Prime Minister KP Sharma Oli and Finance Minister Bishnu Prasad Paudel appear determined to “solve” the entrenched economic problems of Nepal (only) by giving directives. In a meeting of the Developmental Problems Resolution Committee of his ministry last week, Paudel reportedly directed inter-ministerial agencies to improve weak economic indicators by utilising the strengths of the areas of the economy that are performing better. He enlisted foreign currency reserves, the balance of payment surplus, remittances, the abundance of liquidity in banks, low interest rates, low inflation, and an expected marginal rise in revenue collection and economic growth as the strengths. Paudel also urged the utilisation of its strengths to offset trade deficit and improve production, demand, capital expenditure and investment, which constrain growth prospects and overlook a proximate cliff of a potentially sharp recession.

Hollow directions

The core problem with the political leadership is that it appears to have reached its wit’s end in outlining possible solutions to the deepening, multifaceted economic challenges. The directives from powerful leaders like the prime minister and the finance minister crudely instruct to achieve one target or another but fail to outline the vision, strategy and modus operandi.

There are no blueprints or white papers at any level. The documents of the political parties, such as the manifestos, vision papers or policy speeches of the top leaders, barely embody any workplan or roadmap for economic revival and growth. The engrossing fear of a long spell of recession has not stirred up the political elites, ruling and opposition alike.

Nepal suffers from “planning fallacy”, where policymakers underestimate the cost, time and scope of tasks despite their responsibility. Meanwhile, the policymakers remain obsessed with self-proclaimed understanding and self-congratulation on their long experience in economic planning and policy making. As the cumulative outcome of this particular fallacy, the Nepali economy has long been stagnant due to low levels of investment, productivity and domestic job creation, thus converting the nation into a low well-being enhancing state.

The governing elites have the political imperative to window dress the septic wounds rather than deep-cleanse them to enable a recovery process in the true sense of the term. This has hijacked the philosophical paradigm of political parties as the most critical stakeholders in governance and planning, the technical understanding of the demand for development, and the chartered roadmap for a leapfrogging departure. Here are a few such travesties.

Agriculture without land

Of Nepal’s total land area, only 21.88 percent is cultivable, as per government data. As per the Ministry of Land Reform, Co-operative and Poverty Alleviation, the entire cultivable land is fragmented into 30 million plots, and only 4 percent of “farmers” hold plots larger than two hectares. This explains the constraints in commercialising agriculture. Although figures on employment (disguised unemployment) show that about a mammoth two-thirds of the working-age population is engaged in agriculture, this contributes only a quarter to the country's gross domestic product. The prospect of harnessing the true scope of the sector is dampened by the sheer lack of land plots for commercial-scale agricultural enterprises ranging from production processing to pricing.

At the core of such ad-hocism lies the incessant policy experimentation in land categorisation and the lack of comprehensive and sustainable land use planning and implementation. After several policy changes, the land is currently classified into 10 categories. However, there are anarchic overlaps in jurisdictions among the three tiers of government. Further, there is an absence of a coherent national policy framework to provide long-term solutions to give land primarily for agriculture, then to industries and other major pillars of the national economy. Thus, agriculture has failed to be a significant growth engine and provider of a gainful employment even to the population it now putatively engages.

Urbanisation and industrialisation

Urbanisation is a globally used parameter to gauge the quality of, and access to, public services. However, Nepal does not have a single planned city. The implications of first allowing settlements to expand haphazardly and then connecting them with basic utilities like electricity, water supply and sewerage, communication networks, health and education services, and road connectivity are obvious. Even after investing hugely, they never become functional cities with improved quality of life. This directly impacts the prospects of industrialisation and improved social protection.

Urbanisation and industrialisation are often taken as the proverbial “chicken and egg” story. The industrialisation of an area has spurred the growth of cities and vice versa. However, there is a substitute for systematic urban planning for sustainable industrialisation that cares about the residents’ quality of life and labour inputs to the industries.

When we readily lament our extremely low level of industrialisation—resulting in a low level of production, high dependence on imports and rapidly losing ground on creating employment—the planners of this country are oblivious to the broken chords, mainly between these two nodes.

Another grossly ignored dimension in our economic planning relates to the pattern, extent, direction and speed of demographic shifts caused by mass migration. No planning document in the country has even marginally tried to arrest the trend of both domestic and international migration of Nepalis and its socio-economic cost to the economy.

The capital flight and human capital flight are suspected to have led to labour market distortions and social disintegration. Moreover, they have substantially shrunken the consumption capacity of the economy. The out-migration of the youth has a direct impact on economic productivity. In addition, it is also causing a peculiar absence of an energetic segment of the population, which demands improved governance and helps put the rulers on their toes for fear of discontent. This could have served as a blessing in disguise to the country’s political class for an unpunctuated reign of unabated self-interest.

The authority of the elective political executives to “give directives” is undeniable. But if those directives are without a well-defined pathway and set goals, they become empty rants and cannot stop the economy’s downward spiral. This is increasingly becoming far worse than the rulers in Singha Durbar are portraying it as commonplace as it to be.