‘We have to be more specific and efficient while allocating resources’

The federal government will present the budget for fiscal 2018-19 on May 29. The Finance Ministry has formulated the federal budget based on the principles and priorities of the budget and policies and programmes of the government presented in the Parliament. The policies and programmes of the government have set a five-year target of doubling per capita income, and  agriculture production, achieving double digit growth, completing a few mega projects, and creating sufficient employment opportunities. Pushpa Raj Acharya and Sujan Dhungana of The Himalayan Times caught up with former finance ministers Surendra Pandey and Mahesh Acharya to learn whether the announcements made by the government are implementable or not and how the budget has to back up these programmes with resources. Excerpts:

Photo: Balkrishna Thapa Chhetri/ THT

‘We have to be more specific and efficient while allocating resources’

— Surendra Pandey

The government has announced ambitious targets like doubling per capita income and agriculture production, generating 5,000 megawatts of electricity, achieving double digit growth, and completing some mega projects like Kathmandu-Tarai fast track. Do you believe these targets can be achieved?

The targets are not ambitious and can be achieved in the given timeframe of five years. First, we have to define our priority and how we can achieve these targets and that needs to be backed up with resource allocation in an efficient manner. We can take an example of doubling agriculture production. The government has to offer incentives to produce crops, vegetables, milk and poultry, among others in the pocket areas based on the potential so that we can be competitive in production, storage and processing. When we talk about increasing production, we have to fulfil the preconditions like skill based training, quality seeds, fertilisers, irrigation, agriculture extension services, among others. We must divert the labour force engaged in the agriculture sector to other areas through massive us of technology and open the door for industrialisation through agro processing industries. For this, the government’s resources will not be sufficient. We must attract domestic and foreign investment in the areas where the rate of return is high. As Nepal has adopted a federal set-up, it is an opportunity for the federal government to mobilise development budget in mega projects and in those areas that can create synergy in the development process because the small projects have been handed over to the sub-national governments and the federal government must get rid of the piecemeal approach of distributing resources to small projects.

You mean the constituency development programme under which each constituency gets Rs 100 million needs to be scrapped as the sub-national governments have already started functioning?

The constituency development programme should be continued because this is a small portion of the development budget. This will help to endorse the budget as parliamentarians have started taking constituency development programme as a key to endorse the budget. The government has the liberty to allocate resources to priority areas like roads, energy, irrigation, drinking water and sanitation. For example, the fiscal budget has to allocate Rs 25 billion for the Kathmandu-Tarai fast track for the next five years as the government has a plan to complete it within five years. Instead of allocating less resources to cover every sector the government should be more specific in certain areas that can have a multiplier benefit and can be implemented within the desired time frame.

Is there any rationale behind constituency development programme as the country has adopted a federal set-up?

This will be a continuity of the programmes of the previous years. There are various circumstances associated with these programmes and the resources allocated under this programme should be mobilised effectively and efficiently.

There has been debate on establishing infrastructure development authority to execute the projects on time. Do you think this mechanism is needed to expedite development works?

We can accelerate the development works through the existing mechanism. If we take an example of such authority, it is those countries where the dictators have ruled that have practiced such mechanism. As a democratic country we should not resort to such mechanism. We have experienced delay in completing development works due to lack of efficient allocation of resources for development projects. There is a trend of allocating resources for ill-prepared projects and also handpicking projects based on the political influence without completing necessary groundwork to kickstart the project. When we select projects rampantly then the desired result cannot be achieved. Against this backdrop, we have to be more specific and efficient while allocating resources for the development projects. We need to shorten the procedures in the existing mechanism by setting up a single-desk system to clear the processes in a shorter period of time. We also need to make Investment Board Nepal more active to facilitate investment as we require huge investment in infrastructure sector and other areas where the country has opened for foreign direct investment.

Do you think that the federal budget will incorporate the priorities you have mentioned?

The priorities that I have mentioned are must for a realistic budget. Without being clear on the way forward we cannot reach the destination. There is economic benefit of development works, however, we have to focus on particular areas and specific development projects that can create multiplier benefit in the economy and uplift the living standards of people.

Photo: Balkrishna Thapa Chhetri/ THT

‘It is crucial how the govt addresses implementation bottleneck of policies’

— Mahesh Acharya

The policies and programmes of the government have traced a five-year roadmap of country’s development. What is your take on the overall growth targets set by the government and their implementation?

The major problem in Nepal’s planning and development administration lies in the implementation aspect. Even in the past, the country has seen governments announcing good policies and programmes. However, a majority of ambitious policies and programmes have not been implemented so far. As a result, project time and development cost often increase substantially. Following weak implementation of plans and policies of the government, a major portion of the country’s development budget has remained unspent. The recently unveiled policies and programmes of the government have not incorporated any new plans. It has only given continuity to projects, plans and agendas discussed and formulated in the past. Doubling people’s per capita income, enhancing agriculture production, completing the construction of different airports and hydropower projects, among others are national needs and any government should address such issues in its plan. Now, the major concern is what measures will the current government take to improve its administrative capacity to materialise different goals that have been set. Policies and programmes are basically the reflection of the government’s action plan for a fiscal year. However, as the current policies and programmes of the government have set five-year targets, the annual output of the government’s policies and programmes will be blurred by the end of the next fiscal year. I suggest the government to adopt measures to address the implementation bottleneck of the country. But I see that even this government has shown no sign of improving the implementation part and this can been seen in government’s inability to fill the post of chief justice at the Supreme Court and chief commissioner at the Commission for the Investigation of Abuse of Authority, among others. Similarly, a number of parliamentary guidelines and formation of different committees are still pending. Likewise, the current administrative mechanism is not robust due to the inability of the government to adjust bureaucrats at the provincial and the local level.

What measures need to be adopted to materialise country’s growth and development plans?

The government’s plan to achieve double-digit economic growth within the next few years and double the per capita income of people within next five years is not an easy task. It needs massive investment from the government and domestic private sector. Huge foreign direct investment is equally important in priority sectors. But the irony is that the country’s development expenditure has been dropping while unproductive expenditure is increasing. Similarly, it is also crucial that necessary policy reforms are made in a bid to draw bigger investments in the country. We should be able to convey a message to potential investors that the business climate in Nepal has become better. The government should encourage investment only in priority sectors including infrastructure, tourism and energy.

Though you mentioned that both government and private sector investment is equally important to achieve growth and development targets, privatisation is still a debatable issue in Nepal. What do you have to say on this?

If a country wants to progress, all the players in the economy should be motivated. Both the government and private sector are important players in the economy. However, it is the private sector that has to be the leading force for economic growth and prosperity. If the government tries to intervene in every sector, it will result in a ‘crowding out’ situation in the economy. However, the government’s presence in sectors including health, education and infrastructure is crucial. Instead of intervening in numerous sectors, the government should play a regulatory role effectively. By promoting good governance, it should ease the doing business environment in the country for the private sector to flourish.

Resource constraint, especially in the new federal system of governance, is said to be one of the major bottlenecks for the country today. How can this be addressed?

We have limited resources. However, the trend here is that we announce different development projects and plans without the guarantee of necessary resources. Moreover, technically infeasible projects are allocated budget in Nepal. Thus, this trend has to be stopped completely. Projects should be studied properly before they are allocated any budget. The government should allocate resources only to priority projects that are under construction and stop unnecessary disbursement of budget. For example, if the government focuses on a few projects like Postal Highway and other such ongoing infrastructure projects and ensures their completion on time, this will create a multiplier effect in the national economy. It has to be noted that one highway employs thousands of people directly or indirectly and increases economic activities along the highway.

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