This was well reflected when a prominent economist of Nepal recently wrote an opinion piece saying, “Despite liberalisation, more than 50 per cent of children are unable to attain secondary level of education and 15 districts are yet to be connected by roads.” Unfortunately, liberalisation in itself does not do these things. It just allows a platform for all of these things to be done by the individuals in a free society. It would be beneficial for any rational economic discourse to analyse if Nepal has truly liberalised its economy and if liberalisation has any contribution in keeping the poverty levels where it is.
The myth about liberalisation
One of the greatest myths regarding liberalisation in Nepal is that after reforms of 1990s, Nepal is a fully liberalised free-market economy and an epitome of free-wheeling capitalism. Critics love to assert that despite all attempts, the promised utopia of liberalisation not only seems elusive but unattainable. However, nothing can be further from the truth.
Liberalisation in its essence means an economy free of interference from the government (or politics for that matter). Though government has done so in paper, it is not in practice. From agriculture to transport and health, every sector reeks from the heavy hand of government control or sponsored distortions. The best example is the government approved cartels in the transport sector which have wrecked havoc on the overall economy through monopoly.Energy, one important prerequisite for economic growth, is still in the grips
of the government. Nepal Electricity Authority, the sole authority on electricity in Nepal fails to provide power even for 12 hours a day and has negative net worth. Petroleum products are also in the government’s grip. Frequent disruptions in fuel supply have become common now.
Infrastructure is also mostly controlled by the government. Although concepts of Public Private Partnership and Build-Own-Operate-Transfer have been discussed for a while, we are yet to see any significant progress in implementation. The fact that 15 district headquarters are not yet connected by roads, begs a deeper question: Whose fault is it? If we expect liberalisation to work miracles, should we not first free the sector from state’s monopoly?
Labour market is miles away from liberalisation. Politically backed militant trade unions have monopolised the labour market but slapped any liberalisation attempts in Nepal. State-owned enterprises whose losses and quality of service are inversely proportional, such as Janakpur Cigarette Factory, Nepal Airlines Corporation and Nepal Oil Corporation are a drain on the economy. Liberalisation has been unable to spread to these darkest corners of the state.
The myth of failure of liberalisation
In this context, it is imperative to rethink Nepal’s liberalisation reforms or even call it a liberal market-oriented economy. Shifting the blame for underachieved development on liberalisation suggests that policy-makers are cynical and lack commitment to take reform efforts to conclusion. Liberalisation, in its limited form, has worked wonders, if not miracles. A common farmer in the remotest part of the country using a cell phone symbolises the success of liberalisation, wherever it has been done.
The thriving and vibrant media sector of Nepal is another example. The critics of liberalisation should consider that absolute poverty, a major problem of Nepal which decades of planning and government action could not solve, is being rapidly alleviated by a simple move towards liberalisation. Liberalisation in making passport has allowed mill-ions of poor Nepalis to find jobs abroad and raise their living standards. Critics are quick to point dependence on remittance is not desirable for the economy. But, are there any realistic and better alternatives? Relying on the government to fulfil the Nepali dream of prosperity is being naive.
Nepal’s liberalisation, despite many discussions, has remained a will-o-wisp till date. It is true that liberalisation has not been able to deliver to its fullest so far, but liberalisation itself is the last thing to be blamed for it.
(Published in The Himalayan Times - Perspectives of May 20, 2012)