Obstacles to Economic Development in Nepal Siddhi B Ranjitkar
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Obstacles To Economic Development In Nepal Siddhi B Ranjitkar Introduction The recent expenditure of the State capital budget has been alarmingly low (less than 5 percent of the capital budget in 2015) indicating the State has not been able to use the taxpayers’ money for the economic development. Capital budget has been primarily for the infrastructures such as roads, irrigation systems, hydropower projects and so on. Infrastructure is the spine of the overall economic development. Many human-made and natural obstacles have been in the way to the infrastructure development in the past and currently, too causing constraint on the overall economic development, and delaying the poverty alleviation. The country would not economically develop if the State collects the money from the citizens in the various names of tax but does not use it for the economic development. So, money needs to go around and make everybody work and create assets and develop the country. If money sits in the State treasury it won’t be better than a scrap of paper. The State collects money from the common folks in the form of various taxes. Every citizen pays VAT (Value-added Tax) on every service or item s/he pays for. If you go to a restaurant you get the bill with the VAT on the meals you ate and the drinks you drank. If you are a rich person you pay a very high tax on a car you buy. The tax on a car is more than the price of a car. But you might not feel it because the tax has been already added to the price. Then, you pay annual tax on your car, and surely the tax on the fuel for the car. So, you pay very high price for having a car. All the tax money go to the State treasury, and then every year the Finance Minister allocates the money to keep on the army, police, and the civil servants working, and then the remaining money to the development projects. The State even borrows some money from the central bank or from multi-lateral banks or donor countries and agencies, and gets some in grant for the development projects. The State also could print money. Naturally, the money allocated to keep up the army, police and civil services goes to the service delivery for defending the nation and for maintaining law and order in the country. Many large and even small development projects don’t complete on time because of the many loopholes deliberately or unknowingly made in the developments Acts the State employees and other actors involved in the development activities have exploited for their financial benefit causing heavy losses to the nation. For a few thousands rupees, the employees of the Nepal Electricity Authority have caused the leakage of energy worth of billions of NPR over 12 years, the State newspaper ‘gorkhapatra’ reported recently. This is only one case came to the public notice out of maybe thousands of such cases. The whole set of the employees get involved in such unscrupulous activities. Everybody blames the lack of coordination and cooperation among the ministries for the delay in project implementation and completion. However, the National Planning Commission (NPC) mandated with coordination among the ministries apparently remained unconcerned very much. Some lawmakers talked publicly about the lack of coordination but obviously nobody listened to them. Another element that affects the project implementation has been the environment. Even if a project does not so severely adversely impact the environment, and the environmental impact assessment has been positive the local folks sometimes block the project implementation stating it would negatively affect the environment. The misuses of the State treasury and irregularities in spending the money have been the impediment to the development of the country. Billions of NPR were spent irregularly the Auditory General stated in the audit report on the State expenditures. The prime minister and the energy minister of the coalition government KP Oli had presided over had been responsible for irregularities in delivering the electricity to the consumers causing hundreds of billions of NPR worth of loss to the nation. However, the same prime minister always boasted of being the nationalist making the mockery of nationalism. The Parliamentary Public Account Committee is the sole responsible agency to sort out any irregularities in the State businesses, and get back the State money lost to the corrupt bureaucrats and politicians but it has never attempted to get reimburse the money not to mention punishing the culprits making the perpetrators of irregularities in the State businesses go without retribution. Logical thinking people believe that the members of the parliamentary Public Account Committee must have the share in it. The two large neighbors have been boon and bane, too. They have been helping Nepal to develop. However, they became aggressive against Nepal whenever their interest did not served. Sometimes, they went to the extent of the closure of the border entry points causing the most harmful effect to the economic development. Nepalese people had to spent most of the time and energy reinstating democracy during the last 70 years causing to miss the economic development and prosperity. They won the victory over the autocratic Rana rule, and set the democracy in 1951 only to lose it to the Shah king in 1960. They lost the democratic system of governance and the fast economic prosperity for 30 years. They shed blood again to reinstate democracy in 1990. Again, they lost democracy to the Shah ruler in 2005. Ultimately, Nepalese got rid of the monarchy forever in 2008. Use Of Development Budget The development or capital budget might have only a small portion for paying the salaries except for the labor-intensive projects means the projects that use mostly labors for projects otherwise the budget goes to buy various machinery and equipment, and construction materials. If the State money means budget does not buy all those things, and does not build roads, irrigation systems or hydropower projects then the money remains useless as waste papers. Money becomes active only when it is spent, and passes on from one hand to another buying services and products ultimately creating assets causing economic development. Recently, the capital expenditure in other words the use of the project budget allocated to infrastructures has been disastrously low. So, the State could not build a significant number of roads, irrigation systems, and hydropower projects to name a few. It has a chain of negative reactions to the development. For example, nobody can travel or move goods and services for sale or for any other purposes from one part of the country to another without roads. The highly hyped rural or postal roads in the Terai did not materialize so far making the rural people unable to move their products to the market causing the sluggish development of the rural Terai. So, the lack of roads is the primary constraint on the development of the people’s businesses. Irrigation systems are required for agricultural production. That might be for food crops or cash crops or any other crops humans need. When the State does not build irrigation system means the agricultural production lags behind. Majority of Nepalese depends on the agriculture. So, without the development of agriculture, Nepalese would not be able to improve the life. The budget allocated to hydropower projects has not been fully used means hydropower projects are not built. Consequently, the power outage has been for more than twelve hours a day even during the wet season. This means our factories don’t work at the full capacity, businesses have been closed due to the energy shortage, and householders have to look for an alternative energy to run the kitchen. Thus, the unused capital budget means a lot more for the common folks. Even the few percentage of the use of the capital budget has been in the last quarter of every fiscal year. Everybody tries to finish off the budget in this quarter rather than doing something good for the country. Consequently, a large portion of the budget goes into the pockets of the concerned ministers, civil servants including the lowest level engineers, and professionals of other different disciplines, and certainly the contractors. The proof of the money went to the pockets of the State employees has been most of the new houses built in the urban areas including Kathmandu belonged to the State employees. The first quarter of a fiscal year is the festival month. It starts in the mid July when the monsoon is still active not good for any uncovered construction work. Hardly any civil servants work on using the capital budget in this quarter but they consume the budget allocated to their salaries whether they work on the development projects or not the State needs to feed them and their families. Other civil servants, army or police engaged in service delivery work twelve months a year. The State needs to keep them up. The second quarter of a fiscal year is for passing on the budget from the center to the department and then the department to the project. Then, the project management has to award the project jobs to the contractors. A cadre of different political parties fights for the contract jobs for the contractors of their choice causing the political interference in the project work. It has made selecting a contractor and awarding the jobs to contractors a challenging task to the project management recently. This has been one of major hindrances to awarding jobs to the sincere and well-performing contractors. By the third quarter of a fiscal year, the project management awards the jobs to the contractors.