‘… the cul­ture of bureau­cracy must change to­wards a man­age­rial civil ser­vice.’

Mad­hukar SJB Rana, former Fi­nance Min­is­ter of Nepal, gives his views on the fu­ture of a vi­brant South Asian econ­omy in this exclusive in­ter­view to Southa­sia. Mad­hukar SJB Rana is cur­rently a Pro­fes­sor at the South Asian In­sti­tute of Man­age­ment; Mem­ber, Ac

Southasia - - Cover story -

How di­verse is the South Asian econ­omy to­day and how do you see its growth in the com­ing years?

The South Asian econ­omy is in­suf­fi­ciently di­ver­si­fied with more in­tra-coun­try com­pe­ti­tion for the few global mar­ket exports. It needs to be more grounded on a man­u­fac­tur­ing base to cater to the em­ploy­ment needs of the nearly 1.3 bil­lion South Asians as re­liance on the ser­vice sec­tor will not pro­vide full em­ploy­ment se­cu­rity to the vast ru­ral masses, who moved out of agri­cul­ture.

Given the age­ing of the Chi­nese pop­u­la­tion, and the rapid rise in the cost of its hu­man cap­i­tal, I see huge po­ten­tial for South Asia to be the next global man­u­fac­tur­ing hub of the world, if we can let the Chi­nese “fly­ing geese” in­dus­tries to be lo­cated in South Asia with its fa­vor­able de­mo­graphic div­i­dend and mas­sive en­tre­pre­neur­ial ap­ti­tudes among its emer­gent mid­dle classes.

How im­por­tant a role can ma­jor economies in South Asia like In­dia, Pak­istan, Bangladesh, Nepal and Sri Lanka play in pro­mot­ing other re­gional economies?

In-depth stud­ies by the Asian De­vel­op­ment Bank’s re­gional in­te­gra­tion schol­ars (re­fer to Pan Asian In­te­gra­tion Edited by Prad­umna B Rana; Gane­sha Wig­naraja and Joseph Fran­cois, ADB 2009) have shown that im­mense ben­e­fits will ac­crue if South Asia will start to in­te­grate with East Asia (ASEAN, North East Asia) and the Cen­tral Asian Re­publics. The es­ti­mated gains to Asia by 2017 could be as much as the cur­rent GDP of France! But this re­quires that In­dia and Pak­istan get their act to­gether to solve out­stand­ing is­sues over Kash­mir and the emer­gent is­sues over Afghanistan fol­low­ing NATO’s with­drawal.

Fol­low­ing the an­nounce­ment of In­dia’s ‘new neigh­bor­hood pol­icy’ (the so called Gu­jral doc­trine) in 1996 new hopes arose for SAARC in­te­gra­tion us­ing the route of sub-re­gional co­op­er­a­tion be­tween Bangladesh, Bhutan, In­dia’s North East states and Nepal in the form of the South Asian Growth Quad­ran­gle (SAGQ).

Be­yond the ASEAN and CAR re­gions, I feel that Bangladesh, Pak­istan, Nepal and Sri Lanka can play a vi­tal role to bring in China –at least its prov­inces like Xin­jiang, Ti­bet, Gansu, Qing­hai, Sichuan and Yun­nan, which

will find it more ac­ces­si­ble to use the ports of the Bay of Bengal than the east­ern seaboard of China.

What in your opinion is the ma­jor prob­lem that hin­ders smooth eco­nomic func­tions in the de­vel­op­ing economies like ours?

Bad gov­er­nance in man­i­fes­ta­tions such as pol­i­tics of money power and mus­cle power; crim­i­nal­iza­tion of pol­i­tics; vote bank­ing based on tribes, castes and creeds, and the near to­tal lack of an independent spe­cial­ized bureau­cracy that can check and bal­ance ram­pant politi­ciza­tion of in­sti­tu­tions. How­ever, the cul­ture of bureau­cracy must change to­wards a man­age­rial civil ser­vice.

You are cred­ited with bring­ing about re­forms in the fi­nance in­dus­try dur­ing your ten­ure as the fi­nance min­is­ter of Nepal. Can you tell us more about it?

I was Fi­nance Min­ster in 2005-the civil war years at its peak; when the govern­ment was headed by King Gya­nen­dra. I was able to con­vince the pri­vate sec­tor to ac­cept VAT as the main­stay of our fis­cal ad­min­is­tra­tion by ac­cept­ing its rise from 10% to 13% which they had ve­he­mently op­posed when the pre­vi­ous govern­ment at­tempted to raise it. It was nec­es­sary to fi­nance the in­tended de­fense bud­get, (which must be cred­ited with bring­ing the Maoists to seek soft land­ing by re­nounc­ing peo­ple’s war) as the donors be­gan to with­draw or with­hold de­vel­op­ment fund­ing and even put pres­sure on the mul­ti­lat­eral agen­cies to dilly dally.

The pri­vate sec­tor was as­sured a lead role for eco­nomic growth in a true spirit of pub­lic pri­vate and com­mu­nity (peo­ple) par­tic­i­pa­tion not just over projects and pro­grams but, in­deed, also sec­tor poli­cies and plans. Our govern­ment sub­scribed to the mar­ket mech­a­nism and sought to be a lib­eral econ­omy with full scope for SMEs as its true foun­da­tion.

The pre­vi­ous gov­ern­ments had al­ready en­dorsed the SAP and E-SAP agree­ments be­ing pro­moted by the IMF and World Bank but failed to for­mu­late the nec­es­sary acts for lib­er­al­iza­tion of the fi­nan­cial sec­tor like Bank­ruptcy Act, Se­cu­ri­ti­za­tion Act etc. In all, a to­tal of five out­stand­ing acts were pro­mul­gated by or­di­nance to deepen fi­nan­cial sec­tor re­forms. I be­lieve I had helped Nepal’s cen­tral bank to be an independent mone­tary au­thor­ity by ap­point­ing the Gov­er­nor and Deputy Gov­er­nors on the ba­sis of merit and drawn from within the Nepal Ras­tra Bank it­self. Last, but not least, it was en­vis­aged that the Min­istry would be re­spon­si­ble not sim­ply for fi­nance but also econ­omy by in­te­grat­ing it­self with in­dus­try, com­merce and sup­plies and cor­po­rate af­fairs. The idea was to move the fi­nance, trade, in­vest­ment and com­merce bu­reau­cra­cies to­wards the vi­sion of a man­age­rial civil ser­vice.

Com­ing to the Nepalese econ­omy, where do you think the coun­try is head­ing with the re­cent the po­lit­i­cal cri­sis and a de­vel­op­ing hu­man de­vel­op­ment in­dex?

The econ­omy is in a cri­sis mode held afloat by the re­mit­tance econ­omy. With­out re­mit­tances it would have col­lapsed to put peace and the (il­lib­eral) democ­racy it­self at risk. The pol­icy to go global on the la­bor mar­ket front was in­tro­duced by For­eign Min­is­ter Dr. Prakash C Lo­hani in 1996. I am proud to have served as Spe­cial Ad­viser then: since, we note now, that it was pri­mar­ily re­spon­si­ble to re­duce the level of ab­so­lute poverty from 42% to 31% in 2004-05 and now, as per the pro­vi­sional cen­sus, to just 13% in 2011 !

How suc­cess­ful has in­ter­na­tional fi­nan­cial as­sis­tance been in al­le­vi­at­ing poverty and bring­ing about long-last­ing de­vel­op­ment in

the re­gion?

It has been suc­cess­ful in so­cial de­vel­op­ment but a mis­er­able fail­ure when it comes to poverty al­le­vi­a­tion let alone erad­i­ca­tion. It has ex­as­per­ated in­equal­ity class wise, caste wise and re­gion wise. Now they come up with the new doc­trine of ‘in­clu­sive de­vel­op­ment’ af­ter ig­nor­ing the agri­cul­tural sec­tor, com­mu­nity de­vel­op­ment and ru­ral in­fra­struc­ture de­vel­op­ment, es­pe­cially ru­ral roads, ru­ral ir­ri­ga­tion and ru­ral elec­tri­fi­ca­tion.

Speak­ing of South Asian economies, do you think our peo­ple are im­pris­oned in the trap of in­ter­na­tional aid?

I feel we suf­fer from ‘aid col­o­niza­tion’ where our cre­ativ­ity and in­ge­nu­ity, grounded con­sciously on our own civ­i­liza­tional her­itage, are to­tally stymied. What’s worse, the aid par­a­digm keeps chang­ing to con­fuse and de­value the lo­cal think thanks, who in most cases have been re­duced to mere con­tract work­ers to gar­ner lo­cal data for the new par­a­digm be­ing bandied about.

A quote from Zam­bian econ­o­mist Dam­bisa Moyo is worth not­ing: “ Be­tween 1970 and 1998, when aid flows to Africa rose from 11% to a stag­ger­ing 66%, roughly 600 mil­lion of Africa’s 1 bil­lion peo­ple are now trapped in poverty.” In Nepal we have been able to bring it down to just 13% (2011) not be­cause of aid but be­cause of mi­gra­tion that ba­si­cally was fu­elled by the rise of Mao­ism and civil war. What an irony—a war div­i­dend rather than a peace div­i­dend!

Why do we find seething anger and skep­ti­cism in the gen­eral pub­lic about the World Bank and IMF’s loan struc­tures and tax re­forms?

It’s pretty ob­vi­ous that the fi­nan­cial ar­chi­tec­ture based on the “Washington Con­sen­sus” by Churchill and Roo­sevelt is there to serve the in­ter­est of the North pri­mar­ily. As early

as 1991 the SAARC Independent Com­mis­sion on Poverty Al­le­vi­a­tion (in which I was also a Mem­ber) had men­tioned that the SAP and E-SAP strate­gies of the IMF and World Bank were like ‘walk­ing on one leg’ since it had com­pletely ig­nored the poor. And guess what? Come 2005, to add in­sult to in­jury, I was pres­sured to ac­cept the so called HIPEC loans by the IMF based on their ir­rel­e­vant ex­pe­ri­ence of sub Sa­ha­ran Africa, the IMF and World Bank be­lieved that Nepal was en route to be­ing an­other failed state.

These in­sti­tu­tions are now ar­chaic and highly plu­to­cratic. It needs to be re­formed as early as pos­si­ble with the Asian re­nais­sance and the rise of the BRIC+T na­tions (T for Turkey as a Eurasian power like Rus­sia).

How can our gov­ern­ments im­ple­ment pub­lic-friendly eco­nomic poli­cies to help pay back?

South Asian na­tions must col­lec­tively bar­gain for debt write off and use all the pro­ceeds to hence­forth forgo aid and to help the poor with di­rect aid rather than go­ing through INGOs, NGOs, cen­tral and lo­cal bu­reau­cra­cies. Aid, sadly, has been gen­er­ous gifts from the many poor in the North who are hu­mane, hu­man­i­tar­ian and well mean­ing. But it has been a shin­ing ex­am­ple of gifts from the rich coun­try’s poor to the poor coun­try’s rich--to be stacked in for­eign banks.

How im­por­tant is pub­lic par­tic­i­pa­tion in this re­gard?

Pub­lic par­tic­i­pa­tion in the form of grass roots com­mu­nity par­tic­i­pa­tion is vi­tal. Why can’t we em­power lo­cal com­mu­ni­ties to de­sign, im­ple­ment, own and man­age their own projects to meet the MDGs? Com­mu­ni­ties have been di­vided by the un­war­ranted in­ter­ven­tion of po­lit­i­cal par­ties who seek to ben­e­fit them­selves and their par­ties in the most de­ci­sive man­ner. Com­mu­ni­ties have to be made sub­jects and not ob­jects of de­vel­op­ment: with max­i­mum de­vo­lu­tion of po­lit­i­cal and eco­nomic rights and re­spon­si­bil­i­ties.

How can our gov­ern­ments curb spi­ral­ing in­fla­tion, in­fla­tion­ary bor­row­ing and tax eva­sion and tighten up the fis­cal poli­cies?

In Nepal’s case spi­ral­ing in­fla­tion is due to cost push fac­tors ac­counted for by ex­ter­nal and in­ter­nal forces. On the ex­ter­nal front, it’s the en­ergy cri­sis and as well as the in­fla­tion in In­dia with whom we have a free trade cum fixed ex­change regime. On the in­ter­nal front, it’s due to the carteliza­tion and syn­di­ca­tion of mar­kets which has meant that mo­nop­oly forces are at play caus­ing in­fla­tion to be way above what it nor­mally should be as com­pared to In­dia –say at best 2-3 % more. These days it’s sig­nif­i­cantly more be­cause of the oligopolis­tic forces in the po­lit­i­cal and eco­nomic mar­kets.

Anti-money laun­der­ing laws forced on Nepal by the donors have re­sulted in banks and fi­nan­cial in­sti­tu­tions fac­ing se­vere liq­uid­ity crises just at a time when the real es­tate and stock mar­kets have gone bust. It is a clas­sic case of not know­ing when to in­tro­duce a new leg­is­la­tion which has re­sulted in the acute liq­uid­ity crises and sky rock­et­ing in­ter­est rates with fears of fi­nan­cial col­lapse, cap­i­tal flight and peo­ple switch­ing to hold­ing In­dian currency in the bor­der­ing ar­eas. Here the cen­tral bank gave in to for­eign pres­sures with­out do­ing their home work on its so­cial costs, ben­e­fits and im­pact.

Fis­cal poli­cies have to be tight­ened up by hav­ing a uni­ver­sal VAT with no ex­cep­tions as now. For eq­uity pur­poses we should have dif­fer­ent rates of VAT for dif­fer­ent com­modi­ties rather than a flat 13%.

Do you think South Asian economies have be­come re­silient? What steps need to be taken to im­prove these economies?

Re­silience of the South Asian economies have stalled be­cause of the lack of po­lit­i­cal will to deepen fi­nan­cial and eco­nomic re­forms as well as ush­er­ing in fun­da­men­tal in­sti­tu­tional, ju­di­cial , la­bor and elec­toral re­forms to move from an il­lib­eral democ­racy to a lib­eral one to safe­guard peo­ples’ and con­sumers’ sovereign­ties. Civil so­ci­ety and me­dia must act as watch dogs to coun­ter­vail the ex­cesses of par­lia­men­tary sovereignty from the ram­pant oligopolis­tic be­hav­ior of the po­lit­i­cal par­ties re­sult­ing in unimag­ined graft, cor­rup­tion and money laun­der­ing into save havens abroad. Bring­ing back the laun­dered money should be fore­most pri­or­ity. Gand­hian Anna Hazare’s at­tempt to have an all pow­er­ful Lokyukta Bill is an ad­mirable En­deav­our that de­serves to be repli­cated in the rest of South Asia.

In­vest­ment in re­gional pub­lic goods such as Asian High­way, Asian Rail­way, South Asian Wa­ter­way link­ing all of South Asia ma­jor air­ports, mod­ern­iz­ing ports and build­ing dry ports, cold stor­age de­pots to fa­cil­i­tate multi modal tran­sit and trans­ship­ment trans­port will ben­e­fit the re­gion as well as each na­tion sig­nif­i­cantly. It also needs gas pipe­line and en­ergy grids.

South Asia needs to de­velop a Mas­ter Plan for Re­gional and In­ter Re­gional Con­nec­tiv­ity and move col­lec­tively to mobilize the huge FDI for this grand de­sign. The cur­rent crises in U.S. and Euro­pean economies present im­mense op­por­tu­ni­ties for a bold move now to­wards Pan Asia. This must be the ul­ti­mate vi­sion for SAARC for the peace, pros­per­ity, se­cu­rity and hap­pi­ness of the globe. SAARC must move to­wards the for­ma­tion of the Asian In­fra­struc­ture Fund, Asian Mone­tary Fund and ex­pe­dite the trad­ing of in­fra­struc­ture bonds in lo­cal cur­ren­cies through man­i­fold fi­nan­cial in­no­va­tions.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.