Nepali Times Asian Paints
Intelligent options


Gulmi's copper mines used to supply metal to the capital of the Oudh kingdom in Lucknow until 250 years ago. But the British East India Company offered copper at a cheaper price, and the Gulmi mines had no customers. Gulmi was annexed by the Gorkha kingdom in 1786. Prime Minister Chandra Shumsher's 50 per cent tax on copper, over a hundred years later, wiped out what remained of the mines.

At about the time of the Gorkha conquest of Gulmi, the Scottish economist Adam Smith published his magnum opus, The Wealth of Nations, about the nature of the market. He believed that even if everyone behaved selfishly society as a whole would benefit. Smith's successors, particularly Ricardo and Malthus, thought otherwise. Then along came Marx and his theory that capitalism inevitably leads to the rise of monopoly, a polarisation between proletarians and capitalists, and eventually the revolution.

By the time The Communist Manifesto came out, Jung Bahadur was on a sabbatical from ruling Nepal. He met Queen Victoria but it is unlikely he heard about the philosopher in whose name a revolution would be fought in Nepal 150 years later.

Nepal may have been an isolated kingdom, but our lives have always been buffeted by far away events. In the world of ideas, you can either be an incubator, or a dumping ground. Nepal had great leaders who united the country and fought off big powers, but later leaders failed to turn this independence into prosperity. Part of the reason is that Nepal has become a dumping ground for foreign garbage.

This is where overseas Nepalis can come in, with their exposure to the outside world. Nepalis are now working and living all over the world. There are Nepalis who are well off and hold senior positions, but a majority of them are working in menial, hazardous jobs in India and the Gulf. This tradition of exporting Nepalis, which started with the Gurkha soldiers 200 years ago, continues to this day. If there is one thing non-resident Nepalis can do, it is to find alternatives to this trend, the social cost of which has never been assessed.

The only way out is to create new jobs in Nepal, which means one or several of the following: checking unruly labour unions, giving reasonable power to employers, opening more vocational training institutes, investing in infrastructure, and creating new 'intelligent markets'.

An example of an intelligent market is a new crop options market, integrated with an insurance system, to help Nepali farmers burdened with lack of capital, high interest rates and weather risks.

The price of rice drops in December when it is being harvested. In a crop options market, farmers could buy insurance and futures to be hedged against risks. Many overseas Nepalis own banks and if we move soon enough, we can corner the market in neighbouring countries too. This way the land returns to being a source of livelihood, agricultural and finance-related jobs will be created, we feed ourselves, and we even get a market-based solution for food crises.

However, if you give free rein to institutions like an options market, there is always a risk that a few firms will collude to rob both the government and farmers who buy these futures. That's why smart, honest and committed Nepalis are needed to monitor institutions that are set up. Initially, while some non-resident Nepalis can be market makers, others will have to work in foreign futures markets, learn the tricks of the trade, go back to Nepal and monitor the market on behalf of the government.

It is not money that Nepal needs. Indeed, as Paul Samuelson says, without confident hands and confident brains to use it, money itself has no meaning. Gulmi's copper is still in Nepal, it is our minds that can convert it into wires. It is hard to define what wealth is, but if we change something essentially undesirable into a desirable thing, that is a process of creating wealth. All we need is to use our brains. Whatever we do, let's not waste any more time. Let's learn something valuable while we are abroad so that when we go back to Nepal we can create something beautiful there.

Biswo Poudel is an economist affiliated with the University of California at Berkeley and the Coordinator of the Non-Resident Nepali Association Economic Policy Paper Taskforce.

(11 JAN 2013 - 17 JAN 2013)