Economy in New Constitution

  6 min 52 sec to read
Economy in New Constitution

--By Akhilesh Tripathi

As a democratic country, what sort of economic policies should Nepal adopt? Shouldn’t the new constitution clearly define such policies? Can the proposed constitutional provisions concerning the country’s economy really come in the way of its development? Has the draft addressed the country’s economic issues properly?
Those who have prepared the draft of the new constitution seem to have simply ignored these questions. By doing so, many commentators say, they have left a lot of confusion and contradictions in the document which they want to make the supreme law of the land.

Socialism Vs Free Market 
The confusion begins right from the preamble, according to economists as well as constitutional experts. The preamble expresses commitment to create the foundation of socialism “by adopting democratic values and norms including the people's competitive multi-party democratic system of governance, civil liberties, fundamental rights, human rights, adult franchise, periodic elections, freedom of the press, independent, impartial and capable judiciary and concepts of the rule of law.”

Do the countries which are said to have adopted socialism – we all know they can be counted on the fingers of one hand - have multi-party democracy, civil liberties, human rights, periodic elections, free press etc? Many would say no. So why is the spectre of socialism dangling over the draft constitution, promising things that are possible only in a democracy?

Private sector leaders are simply alarmed by the mention of socialism or socialism-oriented economy in the draft constitution. “I don’t think it (socialism) is possible. It has been proven around the world that socialism and communism do not work,” FNCCI President Pashupati Murarka says. “If we take the examples of our neighbouring countries China and India, their economic development and growth took place only after they implemented a liberal economic policy.”

The new constitution should clearly mention that the state shall adopt an open market policy, adds Muraka. It’s not just the preamble that has mentioned socialism. Article 4 (1) of the draft says, “Nepal is an independent, indivisible, sovereign, secular, inclusive, democratic, socialism-oriented, republican, multiethnic state which shall be called Nepal in short.”

According to constitutional experts, the idea of socialism in today’s world is an absurd one. Dr Bhimarjun Acharya, a renowned constitutional expert of Nepal, says that though the draft of the new constitution does mention words like prosperity, it also talks about creating a foundation for socialism. “This is an absurd idea in today’s world – stupid, nonsensical and completely outdated,” he says.

“Definitely, western capitalism does have some expansionist residues. However, an alternate economic system to capitalism which establishes the notions of unrestrained right to private property, market completion and research and creativity promoted by it is yet to come,” thinks Achyut Wagle, an economist, commentator and former editor of Aarthik Abhiyan daily.

Cooperatives – really the third pillar?
Part 4 of the draft constitution which includes the Directive Principles, Policies and Obligations of the State, too has mentioned socialism-oriented economy. Article 54 (3) of this part reads, “ It shall be the economic objective of the State to make the national economy self-reliant, independent, and developing it towards socialism oriented economy with equitable distribution of resources and means, by ending all forms of economic exploitation and inequality, with maximum utilization of available resources and means through the participation of cooperatives, and public and private sector for sustainable development, and to build an exploitation-free society by fair distribution of the achievements made so far.”

The first question that this article raises is: Is there any self-reliant economy in the world? This article also differentiates cooperatives from the private sector, which several economists as well as constitutional experts have called illogical.
“Cooperatives are also a part of the private sector. We have time and again drawn the government’s attention towards this fact. But the constitution drafters have ignored this,” complains Murarka.

Economic rights missing in Fundamental Rights
Article 22 (f) says that everyone will have the right to freedom to engage in any occupation or be engaged in employment, industry and trade. But there is a rider to this provision which says: “Nothing in sub-clause (f) shall be deemed to prevent the making of an Act to impose reasonable restrictions on any activity which may undermine the good relations between federal units, or restricting an activity which may have negative impact on public health, decent behaviour and morality, or the particular industries, trade or services which only the state may engage in, or setting conditions or eligibility to engage in industries, trade, profession, livelihoods or occupation.”

Constitutional experts and economists both say that there should be no industry or trade which only the state should be allowed to engage in. Also, decent behaviour and morality haven’t been properly defined.

Dr Acharya thinks the Fundamental Rights mentioned in the draft constitution have hardly covered economic rights and freedom. “For FNCCI, I had carried out a research on how economic freedom and rights have been covered in the constitutions of other countries. During the research, I went through almost all constitutions written after 1990,“ he says, “I found that economic freedom, issues pertaining to investment, right to property, labourer-employer relations etc are mentioned as Fundamental rights in those constitutions. But our draft constitution does not mention these rights as Fundamental Rights.”

Article 59 prohibits anyone from raising questions in courts if the State fails to implement its policies. This raises a simple question: why make promises where there is no accountability?

Financial System
The draft of the new constitution has proposed that once the country goes into federalism, the states can run their own banks and financial institutions. Nepal Rastra Bank (NRB) officials feel that this could be a serious flaw which if implemented could destabilize the country’s financial system. NRB, the country’s central bank, has already drawn the attention of the political leadership towards this fact. “However, the politicians don’t seem to be in the mood to amend this provision,” a highly placed NRB official says.

According to the NRB official, if this provision is not changed, the states to be formed could issue operating licenses to banks and financial institutions haphazardly which, in turn, could invite unwanted complexities in the country’s financial system.  

The idea of federating the country into eight states hasn’t gone down well with constitutional experts as well as economists. Many believe that it will become a huge cross to bear. “Personally, I am not in favour of federalism. First of all, a question arises: Do we need federalism? Even if the answer is yes, we cannot make it happen in the current situation. There is a possibility that the states will have to bear a lot of economic burden,” says Murarka. 

Dr Acharya smells a rat in the very decision to federate the country. “I am not too sure about republicanism. But I am sure that secularism and federalism were not the agendas of the 2006 April movement. These agendas were forced upon us by outside forces,” he observes. Murarka says the country cannot afford to have eight federal states, even if it decides to go for federalism.

“The draft—that will write the fate of generations to come—includes several contradictory provisions which may obstruct economic and social transformation as dreamed during the people’s movement,” a press release by South Asia Watch on Trade Economics and Environment (SAWTEE) quoted its president Dr Posh Raj Pandey as saying.

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