Nepal was recommended for graduation from the Least Developed Country (LDC) category to be a 'developing country, in the triennial review held by the United Nations Committee for Development Policy (CDP) in February 2021. This graduation of Nepal from the LDC category will happen in 2026. The period of two years until then is very crucial as Nepal has already met all the three criteria set by the United Nations (Though only two of these are required): per capita income, human asset index (HAI) and economic and environmental vulnerability index (EVI).
Nepal has been continuously refusing to graduate from the LDC category until 2021 when Nepal agreed to do so in five years’ time period of which only two years remains to prepare for it. The Article 4 of the Constitution of Nepal declares Nepal as Democratic Socialist state. Socialism and communism have been the most favorable political ideologies as strands of thread to knit and stitch the political movements in Nepal and even the formation of political parties. However, governments have been successively failing to bring prosperity in Nepal and raise the standard of life of the most vulnerable ones among the 30 million people.
All of them solemnly vow to the letter and spirit of both socialism and communism and yet the stark truth of slow speed of development, frequent change of political executive and charges of corruption against the ministers reveal the failure of the system glaringly. Geographically located in the middle of China (the 2nd largest economy in the world) toward the north and India (the 5th largest going to be the 3rd largest economy in the world very soon) toward the south, Nepal has taken quite a long time to transition into a developing country. It requires rethink and honest review of the political ideology of socialism the way it is being practiced and continued to unleash movements for change.
As per the study conducted by International Trade Center (Title of the paper, ''Nepal after LDC graduation: New avenues for exports", published in Geneva, April 2022), Nepal could lose 4.3% of exports owing to tariff changes after it graduates from least developed country status in 2026. The removal of preferential tariffs will especially affect the apparel, synthetic textile fabric and carpet sectors. The present socialist Government of Nepal must assess the consequences of the loss of LDC support measures and devising strategies to offset them without further getting embroiled into the non-essential feature of politics of only grabbing the power and exploit the loopholes of the Constitution to stick to the post. With graduation from LDC status in 2026, Nepal will lose the benefits ensuing from the unilateral tariff preferences for LDCs granted by 25 markets to the next best available regime.
In Macroeconomic Update of Nepal (September 2023), Asian Development Bank has painted a very grim picture of the country's economic system. Gross Domestic Product (GDP) growth has contracted in fiscal year (FY) 2022/023 after rising by 5.6% in the previous year (2021/022). This unexpected fall in the GDP happened because of tight monetary policy, unwinding of COVID-era stimulus, persistent global headwinds, and wider fiscal consolidation. Industry grew by only 0.6% after expanding by 10.8% in FY2022 as manufacturing and construction contracted adversely affected by higher interest rates, import restrictions (during the first five months of FY2023), and slackened domestic and external demand. Services growth nearly halved from 5.3% in FY2022, as wholesale and retail trade compressed. The economic sectors which are nosediving must attract the attention of the present socialist Government as it did both in China and India. The incentives and stimuslus package with varying degrees of reinforcement to domestic economy had worked well if thoughfully implemented by the concerned ministries without compromising on welfare nature of the state.
President Ram Chandra Paudel on May 13, 2024, presented the policies and programs for the ruling coalition government in the joint meeting of the Federal Parliament in which the slogan of "Prosperous Nepal, Happy Nepali'' (Samriddha Nepal, Sukhi Nepali) was invoked. Keeping the socialist credentials alive, the group of socialist parties ruling over the country made bold announcements by pressing upon the social welfare schemes in the document. A decade (2024-2034) has been devoted to accelerating the growth in the agriculture sector. According to the National Climate Change Survey 2022 released by the National Statistics Office (NSO), the economic losses to farm and off-farm in the last five years have been a whopping Rs. 415.44 billion for the households which exclude infrastructural damages. The rainfed agricultural sector employs over half of the total population of Nepal and contributes 24.60 percent to the country's GDP. Unveiling the government's policies and programs, President Paudel pressed upon strengthening democracy, revamping the economy, encouraging social justice, and fostering prosperity.
The present declaration of policies and programs by the ruling coalition government of socialist political parties (that comprises of CPN (UML), CPN (Maoist Center), CPN (Unified Socialist), Janata Samajbadi Party (JSP) and Rastriya Swatantra Party (RSP) is not new. The problem lies in the delivery of the socialist policies and programs which are long overdue after the First People's Movement (February 1990). Nepal has been following the policy of economic liberalization, at least theoretically received a considerable boost under the democratically elected government at the policy level in the name of meeting the cherished socialist and communist goals. For example, the present government outlined the plan to create 5,000 new jobs in the Information Technology sector, dish out start-up loans to 1,000 youths, encourage investment of public, private and cooperatives in the agricultural sector, create a 'Returnee Entrepreneurship Program' in order to create jobs for those who return from foreign employment and so on.
The most infelicitous part of the presented document of the government's plans and programs is the marked absence of any such plan to ramp up the growth of the manufacturing sector and public enterprises (PEs). Nepal follows a mixed economic system where both public and private sectors coexist to enhance public welfare. PEs have started to grow in Nepal right from the First Five-Year Plan in 1956. The growth and maintenance of PEs are of paramount importance for any socialist and communist governments all over the world but not so for the present socialist government of Nepal. The Industrial Policy, of 1957 has pinned down the responsibility of the government in "promoting, assisting and regulating" industrial development in the country. There was a time when the state enjoyed monopolies in the fields of transportation, telecommunication, hydro-electric power generation, and irrigation, and ran some big industries, such as cement, sugar, cigarettes, textiles, iron, and steel. Where they have gone now? Why have they gone at all? The PEs have specific goals to achieve and certain responsibilities to fulfill. Who made these PEs fail? The PEs play a pivotal role in developing the infrastructure and institutional base in the country. Unfortunately, these enterprises have stopped functioning and gone sick before they were phased out. Nepali PEs could not provide benefits to people in general.
The reasons cited for their failures and lackluster performance is the real damp squib for the citizens of Nepal to get enthused about the government's promises for performance set out in official plans and programs. Undue political meddling, absence of autonomy and accountability, zilch scores on professionalism, tampering with financial calculations, conflicts of interest, lack of political ethics, and power lust are now hackneyed phrases for any government ruling over the country to describe their traits. Can the people of Nepal see it the other way round: No political meddling, fixing responsibility and accountability for omission and commission everywhere, respect for performance and professionalism, no financial embezzlement and cipher corruption, the right man at the right post, morality in public life? The answer lies with the present socialist coalition government. The question is still staring at people's faces: Can Socialism deliver Nepal's prosperity and work in the interest of people? People have to decide at the end in the democratic socialist society.
(Binod Kumar Pathak is an editor, educator and academician)
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