Across the political spectrum, there is a consensus that Nepal needs to create more jobs. All parties also agree, at least theoretically, that this can happen only through a mixed economy approach where the government is a direct employer, besides creating an enabling environment for private investment.
Two news reports this week highlighted the state of state-driven employment. Amidst much fanfare, the Maoist government initiated the youth self-employment program. This was their flagship welfare initiative much like the build your own village programme of the short-lived UML government in the 90s. It was meant to provide vocational training, and loans without collateral to begin businesses.
More than 600,000 young people put in their applications. The Youth Self Employment Trust supposed to implement the initiative has Rs 4.5 billion in its coffers.
More than two years later, guess how many individuals have really benefited from the initiative? Rickshaws were distributed to 28 individuals in Dhangadi, and "a few thousand" received vocational training. That's the extent of the achievement as admitted by those who run the program. The Trust has already passed on the buck, and claimed the delay in the budget-blocked progress.
Another news story reported on the government's privatization plans. Categorizing public enterprises into six different categories, a high level commission has recently asked the government to liquidate four companies, merge six others, divest its shares in four (including Hetauda Cement Factory, Janakpur Cigarette Factory), steer reforms in eight major ones (including Gorkhapatra, Nepal Television, Nepal Oil Corporation, Nepal Electricity Authority), operate eleven others under public-private partnership (like Udaypur Cement, Nepal Telecom, Nepal Airlines), and run six others as co-operatives with greater participation of stakeholders like farmers (Nepal Drugs, Dairy Development Corporation, Agriculture Inputs Company).
The commission pointed to the gross lack of financial discipline and estimated that the government had lost
30 percent of its investment of Rs 86 billion in these public enterprises. Collectively, these undertakings are among the biggest employers in the country. Privatisation will inevitably shrink these opportunities.
Moving on the private sector, business leaders have repeatedly emphasised how "political instability" has hampered their prospects. The growth rate in the past four years after the peace process began is less than the rates of growth during the peak of the conflict, which is a reflection of the uncertainties that constrain investment but also the nature of the economy and growth itself.
Fragmentation of land, limited productivity, and growing aspirations of the young who do not want to work in the fields is a natural, but toxic mix limiting agricultural growth. The transition to industrialisation is happening, at a painfully slow pace.
In Nepal we are yet to reach equilibrium between capital and labour, and between state and capital – this leads to insecurity and both businesses and labour move out. The service sector has grown, but that is not enough to cater to job demands in societies where equality of access and opportunity is a distant dream. With limited education and multiple layers of discrimination, a large section of the population can never aspire for such jobs.
It is tempting to point to the failed efforts of the state, blame the Maoists for ruining the industrial climate, and then focus solely on making it easier for private capital to operate as the panacea for unemployment. Are state enterprises doomed to fail, or are there political and economic forces which benefit from ruining them? There is a need for more detailed look at which public functionaries were in charge when many of these units became dysfunctional, which lobbies back them, and whether they can be reformed. What are the consequences of rampant privatization? A Birgunj-based political activist often points out how the closure of public enterprises in the central Tarai belt left thousands unemployed, providing fodder to the violent militancy in the region. How can the state be forced to implement its schemes and promises? Besides focus on the delivery mechanisms, perhaps it is time to think of a national rural employment guarantee scheme, on the lines of the Indian model which has partially dealt with rural distress.
Nepal's political economy is such that only a mixed economy can build on its diverse strengths. The challenge is in finding a political balance where the market wallahs shed their dogma, and state fundamentalists open up.
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