Nepali Times
Strictly Business
Imagine no free market


Last week, in a letter to editor, a reader offered me a back-handed compliment by saying that my pieces are 'usually interesting and thought-provoking, but lately (they have) started becoming a bit repetitious in (my) espousal of the free market being a panacea to everything'.

I am more for market-friendly institutions that promote defined property rights and competition because even when they make mistakes, these institutions are likely to correct errors quicker and in a cheaper manner than bureaucrats with public money. This week let me take up the reader's complaint, look around and report what the real outcomes have been when market-friendly mechanisms are promoted or subverted in Nepal.

Only a few years ago, Indian merchants used to come to Nepal to make overseas calls. Nepal had just installed state-of-the-art technology, while Indians suffered in the hands of a national monopoly. Today, India is throwing open its telecom sector to market competition, many private sector service providers have joined the fray, slashed rates and offered a bundle of services and choices to users. So, Nepalis in border towns today have Indian SIM cards to make calls to Kathmandu! In the capital itself, you are lucky to get a connection on your mobiles.

A happier story is our domestic airline market. Fifteen years ago, state-funded Royal Nepal Airlines was the only carrier that flew to Pokhara, and it did so irregularly. Today, there are at least 12 flights a day between Kathmandu and Pokhara. Lukla sometimes has 25 flights a day. Surely, this is an improvement.

Or take the case of hydropower. Three generations of Nepalis have grown up chanting the mantra of Nepal's infinite hydropower potential. But what good is that resource if we cannot make use of it to live better now? It has taken the Nepali state almost a century to provide electricity to just 23 percent of the population. At that rate, should all the remaining Nepalis wait for more than 300 years to light up their homes?

As our private sector and community-led initiatives of the past 15 years in micro-hydro show, we cannot rely exclusively on the government to provide power. It is time to allow other players to supply more and cheaper electricity faster to more people.

And a mindset that can accept such alternative arrangements can only happen when one assumes a market-friendly (which is not the same as being gung-ho about unfettered market freedom with zero role for the government) disposition to do more by providing incentives to others to invest resources too.

Market-friendly institutions do not solve every problem. Diplomacy, national literacy, primary health care, law and order, defence and basic infrastructure-building need openly elected politicians who represent diverse viewpoints to deliberate what to do on behalf of the public. But if the past 50 years of our development history teaches us anything, it's that only when we expect those representatives and civil servants to do everything-from controlling how many shoes a state-run factory can produce to what loans to who can state-funded banks can give out-that we are likely to end up being disappointed again.

Wouldn't it be better to go for a change by instituting market-friendly mechanisms into how we want goods and services provided to us?

(11 JAN 2013 - 17 JAN 2013)