2-8 January 2015 #739

Time to grow up

We have already lost decades in stalled development, we don’t need messy politics to compound the problem
Anurag Acharya
Professor Angus Madison’s The World Economy: A Millenial Perspective is considered as one of the most comprehensive works of economic history. It provides rich insight into global patterns of growth and demography in the last millennium.

From the fall of the Empires to the rise of modern nation states and expansion of international trade and commerce, the book gives us a broad picture and trajectory of global human development.

Madisson sifts through data and show us how Western Europe, North America, Australia, New Zealand and Japan were able to achieve rapid growth compared to rest of the world. Similarly, he attributes the dramatic rise of economies including South Korea, China, Malaysia, Botswana, Brazil, Thailand, Indonesia, Hong Kong and Singapore to their sustained high growth rate in the last three decades of the millennium (1965-1995).

What hits us most is the realization that south Korea, Taiwan and Singapore were at about the same level of development as Nepal way back when, but leap-frogged due to leadership, cohesive politics and good governance.

To be sure, in the six decades since we opened up to rest of the world, Nepal made dramatic progress socially and politically. From being plagued by illiteracy, disease and high rates of maternal and child mortality, Nepal made impressive progress since 1990 reducing mortality and illiteracy and transitioning into a democratic republic.

However, this achievement has not resulted in improvement in overall quality of life, as both our people and economy remain stunted. The political and energy crisis are feeding into one another to create a vicious cycle, forcing industries and business to shut down, and making farmers abandon their land. Lack of jobs has resulted in exodus of manpower.

At a discussion at Martin Chautari this week, Planning Commission member Swarnim Wagle pointed out that with 40 per cent of country’s population between 16-40, we can either reap youth dividend or set off the demographic timebomb. Wagle said the classic excuse of geography as destiny does not necessarily explain Nepal’s failed development. “While land-lockedness is a handicap, the bigger problems lie at institutional level,” he said, “if we can overcome these, Nepal’s geo-political location between the two fastest growing economies offer huge potential.”

Interview with Swarnim Wagle on News24 TV
Indeed, as Wagle points out, ours is a problem of rent-seeking mindset where politicians are used to scribbling a project plan literally in the back of an envelope and passing it on to the planning commission for execution. A country which keeps big chunk of its workforce out of its own economy  is actually killing its own potential.

Wagle went on to argue why he is against the fashionable demand to scrap the National Planning Commission. Instead, he wants the NPC to scrap its Soviet-style periodic planning model.

“We are done building bridges and approving ministerial programs, let’s leave that to local bodies,” he says, “our job now must be to streamline longer-term sectoral strategies in coordination with the line ministries and focus more on monitoring and evaluating the impact.” Wagle feels first generation economic reforms that advocated for unrestrained privatisation will not work anymore. The new team at the NPC is still trying to diagnose what the past planners overlooked, but they seem convinced that the state needs to play stronger regulatory role, guiding economy from extractive towards inclusive growth. By Wagle’s own admission, reversing country’s growing manpower flight to fuel internal growth, and putting the scattered $6 billion remittance inflows to productive use in the interim period are the trickiest problems. 

The bad news is, even if Wagle and his team manage to figure it all out, it will not be sufficient to kick-start Nepal’s stalled growth. For that those pulling the political strings from Singha Durbar, Balkhu Darbar and Lazimpat Darbar must first start acting like grown-ups. And today’s headline tell me that just ain’t happening anytime soon.  

Read also:

Where is the peace dividend?, Editorial

Superstrucutre bottleneck, Editorial

Decentralised plunder, Editorial

Trade in tatters, Binod Bhattarai

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