Talk of debt-trap is mass-scale propaganda
On April 24, President Bidya Devi Bhandari is going to Beijing to take part in the second Belt and Road Ini-tiative (BRI) conference. There are reports that China is preparing to roll out the red carpet for Bhandari. While in Beijing, Bhandari will address the BRI conference, and reportedly sign a slew of agreements with her Chinese counterpart, Xi Jinping, including on a protocol to the 2016 Trade and Transit Agreement. Some say President Bhandari’s visit will give clear signs of Nepal’s abiding commitment to the BRI, at a time when the Chinese project seems to have stagnated in Nepal. Kamal Dev Bhattarai talked to Nepal’s former Ambassador to China Tanka Karki for his views on the visit and on Nepal-China relations.
Why is China giving President Bhandari such importance?
Nepal and China share a 1,400-km-long border. There has been continuous interaction between the two countries for a long time. We help each other, and we support each other’s genuine interests. The Chinese side understands the value of geographical proximity. Not only now, China was extending a helping hand to Nepal even when China was not economically strong.
Neighborhood policy figures prominently in China’s overall foreign policy. The Chinese realize the importance of peace and stability in the neighborhood. There are no political differences between the two countries. That is why China is giving Nepal utmost priority. I think Bhandari’s visit is taking place in this larger context.
How is President Bhandari’s visit going to differ from previous high-level visits to China?
I think it is a regular visit. In China’s diplomatic dealings, there is no influence of ideology. If someone thinks the Chinese are giving more priority to this government due to its communist ideology, they are totally wrong and they do not understand Chinese foreign policy. Their foreign policy is rather directed by their national interest and mutual interest. I don’t see a difference in President Bhandari’s visit compared to such visits in the past.
What accounts for the delays in the implementation of the BRI projects in Nepal?
Before us are big powers such as India, China, Russia, the US, and others. These powers all exert their influence. Also, instead of focusing on our own national interest and issues, we are more sensitive to others’ interests and issues, which could have affected progress on BRI projects. We should be guided by our needs and interests; such an approach will help us gain credibility. But in the name of making others happy we are accepting unjust demands and pressures.
Nepal’s participation in the BRI means Nepal can no longer be projected as a ‘Himalayan barrier’. To eradicate poverty, we have to try to reap benefits from three major powers: China, India and the US. At the same time, we should not entertain unjustifiable interests of those countries. Joining the BRI means our access to the outer world would be easier. It also means coming out of the old mindset of confining ourselves to only one side of the Himalayas.
Even when China was not economically strong, it was extending a helping hand to Nepal
Are you hinting at pressures from India and western countries for the delay in selecting projects under the Belt and Road Initiative?
India is boycotting the BRI and western countries are divided over it. This means there are ideological differences over this project.
More specifically, is Indian and American pressure the reason for the delay?
In my observation, there is obviously external pressure. But we have not developed the ability to resist such pressure.
There is also talk of a debt trap. How do you see this?
There have been attempts to blame China in the name of debt-trap diplomacy. First, it is mass-scale propaganda warfare. Second, you if take a loan from others you are responsible for its proper utilization. It is our responsibility to execute projects cleanly and create an environment of paying back loans. You cannot maintain a corrupt structure at home and then blame China. There is talk of a debt trap in Sri Lanka. In a recent seminar I attended, a Sri Lankan professor said that the debt trap story is not theirs. He shared a different story. It is about propaganda and we should not run after what others say. We cannot emerge out of poverty only by mobilizing internal resources. We should take loans and correct our defective mechanisms rather than blaming those who loan us money.
Is the new US Indo-Pacific Strategy a counter to China’s BRI?
Mainly, we should give priority to our relations with our two giant neighbors, India and China. The changing global context and our development needs encourage us to maintain cordial relations with western powers and take their help in emerging out of extreme poverty. But Nepal’s best interest still lies in maintaining balanced relations with India and China.
Have there been sincere efforts to maintain such a balance?
We have to do a lot of homework to maintain a fine balance between the two countries. To some extent, there has been progress in our relations with China after the political change in 2006. All powers have understood that Nepalis do not want to live under the influence of external forces, and we want cordial relations with all counties. On foreign policy, we need to figure out areas of mutual interest. Genuine interests should be accommodated while unjust ones should be strongly resisted.
There is much talk about Chinese railway. Is it feasible?
Railway connectivity between Nepal and China will mean Nepal is no more Himalaya-locked. In a real sense, we will be connected to both India and China as well as with global powers. Railway connectivity between the two countries will ensure our strategic autonomy.
But there are reports that rail connectivity with China is too costly.
It is not true. For example, it takes at least 45 days if you bring goods via seaports from Japan. But with Chinese railway, it would take no more than 10 days. It saves us cost and time. If we have such a railway, the current hassles in Kolkata port would be relaxed because they will then have to compete against Chinese transport links with Nepal. When we initiated a railway line with China, India proposed the Raxual-Kathmandu railway. Both are beneficial to us. India alone cannot meet our demands. We need support from India, China and western countries.
How do you see recent American positions and statements on growing Chinese investments in Nepal?
There is a big tug-of-war to reorder the existing global system. The bipolar world created after the Second World War collapsed in 1989. The short-term unipolar world order with America at the top is no longer feasible. In the post-1989 period, the polarization between North and South has escalated dangerously. Even within countries, the gulf between the rich and the poor is widening. A new world order which can bridge these gaps is inevitable. Now, we should focus on minimizing poverty and strengthening our institutions. Quiet diplomacy may be in our best interest right now.
How would you evaluate the Oli government’s handling of foreign policy?
Despite some shortcomings, I think it is broadly on the right track.
Has the government been successful in balancing major powers: India, China and the US?
We do not have the capacity to balance major powers. Creating an environment of trust with all major powers will be a big achievement. We should have no trust deficit, which might create problems. There should be no suspicion in bilateral relations with those countries.
Ideology aside, is the Oli government tilted toward China?
I will say we have not done enough to benefit from China.
Quick questions with Surakshya Panta
Q. What is important to you that you rarely talk about?
A. Privacy.
Q. A quote you live by?
A. ‘If you don’t spend time to work on creating the life you want, you are eventually going to be forced to spend a lot of time dealing with the life you don’t want.’
Q. Are you a morning person or a night owl?
A. Night owl.
Q. Something your fans wouldn’t believe about you?
A. I am short-tempered.
Q. If one of your wishes were to be granted, what would it be?
A. Every child gets education for free.
Q. What’s the best part of your day?
A. At night when I get into bed with the music on.
Q. Your alternate career choice?
A. I already have one: Engineering.
Q. What is one question you wish more people asked you?
A. So, what did you learn from that?
Q. Who would you like to work with next?
A. Prashant Rasaily.
Interview with Anne-Marie Gulde, Deputy Director of Asia Pacific Department of the IMF
In the spring meetings of the International Monetary Fund (IMF) and the World Bank Group from April 8-14 in Washington D.C., various flagship reports of the IMF have been unveiled, namely, the Global Economic Outlook, the Financial Sector Stability Report, and the Fiscal Monitor. Finance Ministers and the Governors of the central banks and representatives of 189 member nations took part in this event. The IMF and the World Bank discussed policy agendas, development and institutional capacity support, with emphasis on prudent fiscal and monetary policy regime for the macro-economic stability in light of the slowdown in global growth to 3.3 percent in 2019. Pushpa Raj Acharya of the Annapurna Media Network talked to Anne-Marie Gulde, Deputy Director of Asia Pacific Department of the IMF, on how Nepal can develop a resilient economy amid the global uncertainty.
The IMF’s Asia Pacific Outlook 2019 is quite optimistic. What are the policy parameters that the IMF would like to prescribe to small economies like Nepal so that they can be more resilient?
We project Asia to grow by 5.4 percent both in 2019 and 2020, largely unchanged from ourprojection from last October. The region continues to account for more than 60 percent of the global growth, but downside risks have increased, including faster than expected deceleration in global growth and trade, the possibility of new trade tensions, higher oil prices, and global financial market volatility.
On Nepal, we see the near-term outlook for growth as favorable, but macroeconomic and financial vulnerabilities have been building up. Growth is expected to reach 6.5 percent in FY2018/19, supported by ongoing reconstruction, investment in hydro-power projects, and strong tourism-related activity. However, fiscal and credit policies are too expansionary, leading to rising non-food inflation, widening current account deficit, falling foreign exchange reserves, and a buildup of financial sector vulnerabilities.The policy priorities are to contain rising domestic demand pressures and external imbalances and safeguard financial sector health. These policies, combined with actions to make Nepal’s economy more competitive and attractive to investment, will help deliver stronger and more sustainable medium-term growth.
The IMF has emphasized coherence of fiscal, financial and monetary policies for macro-economic and financial stability. However, as per general understanding, fiscal and monetary policies are different. Fiscal policies normally focus on growth while monetary policiesareframed to tame inflation, evaluate credit flows from financial institutions and to assess external sector stability. What sort of coherence is required among them?
Policymakers—governments and central banks—generally share a broad set of economic objectives: healthy growth, solid job creation, and macroeconomic stability. Fiscal policy involves control over government spending and taxes, while monetary policy involves control over money supply and interest rates. These policies need to work together, but to avoid conflicts among targets it is generally accepted that the primary mandate of the central bank is price stability, which is a precondition for macroeconomic stability and growth.
For Nepal, the improved near-term outlook provides an opportunity to address vulnerabilities and deep-seated structural weaknesses.Expansionary fiscal and credit policies are exacerbating domestic and external imbalances and have led to increased financial sector risks. Policy stimulus should therefore be withdrawn in the near term, in particular by scaling backcentral government spending and tightening monetary and macroprudential policies. This would reduce domestic demand and henceease pressure on the current account. These policies, combined with actions to make Nepal’s economy more competitive and attractive to investment, will deliver stronger and more sustainable medium-term growth.
What does a slowdown in the Chinese economy mean for South Asia?
We expect a continued but gradual slowdown of China’s economic growth, given its demographic trends and the maturing of its economy. South Asia has been less integrated than other parts of Asia into value chains in manufacturing linked to China, but China is an important partner country in investment and financial relations. South Asian economies should focus on policies to sustain their growth over the medium and longer runs, taking into account global, regional and country specific developments. For all countries labor and product market reforms should continue, with a view to boosting employment, firm dynamism, and innovation, while at the same time strengthening social spending to address rising inequality and inclusion gaps. Alongside, more open trade regimes could build resilience.
Deepening trade integration among Asian countries is one major recommendation of the IMF to keep them away from major shocks. What advice would you give South Asian economies which are least integrated in the world in terms of trade and investment?
Trade openness can play a much larger role in shared prosperity. We strongly believe countries in South Asia would benefit from further reform efforts to improve the business climate, ease supply bottlenecks, and facilitate trade and investment liberalization. These would help boost the countries’ export competitiveness and increase their integration into global value chains.
Nepal aims to graduate into the league of ‘developing countries’ by 2022 and to sustainably grow above 6.5 percent compared to under 5 percent over a decade ago. What are the risks for the Nepali economy and what needs to be done in the near and medium terms?
Our growth projection of 6.5 percent for FY2018/19 reflects the authorities’ established policies. However, this elevated near-term growth will likely put substantial pressure on the domestic economy and the current account. As we note in our recent Article IV report on Nepal, it is crucial to withdraw policy stimulus in the near term to manage fiscal and external sector pressures, avoid an abrupt slowdown later, and promote a more durable economic expansion. The medium-term outlook would also be bolstered by a swift implementation of structural reforms. Last month’s successful Investment Summit was an excellent opportunity to showcase improvements in Nepal’s investment climate. Nepal should continue to advance policies to improve its business climate and put the country on a faster growth trajectory.
Will the South Asian economies be able to maintain the same momentum of growth if they do not face any major shocks?
Asia remains the “growth engine” of the global economy, accounting for over 60 percent of global growth. The outlook for South Asian economies in particular remains broadly positive. However, downside risks have increased, including from trade deceleration, higher oil prices and global financial market volatility. To navigate these risks, macroeconomic policies should aim at stabilizing growth while ensuring sustainability and increasing resilience. Countries also need to focus on policies to sustain their growth over the longer run in the face of declining productivity growth and rapid aging. Policiescan include labor and product market reforms, strengthening social spending to address rising inequality, and efforts to open up the region's economies further to trade.
‘Digital economy’fascinates planners and policymakers everywhere. But there have been delays in developing regulatory frameworks for leveraging these innovations and technologies due to lack of capacity. How can the IMF can help member countries in capacity development in this regard?
Indeed, the digital economy promises a radical transformation of the global economy. In Asia, digital innovation has accounted for nearly one-third of its per capita growth over the past two decades. E-commerce is associated with higher firm productivity. Digitalization is helping improve both revenue collection and expenditure targeting.Neither the opportunities nor the challenges related to digitalization have yet become fully apparent. However, a reorganization of jobs and a wave of investment in physical and regulatory infrastructure will likelydetermine the productivity gains from the digital revolution.
Policy responses will need to strike the right balance between enabling digital innovation and addressing digitalization-linked risks. Policy priorities differ across Asia (and the world), as economies’ initial conditions are different. Policies to harness digital dividends include revamping education to meet the demand for more flexible skill sets and lifelong learning, as well as new training; reducing skill mismatches between workers and jobs; investing in physical and regulatory infrastructure that spurs competition and innovation; and addressing labor market and social challenges, including income redistribution and safety nets. In line with our mandate, we will continue to closely monitor these developments and foster international cooperation among different stakeholders on effective responses to developments in this area.
Quick questions with Raju Singh
Q. Who do you respect the most?
A. My parents.
Q. Could you share any of your secret tricks?
A. Practice, practice, practice.
Q. What advice would you give to other aspiring DJs?
A. Take a three-month course, at least!
Q. If you could eternally be stuck in one year’s music scene, which year would it be?
A. Definitely 1998.
Q. What is one mistake you see a lot of up-and-coming DJs making?
A. They don’t focus and just practice a lot on their set.
Q. What is something that bugs you about the DJ scene?
A. Unprofessionalism.
Q. What is one superpower you want?
A. The ability to fly.
Q. What is one track that never gets old for you no matter how many times you hear it?
A. ‘Chyangba hoi Chyangba, suna suna hoi Chyangba’.
Q. What is one track that got popular that you can't stand?
A. ‘Gucci Gang’.
