Nepali Times
State Of The State
From the frying pan


During a middle-class Nepali meal, a slice of lemon is first squeezed, dipped in dal, and then squeezed again. This process is repeated until the last drop of juice is squeezed out of the lemon. The UML has adopted this technique in ministries under its control to wring every benefit from them before being kicked out.

The sugar-shortage during Dasain-Tihar, the Korean labour export fiasco, the mass transfers in ministry of health, and the tug-o-war over the Nepal Rastra Bank governor have all been coordinated from Balkhu to draw maximum advantage for UML cadre and coffers. Tuesday's hefty hike in fuel prices seems to have been designed to pre-empt the presentation of the half-yearly budget by ordinance, and then offer sops later to derive political benefits.

The UML's high-wire walk of remaining in government while being critical of it has been an adroit balancing act. Alas, the gains may turn out to be illusory, if not harmful, in the long-term. By adding fuel to the fires of inflation, Minister of Commerce and Supplies Ishwar Pokhrel has started an inferno that comrade Bharat Mohan Adhikari in the finance ministry will not be able to control. It may turn out that the schemers in Balkhu have been too smart for their own good.

Obsessed with their own survival, comrades Adhikari and Pokharel have not seen the writing on the wall: despite a temporary spurt in revenue collection, the country's economy is in a tailspin. For the first time since the Indian economic blockade in the late-eighties, Nepalis are losing hope of a revival. This has set off massive capital flight. Labour export has gone up, but the remittance flows are either stagnant or decreasing. This can mean only one thing: capital is leaving on the hundi channel.

The sagging national economy is even more visible in the preliminary data for the fiscal year's first quarter released by Nepal Rastra Bank. The state spend only Rs 825 million on development but regular expenditure during the same period crossed Rs 12 billion.

The agriculture sector is in triple jeopardy: the insurgency has hit harvests hard, the government has reduced investment and removed subsidies without offering any protection from cheap imports. Other than for subsistence, it makes no sense to farm in Nepal anymore.

Tourism is limping along, but income is wilting. Visitors are now confined to the Lukla-Pokhara-Sauraha triangle, and even here frequent blockades and bandas have taken their toll. Undercutting is rife, and our tourist industry actually ends up subsidising the Nepal trip of most visitors. And the domestic airline industry is doing well for the wrong reason: road travel has become too hazardous.

Manufacturing isn't doing much better. Other than instant noodles, biscuits, cigarettes, and alcoholic beverages, most other industries are in trouble. The rebels have killed the goose that lays their golden eggs: businesses on which they depend for extortion money have shut down because of the economic impact of their revolution. Infrastructure, which is the single largest employer in the organised sector, has already fallen prey to insecurity. The urban construction boom in Kathmandu Valley and a few safer towns in the tarai keep contractors partially occupied. But they are not big enough to sustain dozens of steel rolling mills and cement packaging factories.

The only sector doing well seems to be trading, which perhaps explains the rise in revenue collection from import duties. Intense competition between banks and low interest rates have been the engine of growth in trading, as people with secure income take on more debt to finance consumption. Car sales have gone up, and so has the market for consumer durables. But this segment is too small to make a dent in employment situation and consumption doesn't create a value-chain in Nepal because most of the items are imported.

If the present coalition is asked to leave after King Gyanendra's India visit next week, no tears will be shed. Nobody expected anything from premier Sher Bahadur Deuba anyway. But the Unified Marxists-Leninists squandered their political capital by wheeling-dealing just like the consummate capitalists in the reigning coalition. Its alternative vision of the economy has been the biggest casualty of the UML's association with Deuba opportunism.

(11 JAN 2013 - 17 JAN 2013)