Finance Minister Dr. Ram Sharan Mahat created ripples of a sort in mid-March when he pointed to the need of restructuring the economy. No doubt, this is a long pending agenda given the fact that Nepali economy is faced with stagflation-like trap for decades. But, Dr. Mahat's proposition has come so suddenly that it gives rise to two natural questions. Have we done adequate homework for such a massive restructuring? Is there enough political will to embrace the agenda of restructuring, going beyond barely managing it? And, the direction of such restructuring will equally be crucial as will be the sustainability of the transformed structure.
Prioritization of the tasks in such restructuring agenda and garnering political support for the same, are two sets of groundwork that any restructuring agenda cannot perhaps bypass. To both ends, Dr. Mahat as the finance minister has a couple of rare strengths. He understands the Nepali economy thoroughly -- its cracks and crevasses-and has a pro-private sector image. Also, he carries equally strong weaknesses; that he carries a big baggage of self-righteousness, doesn't have a professional team and hardly trusts anyone and, he is a bad politician, at least at the negotiation table.
Needless to reemphasize here, restructuring of a mixed economy that is chronically mismanaged is sure to be a daunting, painstakingly long-term process. If this is not a mere political gimmick that Dr. Mahat has no reason to indulge into, the homework needs to commence at least in two parallel fronts of the economy -- technical and political. On the technical side, there must be a dispassionate assessment of the loss incurred and persistent underperformance of the economy due to over-involvement of the government in planning, production and distribution systems. On the political front, to reduce the state involvement in functional aspects of the economy, a great deal of reorientation is imperative mainly in those political forces who are indoctrinated as communists or ardent socialists.
A great amount of misgivings about the 'inevitability of state intervention and activism in economy' must be dispelled, both at political or people's levels. Dr. Mahat himself needs enough courage to declare the institutions like the National Planning Commission obsolete, at least in the present form. In their present form, they act as omniscient of the needs and priorities of the populace at the grassroots. The decision on liquidating about three dozen state-owned enterprises that have acted as hungry sharks for years in the exchequer is long overdue. Only way to create public awareness on the futility to maintain status quo in these public institutions depends largely on the effective factual communication of the maladies and recurrent losses, year after year. One stroke of liquidating or privatizing the Nepal Oil Corporation would be enough to test Dr. Mahat's sincerity and courage to take-up really meaningful restructuring of Nepal's public economy.
The economy is under stress from more than one quarter. The ballooning imbalance in the country's foreign trade, dwindling absorption capacity of the financial resources and mass-migration of the working age population for low-earning jobs abroad creating labour-market distortion at home are three prominent areas that warrant top priority in the restructuring agenda.
The structural imbalances too are looming large. We spent decades lamenting on the lower-than-demand production of energy, mainly hydropower. But, despite all odds, the energy sector attracted a substantial investment and there are indications that the supply would be doubled in next four to five years. But, we became oblivious of the fact that we needed to develop adequate transmission lines to connect this power to individual houses. There are concerns of this power being wasted for lack of alternative arrangements, for example, replacing LPG cooking stoves with the electric ones to create market for the added power generation, or if possible export to India.
There is a sort of political consensus on the need of a tangible restructuring of the state when it hopefully gets federalized. The proposed agenda of economic restructuring must be a complementary process to that larger goal of spatial restructuring of the state. The restructuring of even larger scale is also required in the private sector to transform it from a mere a trade-margin capitalizer, like from gold smuggling, to employment-generator and export-promoter. Therefore, the restructuring agenda must not fizzle out as seasonal political hyperbole. It deserves more nuanced treatment to make it a fruit-bearing proposition.
