Nepali Times
Economic Sense


The Beed likes to stay away from pontificating on politics. So, this week he will not get into the political side of the integration of the two armies, but from an economic standpoint the deal doesn't look at all viable.

Ten years ago, a finance minister had said the pension costs of security personnel will be a major fiscal burden in 15 years.

Looks like it will happen sooner than that. A 100,000-strong national army means the state has to be ready to dish out a big chunk of regular expenditure towards pension costs of retired soldiers. When the current prime minister abandoned the jungle and entered the peace process, in one of his fiery speeches he had pointed out how he will reduce the army to just 10,000. It's perhaps time to turn that rhetoric into action because the country just can't afford to keep such a bloated army.

But maybe we need to analyse what is the minimum size of the army we require. The questioned needs to be not only answered from the political perspective, but also from a budgetary standpoint.

Along with the size and costs, the other issue is accountability. For decades, the Nepal Army has managed to stay outside the normal accountability structure- not due to lack of procedures but the mannerism in which it operated, especially with the Supreme Commander (the king), the accountability institution of last resort.

The prime minister generally took the ceremonial Defence Ministry and Palace Affairs which literally meant that there were no competencies or systems to regulate the army. The Auditor General's offices paid token visits to look through army accounts, and accountability was minimal. Even the Army Welfare Fund, that belonged not to the state but the army personnel and their families, could get away from disclosure obligations.

There are two ways of managing army spending. One, by the State Treasury just giving grants out of a budget allocation and not asking any questions, hoping that there are self-regulatory mechanisms within the system to take care of accountability. This practice has been used by Singapore after independence, but then one has to have the accountability levels of Singapore to pursue a system like this.

The second is like the one in India- having the Ministry of Defence regulates the armed forces. This perhaps suits the Nepal's democratic republic model. The key caveat of course is that the Ministry of Defence can exercise control in the real sense or go the extreme of the minister, becoming the virtual Commander-In-Chief and replacing the role of the King.

For the numbers, there are solutions. A division can be created that literally gets outsourced by the UN and other humanitarian rescue operations, thereby building a competency in global policing and disaster management capabilities. Therefore, from an army that will never be called on to fight its neighbors and hopefully never its own citizens, it will develop into a revenue earning part of the government.

On the accountability front, a lot will depend on the attitude of the current and future governments that will really take the onus of serious reforms within the system that not only brings about accountability but also better the lives of the people serving in the armed forces.

(11 JAN 2013 - 17 JAN 2013)