to help remove certain cases from the cause list. Accordingly, some Justices were unhappy with her for not allocating specific cases to them. However, Karki continued with her mission, deciding 30 percent of the 797 corruption cases that came forward when she became the Chief Justice. She finalised 17 of 21 case reviews. A number of high profile corruption cases substantially progressed under her authority. In April 2017, while a division bench she headed had just issued its final verdict on a high-profile Sudan corruption case, she learned that two ruling parties had registered an impeachment proceeding against her, charging that she had encroached the prerogatives of the Executive to appoint the Police Chief who was third on the merit list. This caused her automatic suspension as per the constitutional provision. The government was highly criticized within and outside the country for misusing constitutional provisions to impeach an untainted Chief Justice just before her mandatory retirement. The rank and file of the major political parties, including many leaders from the ruling parties, called the action a black day in Nepal’s judicial history. The International Commission of Jurists and the UN High Commissioner for Human Rights urged the government to withdraw the politically motivated impeachment motion and respect the independence of Nepal’s judiciary.
265 Source: http://nepal.ekantipur.com/news/2017-04-30/20170430173318.html Access: 1st May 2017; http://kantipur.ekantipur.com/news/2017-05-01/20170501074339.html Access: 1st May 2017 263
From these two cases, it is clear that the implementation of governance reforms especially the sensitive issues such as anti-corruption reform cannot be fully explained by a list like cause and effect analysis. It requires an in-depth analysis of real cases to fully grasp the intricate politics of governance reforms.
The final point I want to make from my findings concerns the enactment of a reform drama that we may call the ‘Goffmanian frontality’266 which was played by the policy elites.
On most of the reform agendas, Nepalese policy elites responded by creating disingenuous dramas to impress the donors; by wearing appropriate masks that created many false impressions. There are two theatrical stages at play here. The front stage is visible to the audiences (donors) and thus, decorated and illuminated to create a false impression that the leaders were genuinely interested and committed to implement policy reforms. The back stage (or behind the stage curtain) is not visible to all. Only the policy elites know the grim reality of the back stage. Besides playing on these two main stages, elites interacted off-stage with other reform actors – specifically the development partners – not as a part of a bureaucratic team, but in a personal capacity, which is quite different than the former two stages. This concept of ‘Goffmanian Frontality’ is different to what Andrews et al. (2013) called ‘isomorphic mimicry’. Isomorphic mimicry is something copied by the ruling elites wishing to be seen as complying, whereas ‘Goffmanian frontality’ is purposely duplicitous. In ‘Goffmanian frontality’ bureaucrats try to give the appearance of being reformers creating the impression they are preferable to the non-performers (or anti-reformers), whereas in reality they intend to do very little (Goffman 2013). This tendency was more evident in Nepal during the meetings with high level delegates from the international financial institutions such as the World Bank, IMF and the Asian Development Bank and other bilateral development partners.
To conclude, this synthesis and discussion of my research findings allowed me to explain and interpret the politics of governance reforms in a developing country like Nepal. The broader political economy framework developed in Chapter 2 was found useful to answer all the research sub-questions. Discussions on the research findings have demonstrated a perennial failure in achieving reform objectives. Overarching conclusions and implications of the research findings to other similar developing countries are presented in Chapter 9.
266 I borrowed this concept from Erving Goffman, the great American Sociologist who presented the dramaturgical perspective of social interaction in his 1959 book The Presentation of Self in Everyday Life. Details on this concept can also be found in one of his monographs through: https://monoskop.org/images/1/19/Goffman_Erving_The_Presentation_of_Self_in_Everyday_Life.pdf access: 23 June 2017. 264
Chapter 9 Conclusion and implications
“The definition of insanity is doing the same thing over and over again and expecting different results.” (Albert Einstein, attributed)
The final chapter presents an overarching conclusion of my research. I discuss the broader implications of my research findings, applying them to other developing countries in South Asia and beyond. I also highlight the contribution of my thesis to the body of knowledge and the policy and practice of governance reforms. Finally, I suggest some potential areas for further research, building on the limitations of my research. 9.1 Overarching conclusions
The main aim of this research was to examine the adoption of governance reforms in Nepal and discover the key factors that contributed to or inhibited the implementation of governance reforms in the post-liberalisation era (1990-2015). The study investigated governance reforms in three areas: civil service rightsizing, privatisation of public enterprises and anti-corruption reforms in the public service.
Overall, the research has shown that governance reforms did not proceed well in each of the chosen case studies for a number of reasons. As a result governance reforms in the post- liberalisation era did not achieve their reform objectives.
The findings of this research suggest that in the absence of effective policy deliberation, strategic communication and participative management, the prescriptive off-the-shelf reform agenda guided by the expert judgement does not induce or acquire genuine commitment from the key actors of governance reforms. Foreign aid being a prime incentive to the governments of developing nations, many such countries have allowed aid donors to dictate the reform agenda. With the power of the purse and the knowledge power, the external development partners have held the upper hand in shaping various reform agendas. As reforms are considered primarily as preconditions to the approval of foreign aid, policy-makers are not much concerned about the content or substantive nature of the reform agenda. Third World public bureaucracies in general have weak negotiating capacities. Moreover, in the case of Nepal, the legacy of a feudalistic hierarchical society did not allow open and frank debate among the key policy actors on important policy issues. Accordingly, the agenda of reforms promoted was prescribed on behalf of the major external development partners. As a consequence they failed to attract genuine commitment from the key policy actors. In the absence of any sense of ownership and genuine commitment on the part of the local policy actors, reforms were not sustainable.
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The results of this research indicate that the implementation of governance reforms largely depend on the quality of interactions among the actors, institutions and networks throughout the reform process. The quality and effectiveness of interactions depends on the state of political development, regime dynamics, state-society relations, societal culture, administrative tradition and capability in addition to a number of other contextual factors. Despite a series of major political changes, especially after the restoration of multi-party democracy in 1990, there has been no significant change in the power structure and the fundamental characteristics of Nepali society which did not allow for improvement in the nature and quality of interactions among the key actors and stakeholders of governance reforms. As a result, reform performance suffered and objectives were missed.
The findings of this research also support the idea that ownership and commitment to governance reforms without clear interests, stakes and incentives are merely symbolic façades or show an instinct for survival which neither leads to successful implementation nor the achievement of sustainable outcomes. This observation applies both at the country and organisational level. The Nepalese case revealed that, most of the time the political and bureaucratic leaders were not fond of governance reforms as they hardly had any stake, interests or risks attached to them. However, they never failed to express their commitment in front of the development partners during aid negotiations or through the most visible policy documents (such as the periodic plans and annual budget speeches) when they were in need of more foreign aid. However, when the aid incentive was taken away, reform infrastructures crumbled like a house of cards, as was clearly evident in the case of the Governance Reform Programme (2001- 2007), an off-the-shelf policy-based reform initiative from the Asian Development Bank.
The evidence from this research suggests that unless governance reforms are seen to bring some benefit, with an iterative process scaling-up the success stories to build commitment over time, they are unlikely to be characterised by effective implementation or lead to sustainable outcomes. The research findings show that civil service rightsizing was initiated from an arbitrary retrenchment policy, in turn becoming a huge setback to broader civil service reforms in Nepal. The hastily commenced privatisation programme led this process towards persistent failures. The political and bureaucratic leaders, demonstrating the path-dependant character, were found unwilling to ‘learn’ new knowledge and skills and resisting to ‘unlearn’ what did not work in the past. The external development partners, also, did not learn from past mistakes and address these in the subsequent programmes. Thus, the reforms were designed without a clear conception and proper diagnosis of the problems. Consequently, none of the reforms reached their intended outcomes.
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My research concurs with other findings suggesting that implementation of broad-based governance reforms requires strong institutional frameworks and effective coordination among the reform-leading institutions (Paudel 2006; Gautam 2011). This study identified a number of coordination problems among the reform-leading institutions in Nepal. Having varied interests and objectives, and displaying an institutional superiority complex derived from the country’s feudal culture and prevalence of bureaucratic politics, these institutions rarely cooperated with each other during the reform process, leading to partial or poor implementation of governance reforms.
The findings of this research indicate that the increasing involvement of foreign aid donors in domestic politics in the name of ‘doing politically’ actually eroded public accountability in the developing countries for several reasons. First, when the donors are directly involved in the internal political issues of a developing country, they become party to the success or failure of governance reforms. Thus, they lose ground on moral arguments to hold the regime solely accountable for underperformance. Second, their involvement offers an opportunity for the regimes to blame the donors for any evident underperformance. Third, with the increasing tendency of channelling foreign aid through non-governmental channels, developing countries are sandwiched between two groups of consultants: the economists and the critical sociologists. The former group of largely economic ideologues are associated with international financial institutions such as the World Bank and IMF and the mainstream of the major aid donors such as the UK and the US. The latter is led by the socially committed activists in the international non-government organisations. Tapping the global wave of anti-government sentiment and implementing carefully constructed advocacy programmes, the latter have become overwhelmingly dominant in aid-dependent developing countries. Consequently, the reform agenda of the post-liberalisation era has been compromised in the case of Nepal, especially after the 2006 political movement.
The research findings have significant implications for the understanding of how non-functional transparency creates gross national cynicism, eroding public trust in governments and losing faith in reforms. The study has shown that with constitutional and legal guarantees to the right to information, the emergence of a vibrant media, as well as the empowerment of civil society and the rise of digital governance, transparency has significantly improved in Nepal after the restoration of democracy in 1990. However, greater accountability failed to materialise for a number of reasons. First, in the absence of a clear link between the election performances of the political leaders with their work performance in government, the disconnected political leaders were hardly accountable to the people. Second, public bureaucratic patronage practiced by the major political parties saw accountability suffer.
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This is because the individual performance evaluation of staff was based on their personal connections with the prevailing political power structures and with the senior civil service, rather than their actual work performance. Third, the public sector had a long way to travel to improve its own accountability. Fourth, accountability enforcement mechanisms, including the parliamentary committee system, were not effective. Fifth, in the name of political consensus the rule of law was eroded, especially during the prolonged political transition after 2006. With increased access to information and the advocacy of the non-governmental organisations against the government, coupled with the low level of public sector performance, the people’s sense of resentment and cynicism against the reforms increased tremendously after 1990. This had a negative impact on the implementation of governance reforms.
The findings enhance our understanding of the adoption and implementation of governance reforms in hard places where democracy is yet to be institutionalised. In such places, the role of top level leadership is crucial for the efficient and effective implementation of governance reforms. Good leadership is important everywhere. However, it is arguably more important where democratic systems and processes are yet to be institutionalised. As the leaders are not held personally accountable for results, organisational performance largely depends on personal interest, motives and incentives. Similarly, where informal institutions are more functional than the formal ones, individual leadership can make a huge difference in the making and implementation of reforms. The reform-leading institutions perform better under certain styles of leadership. However, in Nepal’s case, such a benevolent and performance-oriented leadership was rare. In many cases leaders were preoccupied in providing the basis for continuity and upholding the status quo, rather than facilitating change and reform. In some cases, excessive individualism also developed into egoistic individualism.
The study has raised important questions about the ideological drivers behind governance reforms. When ideological factors are prominent in the reform drive in a multiparty system, it quickly becomes an emotional issue. When things get emotional, the possibility of a thorough diagnosis of the problem, identification and analysis of different alternatives and the analysis of possible outcomes tends to be low. In Nepal, both the rightsizing and the privatisation policies after 1990 were basically ideologically driven, although they also had some pragmatic aspects. The left had a strong objection to these policies whereas the right were very much fond of getting them implemented even without creating the necessary legal frameworks to implement the policies. As a result, the reforms encountered serious resistance from the main opposition parties and their affiliated trade unions.
It could be argued that even with a degree of successful implementation of the reforms, this factor alone does not necessarily guarantee the achievement of the reform objectives. In
268 contrast to the general conviction that successful implementation leads to the achievement of the reform objectives, this study found that examples of successful implementation did not achieve the reform objectives. For instance, the voluntary early retirement scheme (VERS) was implemented with great enthusiasm and achieved its intended targets on paper but it failed to achieve the reform objectives as the targeted population did not actually retire. Only competent individuals who were saleable in the market opted for retirement from the public sector. Similarly, the rightsizing component of the Governance Reform Programme exceeded its target of reductions. However, the senior civil servants, being both the stakeholders and the key implementers of civil service rightsizing, massively distorted it in their favour, abolishing the junior positions at the field level offices.
Highlighting the significance of reform readiness, both in the making and implementation of policy reforms, the findings of this research suggest a broader perspective for analysing the reform readiness. Analysis of reform readiness is much more complicated than merely recounting current political developments and assessing the preparatory works to commence implementation. It should be viewed from the broader perspectives of societal culture, administrative traditions, political developments, the character and effectiveness of governance, and many contextual factors which in the Nepalese case was found lacking.
The findings of this research suggest a broader perspective is needed to evaluate success or failure of governance reforms combining both the criteria-based assessments and thick interpretation of process and results. Any criteria-based evaluation of success or failure is useful but it cannot fully capture the dynamic nature of broader governance reforms. From a broader perspective, success and failure of governance reforms go beyond what has been achieved in the here and now to examine the implications for the future directions. In some cases, short-term achievements may also have a detrimental impact in the long term. The success or failure of reforms also depended on who was evaluating them. For instance, privatisation might be seen as a great success for the private sector as it provided some semblance of a level playing field to the private entrepreneurs. On the other hand, privatisation could be regarded as a great disaster from the perspective of consumers as it usually increased the price of the goods or services.
Overall, this research provides a holistic view of a set of governance reform programmes. It offers many valuable insights into the implementation (or non-implementation) of these reform programmes. Analytically, it seeks to investigate the degree to which the proposed reforms were aligned with the intended implementation arrangements and evaluation mechanisms. The Nepalese case reinforces the argument that implementation performance cannot deliver substantial improvements solely by focusing on institutional strengthening, legal reforms or
269 creating incentive structures for reforms. Rather, a holistic view of the entire reform endeavour is necessary to explain these relationships and outcomes. A thorough review of government’s policy documents for the last 26 years revealed that weaknesses, lapses and flaws in the policy content was a prominent inhibiting factor for the successful implementation of governance reforms in Nepal. Accordingly, it can be fairly argued that while some minor administrative improvements were effected, there was little prospect of Nepal achieving substantial and sustainable improvements to its overall governance.
Last but not the least, the research findings highlight the severity of the governance problems in Nepal which, if not addressed urgently, may soon develop into a serious crisis in governance and governability. The country can no longer afford to maintain the grossly underperforming civil service, or entering the privatisation process that has been unresolved for quite a long time now, and tolerate the contagious systemic corruption contaminating the whole society. However, without addressing the underlying causes and roots of the deeply entrenched problems within the state and society, no substantial progress will be achieved. Without such fundamental change, superficial reform rhetoric cannot achieve the much anticipated reform objectives.
9.2 Implications of the research to other similar developing countries
Nepal is not a unique case in failing to implement governance reforms. Many other developing countries have had similar results. As with the case of Nepal, initial achievements of governance reforms in Uganda in the 1990s did not last long. Within a couple of years, momentum was lost and the reform process eventually stalled (Robinson 2007a). Polidano (2001) reported similar results for civil service reforms in many other developing countries. As in Nepal, the civil servants distorted the donor-driven civil service reform policies by selectively implementing the components that suited their interests. Similar trends were also found in other South Asian countries when it came to implementing civil service downsizing policies. For instance, Sri Lanka initiated administrative reforms in 1989 with a target of 20 percent downsizing. However, at the same time the size of its executive group was increased by 56.17 percent to 1992. Likewise, Bhutan retrenched 2,500 public service positions after the government started its civil service downsizing policy in 1987. However, by 1991 they had 3,400 new recruitments, mostly under contractual employment (MHHDC 1999, p.151). All these examples show that when the stakeholders and the key implementers are the same, they selectively implement only the policies that suit their interests.
The experience of civil service downsizing in many developing countries shows that it should not be treated as an isolated reform initiative but as part of an overall reform package (Peters 1998). For this reason, too, Nepal opted for a voluntary early retirement scheme to avoid the
270 problems and likely resistance to any arbitrary involuntary retirement scheme. Downsizing reforms are often politically difficult and thus many developing countries seeking to achieve it avoided involuntary dismissals and adopted voluntary approaches to retrenchment instead. From a management perspective, it is often difficult to identify redundant positions and assess the direct and indirect impacts of downsizing on the public service and national economy (Rama 1999). In the case Nepal, the organisational restructuring exercise was carried out based purely on some arbitrary quantitative targets imposed on certain public institutions rather than rigorous functional analysis and work-load assessment.
Civil service reforms in developing countries derived from the external development partners have rarely succeeded (McCourt 2005). Reforms driven by a small team of external experts and the ones with deeply flawed policies are less likely to be successful (Moshonas 2014). Thus the process of engaging concerned policy actors and stakeholders is crucial in civil service reforms, as such collaborative approaches are extremely important for reforms in difficult environments (Roseth and Srivastava 2015). Other studies have found administrative tradition and domestic political forces to be important determinants for the scarce success of civil service reforms (Brosamle 2012).
Privatisation elsewhere in South Asia has also followed the same trajectory as in Nepal – with similar results. Many South Asian countries initiated privatisation in the late 1980s, mostly under the pressure of foreign aid donors. But none of these countries managed to attain significant achievements (Kanesalingam 1991). In Bangladesh, 40 to 50 percent of the privatised enterprises were eventually closed after privatisation (Sen 1997; World Bank 1993a). Even after three decades’ of privatisation efforts in Pakistan, the government failed to achieve its objectives of private sector development, a reduction in the financial burden on government and some contribution to poverty alleviation (Tahir 2014).
Gupta (2008) also found the privatisation process to be slow and partial in India, Sri Lanka, Pakistan and Bangladesh. Political barriers were identified as the main reason for the slow and poor progress of privatisation. However, unlike Nepal, these countries had created strong government agencies to implement their privatisation transformations. In India, a cabinet-level ministerial position was created to expedite privatisation. India also had a core group of secretaries to ensure inter-ministerial coordination for privatisation (GoI 2007).
The South Asian countries sharing a similar historical and cultural heritage to Nepal were found to be among the most corrupt countries in the Asia-Pacific region. Campbell and Saha (2013) found that the transition from autocratic rule to the highly imperfect electoral democracy generally increased the level of corruption in South Asian countries. Democracy offered a better environment for institutional development of anti-corruption agencies but did not contribute to
271 expedite anti-corruption reforms and reduce corruption. This was because patronage and family ties were found to be influential in many of the Asian countries (Kember 2005).
South Asian countries were forced to adopt anti-corruption reform initiatives after Sept 11, 2001. Despite several reform initiatives to fight against corruption, these countries were found mired in rampant corruption. As corruption became the way of life in much of South Asia, anti- corruption reforms have failed miserably (Transparency International 2004; Yadav 2011). And while corruption is widespread throughout the world, it is more prevalent in certain regions than others. In a scoring scale of 0-100, for example, all South Asian countries except Bhutan have corruption index scores of 40 or less.267
Hence, there are many similarities between the Nepalese case and other developing countries in South Asia and beyond. Many of the findings of this research are relevant to these other contexts and thus lessons can be drawn to improve implementation performance elsewhere. However, replication should be carefully considered through the use of rigorous comparative case studies.
9.3 Significance of the research
My research explored governance reforms, a relatively little studied area of implementation research (Saetren 2005a). This research extends our knowledge and understanding of the making and implementation of governance reforms as a dynamic political process with special reference to a little-studied, aid-dependent developing country. This is the first comprehensive historically informed study of public sector governance reforms in Nepal. The major academic contribution along with the implications to the policy and practice are presented in sub-sections 9.3.1 and 9.3.2 below.
9.3.1 Academic contribution
Synthesising an extensive review and critical analysis of literature on political economy analysis, state-society relations, political regime dynamics, political-bureaucratic interface, policy-making and implementation studies, my research has relied on a comprehensive political economy framework to examine the politics of making and implementation of governance reforms in developing countries like Nepal. The framework combines several theories, models and organising perspectives relevant to governance reforms in developing countries from historical perspectives: this is the main contribution of this research. Presenting governance reforms as a dynamic interplay among the state and non-state actors, the analytical framework
267 Countries score from 0 (the highly corrupt) to 100 (highly clean). Source: https://www.transparency.org/ access: 13 May 2017 272 allowed an in-depth analysis of interests, incentives, power and behaviour of the key policy actors and stakeholders during the reform process. Conceptually comprehensive, methodologically systematic and theoretically powerful, the framework unveiled and unravelled the politics of making and implementation of governance reforms in Nepal.
The theories used in the broader political economy framework also helped me answer the research sub-questions of this research. The agenda setting approaches were useful, especially in identifying and explaining the drivers of governance reforms. The theoretical underpinning of Nepal’s state-society relations, political-bureaucratic relations, political regime and state-donor dynamics was helpful in evaluating the public sector capacity and reform readiness in the making and implementation of governance reforms in the country.
The theoretical constructs were important to all three cases. However, some constructs were more relevant to one or more cases. For instance, the political-bureaucratic interface was found to be more relevant to the civil service rightsizing initiatives. The changing political complexion of the state regime was more relevant to privatisation, as it was crucially important to open or close the window of opportunity for privatisation. Similarly, state-society relations was more relevant to anti-corruption reforms. State-donor dynamics and the theories of policy transfer were important in explaining and interpreting the reform agendas. The interactive approach to policy implementation was useful in explaining and interpreting the role of context, actors and institutions in the reform process. The improvement-oriented formative evaluation was useful in identifying and examining the contributing and inhibiting factors of governance reforms in Nepal.
While providing both methodological rigour and data source triangulation, the mixed method research design – employing a questionnaire survey, thematic focus group discussions, elite interviews and a thorough analysis of policy documents for the last 26 years – also offered logically consistent and robust explanations of the interface, interrelationships and interactions among different policy actors and stakeholders of governance reforms. The key strengths of this research are its long duration and the hard evidence of policy documents and reform results to back-up perception, beliefs, attitudes and opinion of the research participants.
Besides the analytical framework, my research also contributed to the policy transfer literature by expanding the existing policy transfer framework (see Figure 2.1). Similarly, albeit on a small scale, it has also contributed to the policy success or failure literature. It has done this by positing a dynamic perspective to the evaluation of success or failure of governance reforms that combines the criteria based assessments with thick interpretations of reform outcomes (see chapter 2). The dynamic perspective was found useful to this research while explaining and interpreting the reform outcomes in relation to the reform objectives.
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9.3.2 Contribution to policy and practice
The findings of this thesis could be used to help improve both the making and implementation of governance reforms in aid-dependant developing countries like Nepal. In this regard, the findings provide a number of practical insights to the policymakers and development partners. First, the adoption of governance reforms without proper diagnosis is bound to fail. The limited achievements made, if at all, do not sustain long. Second, the degree of reform readiness has to be considered from a broader perspective, looking beyond the institutional and legal frameworks to implement reforms. It has to be assessed considering the past track record of implementation and political as well as social constraints to implement the proposed reforms. Third, reform approach and strategies should be consistent with the reform objectives. For instance, the highly centralised approach to anti-corruption reforms did not have a significant impact on the reform objective of improving public service delivery through anti-corruption interventions. Fourth, contextual analysis should be viewed more than just enumerating political events in the recent past. It has to be analysed from a broader political economy perspective. Fifth, reformers need to develop a critical mass of mobilisation to provide continuous support for the reforms and to manage resistance. Sixth, reformers should seriously consider the stakes, interests and incentives of the key implementers before initiating governance reforms to ensure their genuine commitment to reforms. Seventh, reformers should consider implementation accountability right from the formulation process. More importantly, reformers have to be clear on what aspects of governance are to be reformed and what needs to be overcome. Certainly, reforms cannot be implemented efficiently and effectively without overcoming the critical inhibiting factors and breaking the status quo tendency of the reform agents.
As Hudson and Leftwich (2014)have already argued, external development partners need to consider the particular political dynamism of a national entity rather than simply relying more heavily on abstracted economic assumptions. They need to seriously consider local culture, vested interests, ideas and power relations among the key policy actors and stakeholders while designing policy reforms. They should be aware that direct intervention ‘to act politically’ may have a detrimental impact on implementation accountability. Similarly, political analysis should not confine itself to the political regime at the centre; rather it should move further to capture the real politics of the dynamic interplay among the different policy actors and stakeholders down to the implementation level. They also need to ensure continuous engagement with the key domestic policy actors and stakeholders to ensure sustainable outcomes of governance reforms.
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9.4 Suggestions for further research
While the findings and conclusions presented in this thesis across the three cases have provided valuable insights into the making and implementation of governance reforms in aid-dependant developing countries like Nepal, there are several other areas that would benefit from further research.
First, further studies need to be carried out to validate and test the generalisability of my analytical frameworks developed in chapter two. What is now needed is a cross-national study involving similar countries in South Asia and beyond, such as Sri Lanka, Bangladesh and perhaps Laos or Cambodia. These countries share similar political developments, societal cultures and administrative traditions that allow us to test the efficacy and applicability of a broader political economy framework in similar settings. A comparative study could explore a single theme between two or more countries. Such a study could also offer a more sophisticated comparison between the best practices and the failure to explain and interpret why some reforms are better implemented than others.
Second, it would be useful to compare the adoption and implementation of governance reforms at the central government level with that of the street-level delivery offices. This is because the scope of my study was primarily focused on the central government. I also had some insights from the field offices while making observations of some of the service delivery points at the field level during my field work in 2014. However, these observations were not sufficiently in- depth to generalise reforms at the delivery points.
Third, it would be interesting to compare purely domestic or endogenous reform initiatives versus externally imposed donor-funded reform programmes using a case study approach. Further research could explore one or more cases from each category. It could provide valuable insights into the relevance of conditionality-based governance reform initiatives in inducing, implementing and buttressing reforms.
Lastly, the concept of reform readiness and the resort to the almost theatrical ‘Goffmanian frontality’ as posited in this thesis could be further developed and applied to examine political and bureaucratic ownership and commitment to conditionality-based governance reforms in similar developing countries in South Asia or beyond. Cross-national studies could provide valuable insights on why some countries have enjoyed better performance than others while implementing conditionality-based governance reforms.
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Annex 1A: Survey questionnaire on civil service rightsizing
Code No:
General Information of the Respondent [please insert symbol (√) in the relevant box]
1. Age Group: 18- 30 years 31-45 years * 46-58years √ Above 58 years -
2. Sex: Male Female
3. Professional Category: Political Position Academia/Free-lance Expert
Civil Service Other Public Service Donor/INGO NGO
Civil Society Trade Union
Private Business Media
Other (please specify) ………… 4. Professional Position: Secretary/ Chief Executive Officer/ Office Head
Joint Secretary/ Senior Executive/Head of Department
Under Secretary/Officer/ Manager
Junior Officer/ Assistants / Frontline Staff
Other (please specify) ………………………. 5. Current Work Station: Kathmandu Valley Outside Kathmandu Valley
If outside the Kathmandu Valley, please specify the district ……………… 6. Work Experience: Less than 5 years 6-15 years
16-25 years More than 25 years
6. Education: SLC/ IA/ Plus 2 Bachelor’s Degree
Master’s Degree PhD or above
7. Foreign Education and Training:
Education: Yes No
309
If yes,
Subject/ Area Duration
Training: Yes No
If yes,
Subject/ Area Duration
310
Code No. :
Civil Service Rightsizing268
Section A
1. Context of Reforms [Please insert symbol (√) in the number of your choice] Statement strongl don’t strongl y know agree neutral disagree y agree disagre e a. Political change of 1990 created favorable environment to initiate 5 4 3 2 1 0 administrative reforms in Nepal. b. There was a consensus among the major political parties to launch civil service rightsizing 5 4 3 2 1 0 reforms. c. civil service rightsizing reforms was a priority agenda of the 5 4 3 2 1 0 government. d. Civil servants anticipated major administrative reforms after the 5 4 3 2 1 0 political change. e. Society was supportive to launch civil service rightsizing 5 4 3 2 1 0 reforms. f. The government relied on foreign aid to finance its 5 4 3 2 1 0 development needs. g. International financial institutions like the World Bank and IMF advised the government to implement new 5 4 3 2 1 0 public management oriented reforms. h. Civil service rightsizing reform was influenced by the global trend of new public management 5 4 3 2 1 0 reforms? i. Many of the reform measures were based on the experience of 5 4 3 2 1 0 other countries.
268This questionnaire will be used only for the academic purpose. The answers will be kept securely with due confidentiality. Your individual identity will not be disclosed without prior consent. If you have any question or query regarding this research please contact me through the following contact details:[email protected] or [email protected] ; Mobile: 9841386329; 9841243285 311 j. The non-governmental actors also had an opportunity to influence the administrative 5 4 3 2 1 0 reform process. k. Overall, the context of civil service rightsizing reforms was favorable to initiate 5 4 3 2 1 0 administrative reform in the country.
2. Actors Involved in the Reform Process [Please insert symbol (√) in the number of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know a. Major national political parties had clear reform agenda. 5 4 3 2 1 0 b. Political leaders continued their commitment to administrative reforms irrespective to the 5 4 3 2 1 0 changes in government. c. Administrative leaders were actively engaged in in the civil service rightsizing reforms 5 4 3 2 1 0 process. d. Civil servants had ownership on administrative reform agenda. 5 4 3 2 1 0 e. Civil service trade unions supported the reform agenda. 5 4 3 2 1 0 f. Development partners were interested in promoting liberal economic policies through 5 4 3 2 1 0 administrative reforms. g. Civil society was actively engaged in the administrative 5 4 3 2 1 0 reform process. h. Private sector had realized the importance of civil service rightsizing reforms in the 5 4 3 2 1 0 country. i. Free-lance experts’ views on civil service rightsizing reforms were widely disseminated in the 5 4 3 2 1 0 national media. j. The non-government sector used to demand administrative 5 4 3 2 1 0 reforms in the country.
312 k. There was a critical mass to implement civil service 5 4 3 2 1 0 rightsizing reforms. 3. 3. Institutional Setting [Please insert symbol (√) in the number of your choice]
Statement strongl strongly don’t agree neutral disagree y agree disagree know a. The major stakeholders were represented in the civil service 5 4 3 2 1 0 rightsizing reforms. b. Reform leading institutions had competent human resources to 5 4 3 2 1 0 expedite reform process. c. Institutional strengthening of key implementing agencies was carried out before commencing 5 4 3 2 1 0 implementation of civil service rightsizing reforms. d. All the institutions involved in the civil service rightsizing reforms process were assigned 5 4 3 2 1 0 with specific and clear roles and responsibilities. e. Executing agency was capable to effectively coordinate all the implementing agencies including 5 4 3 2 1 0 the agencies with staff functions. f. National civil service was competent to implement 5 4 3 2 1 0 administrative reform policies. g. Informal institutions, norms and values were more powerful than the formal ones in the civil 5 4 3 2 1 0 service rightsizing reforms. h. An adequate financial resource was provided to the implementing agencies to carry 5 4 3 2 1 0 out the reforms. i. Administrative culture was performance oriented. 5 4 3 2 1 0 j. The government had an effective reward and punishment system to 5 4 3 2 1 0 expedite the reforms. k. Public accountability mechanism was effective to enforce implementation of the adopted 5 4 3 2 1 0 reform measures.
313
4. Reform Process [Please insert symbol (√) in the number of your choice]
Statement strongl strongly don’t agree neutral disagree y agree disagree know a. The civil service rightsizing reforms had suggestions and feedback from a large number of 5 4 3 2 1 0 policy actors and stakeholders of administrative reforms. b. The government considered the suggestions and feedback while 5 4 3 2 1 0 preparing its final report. c. There was an effective policy dialogue among the key stakeholders of civil service 5 4 3 2 1 0 rightsizing reforms. d. Interactions among the key policy actors and stakeholders 5 4 3 2 1 0 were transparent. e. Implementation analysis was carried out before adopting the agenda of civil service 5 4 3 2 1 0 rightsizing reforms. f. Detailed action plans were devised before formally announcing the implementation 5 4 3 2 1 0 of civil service rightsizing reforms. g. Reform agenda were periodically reviewed to test their relevance 5 4 3 2 1 0 in the present context. h. Periodic reports on implementation of civil service rightsizing reforms were widely 5 4 3 2 1 0 disseminated. i. Implementation of civil service rightsizing reforms was regularly 5 4 3 2 1 0 monitored. j. Feedbacks from monitoring and evaluation were utilized to enhance the level of 5 4 3 2 1 0 implementation. k. Overall, the reform process was efficient. 5 4 3 2 1 0
314
5. Achievements of Reforms [Please insert symbol (√) in the number of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know a. Most of the recommendations of civil service rightsizing reforms 5 4 3 2 1 0 were implemented. b. Working methods and procedures of government organizations were significantly 5 4 3 2 1 0 improved in the post 1990 period. c. Public service delivery was significantly improved. 5 4 3 2 1 0 d. Financial burden of administrative organizations was significantly reduced through 5 4 3 2 1 0 organizational restructuring. e. Motivation and morale of civil service employees were 5 4 3 2 1 0 improved. f. Non-government sectors’ involvement in public service 5 4 3 2 1 0 delivery was increased. g. Public servants’ ethical orientation towards service 5 4 3 2 1 0 delivery was improved. h. Legal foundation was established to implement new public management reforms in Nepalese 5 4 3 2 1 0 civil service. i. Most of the reform activities reached to the logical end. 5 4 3 2 1 0 j. The reform had positive impact on civil service reforms. 5 4 3 2 1 0 k. Overall, the civil service rightsizing reforms were 5 4 3 2 1 0 successfully implemented. l. The civil service rightsizing reforms achieved its reform 5 4 3 2 1 0 objectives.
315
Section B
1. What do you think was the most import source of idea of forming the civil service rightsizing reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference. Periodic Plan/National Policy Annual Policy/Program
Development Partners’ Recommendation Consultants’ Report
Vision of Political Executive Popular Demand
Election Manifesto Advice of Senior Civil Servant
Parliament’s Direction Court’s Verdict
Other (please specify) ………………… ……………………
2. In your opinion, what was the most important driving force for initiating civil service rightsizing reforms in the 1990s? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Pressure Financial Pressure
Populist Pressure Ideological Pressure
Ecological Pressure Pragmatic Pressure
Other (please specify) ………………… ……………………
3. Who were the most important actors to influence the final report of the civil service rightsizing reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leaders Senior Civil Servants
Development Partners Trade Unions
Civil Society Foreign Experts
316
Local Experts Mass Media
Other (please specify) ………………… …………………
4. Who were the most influential actors for implementing administrative reform agenda of 1991 civil service rightsizing? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leader Civil Society
Senior Bureaucrats Private sector
Mid-career Civil Servants Development Partners
Frontline Managers Trade Union
Other (please specify) ………………… ………………
5. Do you think that the report of the civil service rightsizing reforms was successfully implemented? Yes No If Yes, a. What was the most contributing factor to implement the recommendations? (Please rank in order 1, 2, 3 etc.; 1 for the highest preference) Political Commitment Bureaucratic Ownership
Policy Dialogue Institutional Capability
Accountability Mechanism Civil Service
Leadership Quality Administrative Work Culture
Resource Availability Societal Support
Other (please specify) …………………………..
317
If No,
b. What was the mostinhibiting factor to implement the recommendations of civil service rightsizing reforms? (Please give in order 1, 2, 3 etc.; 1 for the highest preference)
Lack ofPolitical Commitment
Weak Institutional Capacity
Lack of Resources
Lack of Effective Monitoring &
Evaluation System
Lack of Societal Pressure
Other (please specify) ……………………
Lack of Bureaucratic Ownership
Lack of Appropriate Work Culture
Impractical Policy Measures
Mechanism
318
Section C
1. What is your overall impression of the civil service rightsizing reforms? (You can write in bullet points.) a. On Formation:
b. On Working Procedure:
c. On Recommendations:
d. On Implementation:
e. On Outcome:
2. Would you like to add anything on civil service rightsizing reforms or on any aspect of administrative reforms in Nepal or elsewhere that would be useful to my research?
320
Annex 1B: Survey questionnaire on privatization
Code No:
General Information of the Respondent [please insert symbol (√) in the relevant box]
1. Age Group: 18- 30 years 31-45 years * 46-58years √ Above 58 years -
2. Sex: Male Female
3. Professional Category: Political Position Academia/Free-lance Expert
Civil Service Other Public Service Donor/INGO NGO
Civil Society Trade Union
Private Business Media
Other (please specify) ………… 4. Professional Position: Secretary/ Chief Executive Officer/ Office Head
Joint Secretary/ Senior Executive/Head of Department
Under Secretary/Officer/ Manager
Junior Officer/ Assistants / Frontline Staff
Other (please specify) ………………………. 5. Current Work Station: Kathmandu Valley Outside Kathmandu Valley
If outside the Kathmandu Valley, please specify the district ……………… 6. Work Experience: Less than 5 years 6-15 years 16-25 years More than 25 years
6. Education: SLC/ IA/ Plus 2 Bachelor’s Degree
Master’s Degree PhD or above
7. Foreign Education and Training:
Education: Yes No
321
If yes,
Subject/ Area Duration
Training: Yes No
If yes,
Subject/ Area Duration
322
Code No. :
Privatization of Public Enterprises269
Section A
1. Context of Reforms [Please insert symbol (√) in the option of your choice] Statement strongl don’t strongl y know agree neutral disagree y agree disagre e l. Political situation was favorable to initiate privatization of public 5 4 3 2 1 0 enterprises in the 1990s. m. There was a consensus among the major political parties to launch privatization of public 5 4 3 2 1 0 enterprises. n. Privatization of public enterprises was a priority agenda 5 4 3 2 1 0 of the government. o. Civil servants anticipated major privatization of public 5 4 3 2 1 0 enterprises. p. Society was supportive to launch privatization of public 5 4 3 2 1 0 enterprises. q. The government relied on foreign aid to finance its 5 4 3 2 1 0 development programs. r. International financial institutions like the World Bank and IMF advised the government to implement new 5 4 3 2 1 0 public management oriented reforms. s. The privatization policy was influenced by the global trend of 5 4 3 2 1 0 public management reforms? t. Many of the reform measures were based on the experience of 5 4 3 2 1 0 other countries.
269This questionnaire will be used only for the academic purpose. The answers will be kept securely with due confidentiality. Your individual identity will not be disclosed without prior consent. If you have any question or query regarding this research please contact me through the following contact details:[email protected] or [email protected] ; Mobile: 9841386329; 9841243285 323 u. The non-governmental actors also had an opportunity to influence the process of 5 4 3 2 1 0 privatization of public enterprises. v. Overall, the context of privatization of public 5 4 3 2 1 0 enterprises was appropriate.
2. Actors Involved in the Reform Process [Please insert symbol (√) in the option of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know l. Major political parties had clear reform agenda. 5 4 3 2 1 0 m. Political leaders continued their commitment to privatization irrespective to the changes in 5 4 3 2 1 0 government. n. Administrative leaders were actively engaged in in the reform 5 4 3 2 1 0 process. o. Civil servants had ownership on the privatization agenda. 5 4 3 2 1 0 p. Public service trade unions supported the privatization 5 4 3 2 1 0 agenda. q. Development partners were interested in promoting liberal economic policies through 5 4 3 2 1 0 privatization of public enterprises. r. Civil society was actively engaged in the reform process. 5 4 3 2 1 0 s. Private sector had realized the importance of privatization. 5 4 3 2 1 0 t. Free-lance experts’ views on privatization were widely disseminated in the national 5 4 3 2 1 0 media. u. The non-government sector used to demand privatization in the 5 4 3 2 1 0 country. v. There was a critical mass to implement privatization in civil 5 4 3 2 1 0 service.
324
3. Institutional Setting [Please insert symbol (√) in the option of your choice]
Statement strongl strongly don’t agree neutral disagree y agree disagree know l. Major policy actors and the concerned stakeholders were represented in the institutional 5 4 3 2 1 0 structure of privatization of public enterprises. m. The government provided sufficient human resources to implement the privatization 5 4 3 2 1 0 policy. n. Institutional strengthening of key implementing agencies was carried out before commencing 5 4 3 2 1 0 implementation of privatization. o. All the institutions involved in the privatization process were assigned with specific and clear 5 4 3 2 1 0 roles and responsibilities. p. Executing agency was capable to effectively coordinate all the 5 4 3 2 1 0 implementing units. q. Civil service was competent to implement the privatization 5 4 3 2 1 0 policies. r. Informal institutions, norms and values were more powerful than the formal ones in the 5 4 3 2 1 0 privatization process. s. An adequate financial resource was provided to the implementing agencies to carry 5 4 3 2 1 0 out the reforms. t. Administrative culture was performance oriented. 5 4 3 2 1 0 u. The government had an effective reward and punishment system to 5 4 3 2 1 0 expedite reforms. v. Public accountability mechanism was effective to enforce implementation of the adopted 5 4 3 2 1 0 reform measures.
325
4. Reform Process [Please insert symbol (√) in the option of your choice]
Statement strongl strongly don’t agree neutral disagree y agree disagree know l. The privatization policy process had suggestions and feedback from a large number of policy 5 4 3 2 1 0 actors and stakeholders of public sector reforms. m. The suggestions and feedback were considered while designing 5 4 3 2 1 0 the privatization programs. n. There was an effective policy dialogue among the key 5 4 3 2 1 0 stakeholders of privatization. o. Interactions among the key policy actors and stakeholders 5 4 3 2 1 0 were transparent. p. Implementation analysis was carried out before adopting the 5 4 3 2 1 0 agenda of privatization. q. Detailed action plans were devised before formally announcing the implementation 5 4 3 2 1 0 of privatization. r. Policy making process of public enterprise privatization was 5 4 3 2 1 0 participative. s. Reform agenda were periodically reviewed to test their relevance 5 4 3 2 1 0 in the present context. t. Periodic reports on the implementation of privatization 5 4 3 2 1 0 were widely disseminated. u. Feedbacks from monitoring and evaluation were utilized to enhance the level of 5 4 3 2 1 0 implementation. v. Overall, privatization was efficient. 5 4 3 2 1 0
326
5. Achievements of Reforms [Please insert symbol (√) in the option of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know m. Most of the reform agenda of privatization policies were 5 4 3 2 1 0 implemented. n. Government’s revenue mobilization was significantly 5 4 3 2 1 0 increased. o. Public expenditure was focused on priority projects. 5 4 3 2 1 0 p. Performance-based budget management enhanced efficiency 5 4 3 2 1 0 of government investment. q. Disengagement from public enterprise ownership enhanced efficiency of the state owned 5 4 3 2 1 0 enterprises. r. Divestiture of public enterprises significantly reduced financial 5 4 3 2 1 0 burden of the government. s. Formula-based grant distribution system to the local bodies increased allocative efficiency of 5 4 3 2 1 0 the government. t. The privatization had a significant contribution in promoting financial 5 4 3 2 1 0 accountability in public service. u. Privatization had significant contribution on private sector 5 4 3 2 1 0 development in the country. v. Overall, the privatization was successfully implemented. 5 4 3 2 1 0 w. The privatization had sustainable outcomes. 5 4 3 2 1 0
327
Section B
1. What do you think was the most import source of idea of public enterprise privatization? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Periodic Plan/National Policy Annual Policy/Program
Development Partners’ Recommendation Consultants’ Report
Vision of Political Executive Popular Demand
Election Manifesto Advice of Senior Civil Servant
Parliament’s Direction Court’s Verdict
Other (please specify) ………………… ……………………
2. In your opinion, what was the most important driving force for initiating privatization in the country? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Pressure
Populist Pressure
Ecological Pressure
Financial Pressure
Ideological Pressure
Pragmatic Pressure
Other (please specify ………………
3. Who were the most important actors to influence the design of privatization policy? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leaders
328
Development Partners
Civil Society
Senior Civil Servants
Trade Unions
Foreign Experts
Local Experts
Mass Media
Other (please specify) ………………… …………………
4. Who were the most influential actors for implementing the privatization policy? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leader
Senior Civil Servants
Mid-career Civil Servants
Frontline Managers
Civil Society
Private sector
Development Partners
Trade Union
Other (please specify) ………………… ………………
329
5. Do you think that privatization policy was successfully implemented?
Yes No
If Yes,
a. What was the most contributing factorfor the implementation of the privatization policy? (Please rank in order 1, 2, 3 etc.; 1 for the highest preference)
Political Commitment Institutional Capability
Policy Dialogue Civil Service
Accountability Administrative Work Mechanism Culture
Leadership Quality Resource Availability
Bureaucratic Ownership Societal Support
Other (please specify) …………
If No,
b. What was the most inhibiting factor for the implementation of privatization policy? (Please rank in order 1, 2, 3 etc.; 1 for the highest preference)
Lack of Political Commitment
Weak Institutional Capacity
Lack of Resources
Lack of Effective Monitoring &Evaluation System
Lack of Societal Pressure
Lack of Bureaucratic Ownership
Lack of Appropriate Work Culture
330
Impractical Policy Measures
Lack of Effective Accountability Mechanism
Lack of Effective Leadership
Other (please specify) …
331
Section C
3. What is your overall impression of the public enterprise privatization on the following? (You can write in bullet points.)
a. Reform Agenda:
b. Program Design:
c. Institutional environment:
d. Actors, interests and incentives:
e. Implementation:
f. Sustainability of achievements:
4. Would you like to add any comment or observation on the design and implementation of privatization policies? (Please add additional sheet if necessary).
332
Annex 1C: Survey questionnaire on anti-corruption reforms
Code No:
General Information of the Respondent [please insert symbol (√) in the relevant box]
1. Age Group: 18- 30 years 31-45 years * 46-58years √ Above 58 years -
2. Sex: Male Female
3. Professional Category: Political Position Academia/Free-lance Expert
Civil Service Other Public Service Donor/INGO NGO
Civil Society Trade Union
Private Business Media
Other (please specify) ………… 4. Professional Position: Secretary/ Chief Executive Officer/ Office Head
Joint Secretary/ Senior Executive/Head of Department
Under Secretary/Officer/ Manager
Junior Officer/ Assistants / Frontline Staff
Other (please specify) ………………………. 5. Current Work Station: Kathmandu Valley Outside Kathmandu Valley
If outside the Kathmandu Valley, please specify the district ……………… 6. Work Experience: Less than 5 years 6-15 years 16-25 years More than 25 years
6. Education: SLC/ IA/ Plus 2 Bachelor’s Degree
Master’s Degree PhD or above
7. Foreign Education and Training:
Education: Yes No
333
If yes,
Subject/ Area Duration
Training: Yes No
If yes,
Subject/ Area Duration
334
Code No. :
Anti-corruption Reforms270
Section A
1. Context of Reforms [Please insert symbol (√) in the number of your choice] Statement strongl don’t strongl y know agree neutral disagree y agree disagre e w. Political situation was favorable to initiate anti-corruption 5 4 3 2 1 0 reforms in the country. x. There was a consensus among the major political parties to launch the anti-corruption 5 4 3 2 1 0 reforms. y. Anti-corruption reform was a priority agenda of the 5 4 3 2 1 0 government. z. Civil servants anticipated major governance reforms. 5 4 3 2 1 0 aa. Society was supportive to launch anti-corruption reforms. 5 4 3 2 1 0 bb. The government relied on foreign aid to finance its 5 4 3 2 1 0 development needs. cc. International financial institutions like the World Bank and IMF advised the government to implement new 5 4 3 2 1 0 public management oriented reforms. dd. anti-corruption reformswas influenced by the global trend of 5 4 3 2 1 0 governance reforms? ee. Many of the reform measures were based on the experience of 5 4 3 2 1 0 other countries.
270This questionnaire will be used only for the academic purpose. The answers will be kept securely with due confidentiality. Your individual identity will not be disclosed without prior consent. If you have any question or query regarding this research please contact me through the following contact details:[email protected] or [email protected] ; Mobile: 9841386329; 9841243285 335 ff. The non-governmental actors also had an opportunity to influence the anti-corruption 5 4 3 2 1 0 reforms process. gg. Overall, the context of anti- corruption reform was appropriate to initiate 5 4 3 2 1 0 governance reforms in the country.
2. Actors Involved in the Reform Process [Please insert symbol (√) in the number of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know w. Major political parties had clear reform agenda. 5 4 3 2 1 0 x. Political leaders continued their commitment to anti-corruption reforms irrespective to the 5 4 3 2 1 0 changes in government. y. Administrative leaders were actively engaged in in the reform 5 4 3 2 1 0 process. z. Civil servants had ownership on anti-corruption reform agendas. 5 4 3 2 1 0 aa. Civil service trade unions supported the reform agenda 5 4 3 2 1 0 bb. Development partners were interested in promoting liberal economic policies through 5 4 3 2 1 0 governance reforms. cc. Civil society was actively engaged in the reform process. 5 4 3 2 1 0 dd. Private sector had realized the importance of anti-corruption 5 4 3 2 1 0 reformsin the country. ee. Free-lance experts’ views on anti-corruption reformswere widely disseminated in the 5 4 3 2 1 0 national media. ff. The non-government sector used to demand governance reforms in 5 4 3 2 1 0 the country. gg. There was a critical mass to implement anti-corruption 5 4 3 2 1 0 reformsin the civil service.
336
3. Institutional Setting [Please insert symbol (√) in the number of your choice]
Statement strongl strongly don’t agree neutral disagree y agree disagree know w. Major policy actors and the concerned stakeholders were represented in the institutional 5 4 3 2 1 0 structure of anti-corruption reforms. x. The government provided sufficient human resources to implement the anti-corruption 5 4 3 2 1 0 reforms. y. Institutional strengthening of key implementing agencies was carried out before commencing 5 4 3 2 1 0 implementation of anti- corruption reforms. z. All the institutions involved in the reform process were assigned with specific and clear roles and 5 4 3 2 1 0 responsibilities. aa. Executing agency was capable to effectively coordinate all the implementing agencies including 5 4 3 2 1 0 the agencies with staff functions. bb. National civil service was competent to implement anti- 5 4 3 2 1 0 corruption reforms. cc. Informal institutions, norms and values were more powerful than the formal ones in the reform 5 4 3 2 1 0 process. dd. An adequate financial resource was provided to the implementing agencies to carry 5 4 3 2 1 0 out the reforms. ee. Administrative culture was performance-oriented. 5 4 3 2 1 0 ff. The government had an effective reward and punishment system to 5 4 3 2 1 0 expedite reforms. gg. Public accountability mechanism was effective enough to enforce implementation of the 5 4 3 2 1 0 adopted reform measures.
4. Reform Process [Please insert symbol (√) in the number of your choice] 337
Statement strongl strongly don’t agree neutral disagree y agree disagree know w. Anti-corruption reforms had suggestions and feedback from a large number of policy actors 5 4 3 2 1 0 and stakeholders of governance reforms. x. The suggestions and feedback were considered while designing 5 4 3 2 1 0 the reform program. y. There was an effective policy dialogue among the key stakeholders of anti-corruption 5 4 3 2 1 0 reforms. z. Interactions among the key policy actors and stakeholders 5 4 3 2 1 0 were transparent. aa. Implementation analysis was carried out before adopting the agenda of anti-corruption 5 4 3 2 1 0 reforms. bb. Detailed action plans were devised before formally announcing the implementation 5 4 3 2 1 0 of anti-corruption reforms. cc. Policy making process of anti- corruption reforms was 5 4 3 2 1 0 participative. dd. Reform agenda were periodically reviewed to test their 5 4 3 2 1 0 relevance in the present context. ee. Periodic reports on the implementation of anti- corruption reforms were widely 5 4 3 2 1 0 disseminated. ff. Feedbacks from monitoring and evaluation were utilized to enhance the level of 5 4 3 2 1 0 implementation. gg. Overall, implementation of anti-corruption reformswas 5 4 3 2 1 0 efficient.
5. Achievements of Reforms [Please insert symbol (√) in the number of your choice]
Statement strongl disagre strongly don’t agree neutral y agree e disagree know
338 c. Most of the reform agenda of anti-corruption reforms were 5 4 3 2 1 0 implemented. d. The role of politics and administration was clearly 5 4 3 2 1 0 defined. e. Central level government organizations strengthened their internal capacity to implement 5 4 3 2 1 0 anti-corruption reforms. f. Anti-corruption reforms promoted result oriented work culture in the Nepalese public 5 4 3 2 1 0 service. g. Anti-corruption reforms promoted ethics and integrity in 5 4 3 2 1 0 the public service. h. anti-corruption reforms had significant contribution in improving public service 5 4 3 2 1 0 delivery in the country. i. The reform had significant contribution in improving public accountability system in the 5 4 3 2 1 0 country. j. Motivation and morale of civil service were enhanced. 5 4 3 2 1 0 k. Women’s participation in civil service was significantly 5 4 3 2 1 0 increased. l. The anti-corruption reforms had a significant contribution in promoting transparency in public 5 4 3 2 1 0 service. m. Overall, the anti-corruption reforms were successfully 5 4 3 2 1 0 implemented. n. Anti-corruption reforms reduced corruption in the country. 5 4 3 2 1 0 o. The reform had sustainable outcomes. 5 4 3 2 1 0
339
Section B
2. What do you think was the most import source of idea of anti-corruption reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference. Periodic Plan/National Policy Annual Policy/Program
Development Partners’ Recommendation Consultants’ Report
Vision of Political Executive Popular Demand
Election Manifesto Advice of Senior Civil
Servant Parliament’s Direction Court’s Verdict
Other (please specify) ………………… ……………………
2. In your opinion, what was the most important driving force for initiating anti- corruption reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Pressure Financial Pressure
Populist Pressure Ideological Pressure
Ecological Pressure Pragmatic Pressure
Other(pleasespecify) …………………
………………
3. Who were the most important actors to influence the design of anti-corruption reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leaders Civil Society
Development Partners Senior Civil Servants
340
Trade Unions Local Experts
Foreign Experts Mass Media
Other (please specify) ………………… …………………
4. Who were the most influential actors for implementing the anti-corruption reforms? Please rank in order as 1, 2, 3, etc., 1 for the highest preference.
Political Leader Civil Society
Senior Civil Servants Private sector
Mid-career Civil Servants Development Partners
Frontline Managers Trade Union
Other (please specify) ………………… ………………
5. Do you think that the anti-corruption reforms were successfully implemented?
Yes No
If Yes, What was the most contributing factorfor the implementation of anti-corruption reforms? (Please rank in order 1, 2, 3 etc.; 1 for the highest preference)
Political Commitment Bureaucratic Ownership
Policy Dialogue Institutional Capability
Accountability Mechanism Civil Service
Leadership Quality Administrative Work Culture
Resource Availability SocietalSupport
341
Other (please specify) ………………
If No,
What was the most inhibiting factor for the implementation of anti- corruption reforms? (Please rank in order 1, 2, 3 etc.; 1 for the highest preference) Lack of Political Commitment
Weak Institutional Capacity
Lack of Resources
Lack of Effective Monitoring & Evaluation System
Lack of Societal Pressure
Lack of Bureaucratic Ownership
Lack of Appropriate Work Culture
Impractical Policy Measures
Lack of Effective Accountability Mechanism
Lack of Effective Leadership
Other (please specify) ……………
342
Section C
3. What is your overall impression of the anti-corruption reforms on the following? (You can write in bullet points.) a. Relevance of Program:
b. Program Design:
c. Reform Agenda:
d. Implementation:
e. Outcomes
f. Sustainability of Achievements:
4. Would you like to add any comment or observation on the design and implementation of anti-corruption reforms? (Please add additional sheet if necessary).
343
Annex 2: List of interviewees
Name Organization/Position Amrit Bahadur Rai Joint Secretary , Ministry of Foreign Affairs Ananta Raj Luintel Principal Correspondent, The Himalayan (daily) Under Secretary, Ministry of Federal Affairs and Local Baburam Shrestha Development
Baladev Joshi Under Secretary, Ministry of General Administration
Balananda Paudel Former Secretary, Government of Nepal
Bharat Bahadur Thapa Secretary General, Transparency International Nepal
Former Chief Election Commissioner and Secretary, Bhoj Raj Pokharel Government of Nepal Bimal Koirala Former Chief Secretary, Government of Nepal
Bimal Wagle Chairperson, Public Enterprises Directorate Board Nepal
Bishwa Prakash Pandit Secretary, Ministry of Education Brinda Hada Former Secretary, Government of Nepal Dipendra Bikram Thapa Former Secretary, Government of Nepal Secretary, Office of the Prime Minister and Cabinet Durga Nidhi Sharma Secretariat Dwarika Nath Dhungel Former Secretary, Government of Nepal Hari Bahadur Thapa News Editor, Kantipur Publications Joint Secretary, Ministry of Women, Children and Social Hari Paudel Welfare Executive Director, Nepal Association of Tour and Travel Hari Sharmah Agents (NATTA) Jeeb Lal bhusal Local Development Officer, Dailekh District General Secretary, Forum for the Protection of Consumers’ Jyoti Bania Interest
Kala Nidhi Devakota Executive Secretary, Nepal Municipality Association
Kashi Raj Dahal Chairperson, Administrative Court Kayo Devi Yami Chairperson, Public Service Commission
Kedar Khadka Chairperson, GoGo(Good Governance) Foundation
Secretary, Commission for the Investigation of Abuse of Keshab Prasad Bhattarai Authority (CIAA)
344
Krishna Devakota Freelance Expert Krishna Gyawali Secretary, Ministry of Industry Lal Shankar Ghimire Joint Secretary, National Planning Commission Joint Secretary, Office of the Prime Minister and Cabinet Laxman Aryal Secretariat Laxman Ghimire Former Minister for Water Resources Lecturer, Public Administration Campus, Tribhuvan Laxmi Kanta Paudel University
Madhav Prasad Ghimire Former Minister for Foreign Affairs, and Home Affairs
Madhu Nidhi Tiwari Professor of Public Administration Mahesh Acharya Minister for Forest and Soil Conservation Moha Dutta Timilsina Deputy Auditor General Executive Director, Institute for Governance and Mukti Rijal Development
Mukunda Paudel Secretary, State Affairs Committee, Legislative Parliament
Mukunda Prasad Arjyal Former Secretary, Government of Nepal Narayan Raj Tiwari Former Secretary, Government of Nepal Narottam Aryal Executive Director, Kings College Executive Director, South Asian Academy for Rural Netra Timsina Reconstruction Nirmala KC President, TEWA and Principal IBMS College
Pampha Bhusal Spokesperson, Communist Party of Nepal Maoist
Secretary, Nepal Communist Party Unified Marxist and Pradeep Kumar Gyawali Leninist
Prajjwal Aryal Joint Secretary, Ministry of General Administration
Prem Kumar Rai Joint Secretary, CIAA Former Vice Chairperson of National Planning Commission Rabindra Kumar Shakya of Nepal. Acting Regional Administrator, Mid-Western Development Raj Kumar Shrestha Region Former Deputy Auditor General, Office of the Auditor Ram Babu Nepal General Ram Prasad Bhandari Senior News Editor, Nepal Television Ram Sharan Mahat Finance Minister Ram Sharan Pudasaini Joint Secretary, Ministry of Finance Shyam Prasad Mainali Former Secretary, Government of Nepal
345
Senior Capacity Development Specialist, Ministry of Peace Shyam Sundar Sharma & Reconstruction(MoPR)/ European Union
Senior Public Management Specialist, Asian Development Surya Prakash Shrestha Bank, Manila Sushil S.J.B. Rana Former Secretary, Government of Nepal Tara Wagle Correspondent, Nepal Samachar Patra
Chair Person, College of Administration, Management and Umesh Mainali Development (now, chairman, Public Service Commission)
Viddhyadhar Mallik Vice Chair Person and CEO Poverty Alleviation Trust
Yam Nath Sharma Assistant Country Director, UNDP Nepal Secretary, International Relations and Human Rights Bharat Gautam Committee, Legislative-Parliament Member of Legislative Parliament and Central Committee Amaresh Kumar Singh Member of Nepali Congress Party Arjun Bahadur Adhikari Freelance Consultant Arjun Mani Dixit Former Joint Secretary, Government of Nepal Babu Ram Paudel Local Professional, Pro-Public Secretary, Ministry of Law, Justice, Constituent Assembly Bhesh Raj Sharma and Parliamentary Affairs Binod Atreya Acting Executive Director, Nepal Rastra Bank Chairperson, Nepal Madheshi Civil Service Employees’ Binod Kumar Singh Forum Chairperson, Nepal National Civil Service Employees’ Bishnu Prasad Pandeya Organization Chandra Mani Adhikari Member, National Planning Commission Chitra Bahadur KC Member, Legislative Parliament Member, Legislative Parliament and also a member of State Dharma Nath Prasad Shah Affairs Committee Dilli Raj Khanal Former Member of Parliament Senior National Advisor, Project to Prepare Public Dinesh Pant Administration of State Reforms, Ministry of General Administration/UNDP Senior Vice Chair Person, Confederation of Nepalese Hari Bhakta Sharma Chamber of Industry Executive Secretary General, Association of District Hem Raj Lamichhane Development Committees of Nepal Director General, Federation of Nepalese Chamber Hemanta Duwadi Commerce and Industry (FNCCI) Hira Mani Ghimire Freelance Expert
346
Hridaya Ram Thani Member of Legislative Parliament Coordinator, Administrative Reform Implementation and Krishna Hari Banskota Monitoring Committee Lal Babu Pandit Minister for General Administration Leela Mani Paudyal Chief Secretary, Government of Nepal
Megh Nath Neupane Director General, Confederation of Nepalese Industry
General Secretary, Nepal Government Employees’ Mohan Ghimire Organization Nirmal Hari Adhikari Under Secretary, Ministry of Finance Executive Director, National Association of Village Parashuram Upadhyay Development Committees in Nepal
Prithivi Raj Ligal Former Vice Chairperson of National Planning Commission
Punya Dhakal Chairperson, Nepal Government Employees’ Organization
Former Registrar, the Supreme Court & Executive Director, Ram Krishna Timilsena National Law College, Nepal Ram Prasad Thapalia Chief District Officer, Udayapur District Rameshwor Prasad Former Finance Secretary, Government of Nepal Khanal Sagar Pandit Deputy Editor, Naya Patrika Daily Shankar Sharma Former Ambassador to the USA
Shobhakhar Regmi Chairperson, Nepal Civil Service Employees’ Union
Shravan Kumar Timilsina Chief District Officer, Lamjung District Professor of Public Administration and Chairperson of Pro- Shree Krishna Shrestha public Sishir Dhungana Joint Secretary, Ministry of Finance Srijana Chhetri Program Manager, Asia Foundation Nepal Surendra Paudel Senior Correspondent, Nagarik Daily Yam Birahi Senior Correspondent, Annapurna Post (daily)
Senior Study Director, Nepal Administrative College and Yuba Raj Bhusal Former Secretary, Government of Nepal
347
Annex 3: List of FGD participants
Theme: Anti-corruption Reforms
Date and Time: August 29, 2014
Venue: Office of the Secretary, National Planning Commission
Moderator: Mr Sharada Prasad Trital
Rapporteur: Buddha Bahadur Gurung
Name Organization Position
1. Sharada Prasad Trital National Planning Commission Secretary
2. Mahendra Kumar Thapa Office of the Prime Minister and Joint Secretary Council of Ministers
3. Tirtha Dhakal National Planning Commission Joint Secretary
4. Bharat Raj Gautam Legislative Parliament, Secretary International Relations and Human Rights Committee
5. Lal Shankar Ghimire National Planning Commission Joint Secretary
6. Binod KC [Ministry of Peace and Joint Secretary Reconstruction
7. Ganesh Prasad Pandey Inland Revenue Department Deputy Director General
348
Theme: Right Sizing the Civil Service
Date and Time: September 4, 2014
Venue: Ministry of Forest and Soil Conservation
Moderator: Ram Prasad Ghimire
Rapporteur: Buddha Bahadur Gurung
Name Organization Position
1. BalKrishna Ghimire Department of Revenue Deputy Director Investigation General
2. Kiran Rupakheti Ministry of Women, Children and Under Secretary Social Welfare
3. Kiran Raj Sharma Ministry of Forest and Soil Joint Secretary Conservation
4. Dilli Ram Sharma Office of the Financial Deputy Financial Comptroller Comptroller General General
5. Rameshwor Dangal Ministry of Home Affairs Joint Secretary
6. Ghana Shyam Office of the Prime Minister and Joint Secretary Upadhyayay Council of Ministers
349
Theme: Privatization and Private Sector Development
Date and Time: September 5, 2014
Venue: Ministry of Finance
Moderator: Mr Ram Sharan Pudasaini
Rapporteur: Buddha Bahadur Gurung
Name Organization Position
1. Ram Sharan Pudasaini Ministry of Finance, Corporations Joint Secretary and Coordination Division Head of the Division
2. Chitrangat Baral Ministry of Industry, Public Section Officer
Enterprise Section
Nepal Food Corporation General Manager 3. Shibahari Shrestha
Ministry of Finance, Budget and Under Secretary 4. Hari Sharan Pudasaini Program Division
Ministry of Finance, Budget and Under Secretary 5. Yagya Dhungel
Program Division
Office of the Prime Minister and Joint Secretary 6. Laxman Aryal Council of Ministers
Ministry of Finance, Budget and Joint Secretary 7. Rajan Khanal Program Division
Ministry of Finance, Budget and Head 8. Baikuntha Aryal Program Division
Ministry of Finance, Budget and Under Secretary 9. Nirmal Hari Adhikari Program Division
Ministry of Finance, Corporations Under Secretary 10. Bashu Sharma Coordination Division
350