The emergent Rastriya Swatantra Party, the fourth largest force in the federal lower house, has of late been trying to add clarity to its ideological and organisational orientations. In the parliament, it has also been a vocal advocate for reforms in a number of sectors and issues. Yet, there is also no shortage of controversy surrounding the party. The Post’s Thira Lal Bhusal sat down with Swarnim Wagle, a celebrated economist and now an RSP lawmaker and vice-chair of the party, to discuss these issues. Meanwhile, Wagle also dissects the country’s political-economic malaise. Excerpts:

Let us start with some contemporary issues. The House of Representatives has passed a bill to amend money laundering-related laws. RSP lawmakers, including yourself, have objected to some of the bill’s provisions. Why?

Government officials argue that the bill’s provisions comply with international norms. But our concern is that many of the provisions could be aimed at helping preserve ill-gotten wealth and protecting the corrupt elite from criminal charges. Our main objection centres on the provisions that allow one to legalise money in their possession by taxing it without having to show its legitimate source. The wealth is apparently legal on the grounds that it cannot be proven that the money has been obtained through criminal activities.

Assume stacks of money are found in someone’s house, and no source of the money is provided. The person might have exercised his/her perverse influence to appoint someone to an important position, engaged in policy corruption and hobnobbed with big contractors without leaving any trace of such activities. We all know such practices are rampant in our society. The provision is that one can legalise such money just by paying tax. We objected to that. But we are also sensitive to the argument that such activities could be tackled through other related laws and that money laundering could be interpreted as a secondary offence (with crime committed prior to laundering being the primary).

Separately, you have registered your objection to limiting the role of the central bank in overseeing the problematic cooperative sector.

The poor governance of the cooperative sector has been a challenge for at least two decades. MPs with vested interests have diluted the provision by saying that the Rastra Bank can come in only at the request of the cooperatives department. The distinction is that the central bank is one of Nepal's most professional public institutions. One can easily remove the head of the cooperatives department. Thus, the provision of keeping the central bank out till the very end is aimed at continuing the ongoing malpractices. This is not an isolated incident. Even former special court justice Gauri Bahadur Karki, who was tasked with investigating the irregularities a decade ago, has clearly pointed out how the current Cooperative Act was brought. As many as 693 amendments were registered to water down the bill. The interest groups that didn’t want the cooperatives sector to be tightly regulated tried to weaken the law.

Rampant malpractice in the cooperative sector has become a national problem. Many noted personalities are linked to such cases. Even your party chair Rabi Lamichhane courted controversy over a transaction from a cooperative before he joined politics. Since your party entrusted you with studying the matter, what did you find?

Our party chair himself did a press conference recently and explained the circumstances. So, I don’t need to talk much about it. In fact, not a shred of evidence has linked him directly to those allegations. He has been very forthcoming as a leader of a national party to answer the questions publicly raised about him. He has asked the state to investigate the matter and prosecute him if he has embezzled funds as alleged. Our party believes this is an unwarranted attack on a hugely popular leader.

We find so many informed and even noted people courting controversy on cooperative issues. Why are such incidents taking place?

Lax regulations, intense politicisation of the sector for easy credit, and some economic shocks enabled unscrupulous people to abuse the public’s money and trust. Common people have been duped by high interest rates. The major reason for such malpractices is that politicians have sabotaged much-needed reforms in this sector for over a decade.

Of late, ruling leaders have been claiming that the country’s economy has significantly improved, and they often cite the increase in foreign exchange reserves as a success. Is the national economy really on the up?

Our economy remains stagnant. The exodus of about one million youth annually continues, which is rare for any nation in peacetime. The youth have lost hope in the country’s economic revival. They don’t see prospects for decent jobs here. State agencies are becoming dysfunctional. There is an environment of social unease and normlessness in society. There is reform stasis. After all, the increase in foreign exchange reserves shows that more and more youths are leaving this country and sending money to meet the basic needs of their family members. The piling of money suggests a lack of investment. The government is not delivering, and I don’t see any credible hint of a substantive departure anytime soon. The production of cement, steel and other concrete items is down by 30 to 40 percent. There is a massive drop in the sales of items like mobile phones, cosmetics and laptops that young people use. The scenario in the development sector is bleak as well. Again, slow credit adoption, hollowing out of the young middle class, and poor capital expenditures by the state are dampening economic growth.

Some experts suggest we are entering a stage of recession. Is the situation that alarming?

We need to be careful with the use of such words. The economy worsens in a sequence: A slow-down, then a recession before entering a full-blown crisis in the form of a depression. I believe we are in a state of mandi or slow-down. As a responsible political economist, I cannot sound alarmist. But I reject all claims that the economy has improved notably. The ruling coalition has a comfortable majority, but there is no appetite or desire to improve things. We are in a social state of anomie, politically dysfunctional and economically stagnant.

How do you evaluate this government in terms of governance?

Governance has become hostage to a venal coalition that is inept and idle. In my two recent meetings with Prime Minister Pushpa Kamal Dahal, he exhibited a drive to show results during this tenure, but he is dependent on the Congress President Sher Bahadur Deuba, whose political incentives are quite perverse. Leadership that does not inspire confidence fuels public frustration.

You often stress on the need to capitalise on Nepali youths’ expertise in Information Technology. Could you elaborate?

As we are a landlocked country, we can’t be rich by relying on a cross-border supply of bulky goods that are shipping-dependent. Whatever we do, countries like India, Vietnam and Bangladesh can outdo us by producing things cheaper and faster. We have to rely on goods that are weightless and don’t need to be physically transported. IT can be a sector where we can compete with others. But the state isn’t promoting those who want to set up IT companies here. Some Nepalis have tried to set up companies here but have been harassed to the point that they have fled. To be a vibrant player in the international gig economy, we need to be open to attracting ideas, capital and talent from abroad. For that we have to radically reform issues related to taxation, regulation, infrastructure, repatriation, contract enforcement, and arbitration of disputes.

Despite decades-long struggle, Nepal has failed to progress in manufacturing. Do we still need to push for it or is it time to explore possibilities in service and other sectors? Can a country progress economically without a minimum level of growth of the manufacturing sector?

This is an ongoing debate in the global development discourse. You used to be able to absorb young people in manufacturing as you are not constrained by the domestic size. A small country could still produce for the world. Having said that, the character of manufacturing itself is changing. It’s not as employment-intensive as it used to be because of the greater use of machines and robotics. So, it remains to be seen how employment-intensive the new kind of manufacturing will be. Instead, the services sector is becoming more job-friendly. We still have niche areas such as high-value agriculture and tourism, hydropower and digital sectors, but they should all be linked with the regional and global value chains.

In this context, how do you view the long-term energy deal that Nepal recently signed with India?

It is, in fact, a welcome framework agreement. How it is operationalised is yet to be seen. India’s pledge that it will buy our surplus energy assures domestic as well as foreign investors. In an era of climate change, our vision is to build a vibrant market for clean electricity trade in the South Asia region.

Let’s move on to politics. Many are still curious about your party’s policies on key political matters. You also recently said that the RSP is not a party of pro-monarchists. Could you elaborate?

Our party has been clear from the beginning. From the Jaleshwar meeting in November, we gave more clarity to our policy, leadership and organisational issues. Our party statute, election manifesto and other documents have already made our political orientation clear. We clearly adhere to the current constitution of Nepal, which is a republican constitution. On federalism, we will nominally retain the current set up but we are critical of the provincial layer, which seems redundant. It is costly and burdensome and has been designed mainly to accommodate the second-tier party cadres of old political parties. We will radically overhaul this aspect of the constitution the day we attain the requisite strength.

We are clear that we will be a socially just liberal economy. We will be the most private sector-friendly party that Nepal has ever had. We believe in a social market economy that has a dynamic middle class that is enterprise friendly, investment compliant, and pro-competition. That is our line. We are a centrist force that seeks socially just outcomes in a liberal economy that is governed by a robust regulatory architecture.

Even on culture and religion, we are equally clear. We will adhere to the definition of the constitution that respects sanatana dharma while being plural and inclusive.

How will it be different from the present system?

Our country today is trapped in a shady version of crony capitalism. All organs of the state are hijacked. There is not a single regulatory or constitutional body that isn’t under the influence of politics. The system we envision is completely different: meritocratic, fair and devoid of corruption.

How can a federal system work effectively with a weakened provincial layer?

We don’t equate an inclusive liberal democratic order with federalism. We should worry more about the ends, not the means. There is no text in political science that states that to be democratic, you have to adhere to federalism. We don’t subscribe to the view that you have to adhere to the federal system to be progressive. We reject that. We will retain the seven-province setup for now. We are critical of the way the provincial layer has been designed. We aren’t against federalism as it is one of many forms of devolving power.

How can the RSP break the grip of traditional political parties and emerge as a bigger force?

The dynamics of the three Ds will catapult the party to power. First is young demography. The youths support us even if their parents are Congress or Communist party members. Second is digitalisation. In the past, you needed to reach people’s doorsteps and meet them in person. This involved years of political toil. I became a federal lower house candidate from Tanahun, which was new for me, just weeks before the vote. I won the election from the district, which was a Congress bastion, where the current President, Ramchandra Paudel, won repeatedly. Digital access helped me reach the common people in just two weeks. Third is diaspora. The youths abroad have a hunger for an aspirational society. They have seen how open, democratic countries have prospered with good leadership. These three Ds will make a big difference in Nepal and are RSP’s currency.