The big why

  • December 7, 2015

2015-12-07, Ram C Acharya

When it comes to nation-building—empowering and unifying people and advancing rapid economic development—every country faces challenges and enjoys opportunities in varying degrees. The task of nation-building requires attaining the twin goals of minimising the challenges and seizing the opportunities.

Nepal’s major constraints to nation-building are being landlocked, sharing borders with only with two countries, and its tiny size compared to its neighbours. Its strengths are its resilient people who endure any hardship imposed on them either by nature or foreign forces hoping that, one day, Nepal will emerge as a peaceful, inclusive and prosperous nation. Furthermore, the intriguing natural beauty and the abundance of water resources can be catalysts for building a vibrant economy.

Missed opportunities
The government’s past policies did not help build the nation; they derailed it.  Instead of harnessing people’s power, the policies marginalised them, and rather than optimising the use of resources, they squandered them. Today, policy-induced barriers dwarf the natural obstacles in nation-building. Policy failures and the ruined potential of its people and resources, rather than Nepal’s landlockedness and small size, are more pressing problems.

Consequently, whether responding to a natural disaster or to gross violation of its basic international rights by a foreign power, the country seems helpless. Nepal remains one of the poorest countries in the world and income inequality is huge. What went wrong? Many things; among which, the following four are the genesis.

First, being landlocked and bordered with only China and India, connecting with both the neighbours by good road networks should have been the focus to mitigate the risks associated with Nepal’s geography. Even for a coastal nation, economic integration—mobility of goods, capital and people across countries—is key to conomic development. It is more so for a landlocked one. But Nepal made a blunder by not integrating with China even as countries around the world, including the US, are doing so. While integration with India and China is considered to be a step towards prosperity by other countries, in Nepal such efforts are ridiculed and termed as playing the ‘China card’ or ‘India card.’

Second, a country is as strong as its people, who in turn derive strength from the education and skills they possess. No country in the world that provides high quality education to its citizens has remained underdeveloped. In fact, education is the most important and an indispensable tool for nation-building. Unfortunately, Nepal’s education system has turned nation-building on its head by systematically discriminating the majority  through its disgraceful public education. Only children who belong to 20 percent of the richest households that can afford private schools graduate from high school. Children from the remaining 80 percent households are either illiterate or school dropouts.

As a result, only 11 percent of the population above 18 years has completed grade 12, and only 1.3 percent of those above 25 years have completed undergraduate in Nepal. Due to the lack of public education and social mobility, the chances of children belonging to poor families to become high-income earners are frozen, making economic exclusion intergenerational. The country which should aim to be a soft power—a location of world-class education, conferences, intellectual debates, and research centres—to complement its atomic neighbours has remained a cluster of unskilled workforce.

Third, nation-building is akin to achieving rapid economic growth and sharing this prosperity among citizens. The only way to achieve higher growth is by producing more goods and services. This requires, first and foremost, for the country’s resources to be fully employed. Every day, a larger number (1,800) of the working age population leaves for foreign countries in search of manual work than the number entering the job market (1,400). Yet the unemployment rate is 22 percent. Such a jobless economy is making people economically destitute.

Fourth, water resources that have the potential of creating economic prosperity have not been exploited because of policy incompetence. Rather than utilising them rapidly for energy, drinking water and irrigation they are wasted.

Course correction
There is no quick and easy way to correct these mistakes but the determination of political parties could make all the difference. If they take the task of nation-building seriously, within a decade, Nepal can be a respected and vibrant nation. This requires revamping almost all economic and social policies, starting with those that would enable the four pillars of global integration, education, job creation and resource utilisation.

Nepal should have symmetric policies with India and China in terms of infrastructure connection and product and capital markets integration. It should build viable roads throughout the northern border connecting China. It will be costly, but they are going to be invaluable for generations to come.
In addition, Nepal’s trade policy should be the same for China and Saarc countries. By moving towards free trade only with Saarc countries and not with China, Nepal is creating inefficiency—with the possibility of otherwise cheaper imports from Chinese to be replaced by expensive imports from Saarc countries. This policy bias blunts the forces of economic linkages with China.

Nepal should welcome foreign investment from all countries. International contracts should be awarded on the basis of the merits of the bids and not the nationality of the bidders.

Education is a game changer. The nation should provide a decent universal standard, publicly funded, education to all youths in Nepal till grade 12. So, nation-building should start from public schools. They should be transformed from a symbol of despair to a beacon of hope.

With fallen productivity in agriculture, hollowed-out industries and non-existence of service sector, Nepal has been reduced to a consumption centre financed by remittances and foreign aid. To reverse this trend, the monetary, exchange rate, tax and subsidy policies need drastic changes so that their focus is job creation and production expansion.

Nepal should end subsidies on petroleum products, allow the private sector to import and diversify the country sources of imports, and most importantly generate energy through hydro, wind, solar and biomass, based on cost effectiveness.

Drivers of destiny
Nepal is small compared to its neighbours. It is about 2.1 percent of China and India in terms of population but one percent of India and 0.2 percent of China in terms of Gross Domestic Product, a measure of economic size. Size matters, but countries with right set of policies have prospered irrespective of their size.

Nepal’s development strategy should aim to earn China’s and India’s cooperation and engagement. But, the main drivers of prosperity are going to be its own policies, people, and resources.

In difficult times, fiery speeches and emotional expressions are natural responses, but they do not take the nation much forward. Without delay, Nepal should start a sure process of nation-building by implementing a smart set of policies with courage and discipline.

Empowering people politically, economically and socially is the only way to build a nation. If a nation can take its people in confidence by empowering them then it has nothing to fear. It is the people, not any foreign or military force, who decide the destiny of a nation.

Acharya is an economist ([email protected])