Nepal has finally graduated from a unitary to a federal set up after the successful completion of historic federal elections. It is now time to build a strong foundation and establish a proper system to bring transparency and accountability to Nepal.

Transparency and accountability must prevail in fiscal federalism. The federal budget has been introduced for the first time this fiscal year. Around 18 percent of the total budget has been transferred to the state and local levels, which will help to carry out development activities at the grassroots. Under the Federal Act, the power and funds will be decentralised to the local bodies, which will create more layers and require more personnel than a unitary central governance structure. In order to prevent the misuse of power and money, different Acts have been enacted such as the Local Government Operation Act, the Intergovernmental Fiscal Management (IFM) Act and the National Natural Resource and Fiscal Commission Act for the effective and efficient operationalization of fiscal federalism. The Federal Financial Procedure Act is another such Act that is expected to maintain fiscal discipline by providing true and fair accounting information. There should be a mechanism in place to check and balance all the activities of local bodies, and provincial and central governments.

Lessons from Australia

Australia has been successful in institutionalising transparency by establishing the Productivity Commission (PC). The PC acts as the Australian government’s advisory and review body to conduct independent research on economic, social and environmental issues. Its advice contributes to well-informed macroeconomic policy, regulation and decision-making. The Productivity Commission (PC) is considered as the epitome of transparency and has played an important role in facilitating economic reforms.

Nepal’s National Planning Commission (NPC) can operate under a similar model. As an apex body, it can act as a guide to all levels of government in framing development plans and policies. According to provisions in the IFM Act, the NPC is planning to reintroduce the Medium-Term Expenditure Framework (MTEF). The MTEF will help the government to identify medium-term expenditure needs and find revenue sources to meet those needs.

The NPC can aide in bringing structural reforms in a number of ways. For example, it could be authorised to conduct inquiries via the collection of public opinion through hearings; it could then take the information received and come up with draft reports. These reports could ultimately assist the government in designing reform policies. The government would not be obliged to take the NPC’s advice, but could refer to the reports on appropriate matters. Government departments shouldn’t rely on the NPC reports alone, because these departments are also responsible for conducting their own internal evaluations of policies. Transparency should be an integral part of the NPC’s operation.

In the world of digitisation, we also need to develop a system for the availability of real-time information. There are some instances where discrepancies have been detected in the data of the production of milk, meat and eggs that were compiled by two different government bodies. The disparity in trade data is another serious issue. Three different government bodies—the Department of Customs, Nepal Rastra Bank and the Trade and Export Promotion Centre—collect data from the same source. Instance such as these cast doubt on the reliability of statistics produced by the government. Therefore, the Central Bureau of Statistics should be responsible for standardising, processing and analysing data in order to avoid duplication and discrepancies.

Combating corruption

Although institutionalising transparency is not a common practice in the world, Nepal should strive to achieve it under the federal structure. The benefits of institutionalising transparency are immense but the processes are rigorous, expensive and time-consuming. Nevertheless, it fosters an evidence-based approach to public policy. It also enhances government accountability, facilitates greater collaboration and builds public trust among all tiers of government. It strengthens creditability and reduces the scope for rent-seeking. Transparency is considered as a strong weapon to combat corruption. Nepal stood 131th in the Corruption Perception Index 2016 survey published by Transparency International, and its performance in the index for the last 10 years has been disappointing. Corruption continues to threaten our economic progress. It is very important to shield the corruption watchdog institutions so that they can bring corruption to light and the corrupt to justice.

Post federal election, the country is in the process of establishing a proper system to practice federalism. There is a dire need of a proper mechanism to perform checks and balances on the system. Nepal’s economic performance can benefit greatly by the establishment of high-quality, transparent institutions. Institutionalising a culture of transparency and accountability can be a harbinger of good governance and an economic development.

Dhungel is a fellow at Nepal Economic Forum