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Province 5 is gearing up for an Investment Summit in next few months to attract domestic and foreign investment into provincial level infrastructures and to finance other development works. But the federal government’s laws on for­eign direct investment (FDI) give the Department of Industry (DoI) full authority to decide whether to let provincial governments process any foreign investment. The fed­eral government alone needs $15 billion a year in investment to meet infrastructure gaps, and struggles to keep up with the demands of the provincial and local governments. Yet despite the dire financial need of local and federal governments, there is no conducive environment for investors. Unfavorable regulatory envi­ronment, lack of infrastructure and absence of credit facility are major hindrances for the country’s small and medium enterprises. Large infrastructure projects face even more complex challenges such as in availability of land and long-term financing mechanism. Although the World Bank’s new Doing Business Index has por­trayed Nepal as a better destina­tion for investment compared to some earlier years, actual invest­ment is minimal. The FDI inflow in 2018/19 was around $130 million, or 25.7 percent less than previous year. Overall non-farm enterprise growth in the country is bleak. Yet Nepal has still been ranked 94th in 2020, almost 16 positions up from last year’s position among 190 countries ranked.

Government efforts to attract FDI and engage private sector to develop infrastructures seem mostly ritual­istic. The Ministry of Finance, and especially finance minister Yubaraj Khatiwada, made possible the For­eign Investment and Technology Transfer Act (FITTA) 2019 and the Public-Private Partnership and Investment Act (PPPIA) 2019. These bills were major ‘showpieces’ during the March 2019 investment summit. But the summit organized to present Nepal as a favorable global invest­ment destination has yielded almost no fruit. Nepal’s competition is with countries such as Bangladesh, Kenya and Philippines, which have made significant strides in terms of attract­ing FDI.

Implementation is always a criti­cal hurdle in Nepal. The PPPIA aims to make Investment Board of Nepal (IBN) more functional by dividing it into investment and PPP units, in order to more efficiently manage pure investments and PPP activi­ties. But the government has shown no interest in this pragmatic mea­sure. Only endorsing bills won’t be enough to get more FDI if the acts cannot be implemented.

Engagement of domestic private sector in infrastructures and invest­ment in services is also limited as the government perception of property rights is negative. Finance Minister Khatiwada’s remarks on imposition of property tax while transferring inherited property has played a role in keeping the private sector away from economic activities. Overall performance of the economy might seem healthy as our growth figures are above the average of the past one decade. But the non-farm enter­prises growth is declining and con­tribution of manufacturing sector in GDP is decreasing.

It is a challenge to attract invest­ment given the long list of indus­tries and businesses restricted for foreign investment. Moreover, lack of institutional coordination and communication among institutions such as the Department of Indus­try (DoI), the Nepal Rastra Bank (NRB) and the IBN creates further hindrances for foreign investors. Similarly, undermining the merito­cratic process in appointment of top leaderships of such institutions has direct impact in undermining insti­tutional good governance. In the absence of institutional good gover­nance within key organizations, the process of attracting foreign invest­ment and engaging private sector remains hamstrung. Having a team of weak negotiators on the other side of the table is a waste of time for genuine investors.

In the federal context, provin­cial and local governments should be allowed to attract investment without any intervention from the center, and these provincial and local governments should also be empowered to manage small to medium size foreign investment. Similarly, the government decision to increase minimum FDI threshold from $50,000 to $500,000 has sig­nificant implications on FDI inflow. This policy hurts small and medium enterprises (SMEs), which have been a major driver of Nepal’s service sector. In fact, the contribution of service sector, almost 57 percent of the economy, has been increasing in the past one decade. Against this backdrop, the government should revisit its new FDI cap O

The author is an economist

 While talking about our econ­omy, we can analyze it in two ways. One is describing the positive things that have hap­pened. The second is to describe what positive things have not hap­pened or the negative things that have. Most people focus only on negatives but I would like to discuss both the sides. First, let’s discuss positive things. For the past 25-30 years, education has improved by a lot, so has peo­ple’s lifespan. We live to be 70 now than die at 35, as my school textbook used to inform me. So people’s aver­age lifespan has doubled. Of course, there are people, for instance the Dalits of the far-west or western hills, who do not average 70 years. But that is something we have to work on.

Poverty has been reduced by almost half, a huge achievement. From around 42 percent in 1995, the proportion of absolutely poor or very poor who do not get two meals a day has come down to 21 percent. It is a huge achievement.

There are, of course, 20-21 percent who are still poor, who do not have two meals a day. Also, 35 percent of our children are stunted as they do not have nutritious diet. Being stunted means not only are you are physically deficient you are also mentally ill.

Another positive is that we are growing at about 6.5 percent, which is not very high but not very low either. It is about the approximate growth in India and now also in China. So the growth rate is rea­sonably high, although it is not the rate we should be satisfied with; we should grow at about 10 percent annually. Plus, in infrastructures such as roads and hydro, we are doing well. We will be self-sufficient in hydro production starting next year and there will be surplus to sell. The NEA has thus been asking us to cook food with electricity.

Now let’s talk about the problems. First, I say one-fifth population is absolutely poor that cannot afford two meals a day. That is a sad sta­tistics and should trouble our state and government that promised to institutionalize socialism.

Socialism is particularly needed for the poor, females, Dalits and other marginalized groups. It is not an immediate priority for those who are well off. But our government would have failed if it cannot meet the needs of the very poor, women, Dalit and so forth.

Inscribing socialism in the con­stitution is one thing but actually implementing it is another. So the government should think seriously about what socialism means. Of course, the constitution does not merely says socialism, it also says socialism based on democratic norms and values. So it is not social­ism of the variety implemented in the Soviet Union or China.

It is more democratic socialism, or socialist democracy as they call it in Northern Europe, which means you have individual liberty, freedom of association and so forth. It also means the economy to a large mea­sure will be run along capitalist lines but revenue will be spent on social welfare. There is some way to go have that kind of socialism in Nepal.

The second point is that we do not have an investment-friendly cli­mate. We live at a time the Foreign Direct Investment is open across the world. The fact that we are poor does not mean we should have no investment.

Investment can flow across the world in principle. But there are hin­drances in Nepal obstructing people from investing. The government should open up to international investment. Now, a sizable number of people in Nepal can invest. But their investment is going mainly in three or four areas: land deals, con­struction, schools, and health.

Other sectors are short of invest­ment. For instance, there is insuffi­cient investment in tourism, agricul­ture, even in hydro. It is important that we take all possible steps to open investment in other areas, the principal avenues through which poverty can be reduced.

Poverty in Nepal was reduced by half within the 25 years primarily, not exclusively, as many Nepalis were employed in South East Asia, West Asia and other countries. So why can’t we have more jobs right here? Investment is the prime ave­nue through which we can increase employment.

Some sectors are growing, for example hydro and roads but agri­culture has no investment, even though it creates 60 percent jobs in Nepal. We have come a long way from the time agriculture contrib­uted 75 percent of total GDP in 1970.

Now, it is more like 25 percent. But the number of people who rely on it is still high. So agriculture may not generate as much GDP as it did but continues to provide job oppor­tunities to most of the population.

Many rely on agriculture, at least for their household income. If agro productivity continues to decline many will suffer. It vital that agricul­ture productivity be increased; and in its subsectors like hatchery, dairy, fruit cultivation, green vegetable cultivation, it has increased. We now hear stories like how a family earns up to Rs 1.5-2 million a year from the orange they grow.

You can grow vegetables, tree crops and other products. Tree crops will be very important in dry areas. They are water-efficient unlike other crops which require much water. Tree crops, of course, pay back in 10-15 years, not immedi­ately. It is not like you bring a cow and it starts giving milk right away. Tree crops take longer but their rate of return is much higher and they are much more climate-change friendly. So growing trees and for­ests is important.

With bigger roads and even rail­roads between Nepal and China, we can sell high value crops in their markets. Even bus and truck corri­dors with China will open up huge opportunities for Nepal.

It is important that the govern­ment gives due attention to agricul­ture. That will help especially the poor in rural areas. Health and edu­cation are fundamentally important for growth but in a narrow way. Hydropower, agriculture produc­tivity, tourism and connectivity are important for Nepal and we must open up more with China. It is not only an economic imperative but also a political one. We are now like a stadium with only one gate so in my life-time I experienced three blockades. We cannot let happen that again.

We must open all avenues of exchanges and connectivity with other neighbors and friends rather relying on only one neighbor. That is imperative from both economic and strategic viewpoints.

Finally, it is important we govern well. The main problem in Nepal is governance, particularly in the bureaucracy and political parties. The parties have monopolized most sectors, capturing universities, bureaucracy, school boards, and community forestry. Monopoliza­tion of power by political parties leads to economic depression. The bureaucracy is too bound by rules.

Some bureaucrats are not working properly, while others live in fear. Corruption has not decreased. So how can there be economic growth? There should be timely decisions at the source. The main blockage is in Singhadurbar O

Based on a conversation with Kamal Dev Bhattarai

 We are delighted to bring to you the 100th issue of The Annapurna Express. In the past two years, we have always tried to adapt our content and design based on your feedback. Our goal remains the same: to publish a comprehensive weekly newspaper that is both informative and fun to read. Rather than follow the crowd, APEX has been able to craft a unique niche for itself even in Nepal’s crowded newspaper scene. Our experimentation continues, as we look to add more value to our readers.

Yet the state of the country worries us. According to government figures, the economy continues to grow at over 6 percent, a middling rate for a country in Nepal’s state of development. But what is holding us back? Why are most sectors of our economy stagnating? There is scope for improvement everywhere: BFIs, construction, advertising, media, vehicles, services, you name it.

This should be the most important national issue right now. If our industries and businesses cannot thrive, it is hard to see the government realize its vision of ‘Prosperous Nepal, Happy Nepali.’ To mark our 100th issue and second anniversary, APEX thus sought the advice of experts in multiple fields to find out their problems and seek some solutions. In this special issue, we also explore ways to boost the overall economy.

With the broader contours of federal Nepal now in place, it is vital that the country quickly embarks on the path of economic development, if only to secure the recent political gains. It is not enough for a handful to feel rich; the common man on the street must feel empowered today to at least fulfil his basic needs and to dream of a better tomorrow.

APEX wants to prosper with the country. We hope we have contributed to the vital political and economic debates in Nepal over the past two years. Perhaps we also entertained a few of you. Let us know. Any kind of feedback is most welcome. On this occasion, we would also like to express our abiding faith in democracy, nationalism, and national unity Again, thanks to our readers and advertisers for bringing us this far. Keep supporting us.

Sachan Thapa

Publishing Director

The Annapurna Express

The party-less Panchayat regime had adopted a policy of attracting educated men and women into politics by reserving four seats in the Rastriya Panchayat for university graduates. In the 125-strong parliament, 90 would be elected from zonal panchayats and 15 from class-based organizations. The king used to nominate another 16. At least four more of the elected MPs would be bachelor’s
degree-holders.

In its early days, the Panchayat system had four tiers of government: villages/towns, districts, zones, and the Rastriya Panchayat at the top. Holders of bachelor’s degree would contest direct first-past-the-post elections, whereas others fought indirect elections or were nominated for the post. For the graduate seats, not only the candidates but the voters were also required to have a bachelor’s degree from a university or similar
educational institution.
A total 105 members of the Rastriya Panchayat were indirectly elected, after going through the successive village/town, district, and zone levels. Only members of zonal panchayats qualified to be Rastriya Panchayat members. So elections for the Rastriya Panchayat was held among the limited members of zonal panchayats. This provision also applied to the class-based organizations.
But the bachelor’s degree-holders were allowed to contest direct elections. A month prior to the poll, an election officer was appointed, also a bachelor’s degree-holder. The officer would supervise, control, and direct the preparation of voters’ list. The officer would also designate a polling station. Salaried government employees did not qualify as candidates but they could cast a vote as government employees above the officer level were also university graduates.
The graduate provision was a unique experiment in the Panchayat system. The indirect elections for 105 seats didn’t ignite much excitement. Only the loyal Panchas were involved there. On the other hand, politically conscious enthusiasts entered the fray for university graduate seats. The contest gave a different vibe to national politics.
There used to be only limited voters in the zonal panchayats. The contestants were chosen on the orders of the zonal administrator who took orders from the palace. Votes had to be cast as ordered. For the graduate contestants, neither the palace nor the zonal administrator had much influence. While other contestants made rounds to the zonal administrators to curry their favor, the graduates toured the country accompanied by educated men and women. They visited different districts for a month looking for university graduates, meeting them, and handing out election
manifestos and pamphlets.
One sad thing about the provision was that the prospective candidates had to pledge ‘allegiance to the party-less system’ while filing their candidacy. After signing the candidacy paper, they were considered to have come into the party-less fold. Upon election, they had to take oath of ‘complete loyalty to the king and his successors’.
The graduate elections were held thrice—in March 1963, August 1967 (the April elections were postponed), and May 1971. The constitution was amended and the fourth elections did not happen. Panchayat supporters had by then concluded that the anti-Panchayat elements were misusing
this provision.
The first graduate elections in 1963 were held to little fanfare. Nepali Congress members were not interested as the party was pursuing armed revolt at the time. However, Nagendra Prasad Singh, who was close to Nepali Congress, contested the election. Advocate Krishna Prasad Dhungana, who was close to the communist party, had also filed candidacy. There were only a few other contestants. The candidacy of Singh and Dhungana got some attention due to their political backgrounds. The first time, Kumar Das Shrestha and Ramji Prasad Sharma got elected besides Singh and
Dhungana O
Next week’s ‘Vault of History’ will discuss emergence of some pro-democratic and pro-republic leaders through graduate constituencies