Building on Bihar

As a new government is formed in Kathmandu, how can Nepal not only learn from the changes underway in Bihar, but capitalise on them?

Poor infrastructure, weak human capacity, politicised local bureaucracies, difficult caste relations, debilitating power shortages and deeply entrenched poverty – driving around Bihar recently, it was clear that the state has yet to transform into the orderly, prosperous society that recent press coverage has suggested. That said, there is no doubt that a nascent but carefully structured institutional reform process is allowing for the slow emergence of a 'naya' Bihar. Since 2005, the government of Nitish Kumar has consolidated rule of law, built critical infrastructure, begun to deliver services, increased revenues and expenditures, improved bureaucratic functionality, and generated an important sense of citizenship among many of the state's communities. The economy has grown at over 10 percent per year for the past six years, despite the separation of resource-rich Jharkhand in 2000, periodic floods and droughts, and the recent global financial crisis.

Fifteen years ago, Nepalis would look to Bihar and bemoan their luck for being located next door to one of the most corrupt, crime-prone and poverty stricken states in India, from which migrants would flood northwards in search of livelihoods. Now it is the Biharis that look across the border, wondering when criminal gangs will be brought under control and seeking to draw on Nepali labourers to support the state's construction boom. In many ways, Nepal is far wealthier than Bihar in terms of relative capacities, structures and assets. The difference is that the current administration in Patna is moving to consolidate positive changes and create a virtuous circle of growth and development – albeit starting from a low base – while Nepal continues to struggle with difficult issues of state and market-building. While the ongoing changes in Bihar must be considered in the context of their own unique history, the current situation nonetheless poses two, inter-related questions: What broad trends can be identified from the recent history of Bihar that might be relevant for Nepal? And how can Nepal benefit from the positive changes happening to its south?

Most writings on the recent history of Bihar look toward plans put in place by Nitish Kumar's governments across a broad spectrum of issues. These have included the rule of law (drafting 11,000 policemen), infrastructure (building nearly 25,000 km of roads), governance (signing the Bihar Special Court Bill and the Anti-Corruption Act), and service delivery (the appointment of 300,000 teachers and the dramatic improvement in public-health facilities). These are all important changes, but such explanations are often more descriptive than analytical, and provide a simplistic, linear conception of transformation.

At its core, Bihar's transition has been based on a combination of several closely linked factors. The first is strong leadership by Nitish Kumar and his team. The key decision-makers in Bihar have spent periods of service in the national government, which has provided important experience in the management of complex organisations and has expanded conceptions of what is possible in governance terms. Traditionally, Biharis have respected power, but now power is being combined with legitimate authority, which is allowing for progress.

Second, the government has recognised the feasibility of change and the inter-dependence between state functions. Through a carefully sequenced and prioritised approach to state-building – beginning with rule of law – the Nitish Kumar administration has worked to enable change where possible, and to generate a self-reinforcing sense of progress that in turn has allowed for further reform. Third, the state has moved from dysfunctionality, during which there was deliberate abuse of public financial-management systems, into a 'control' phase, with supervision established over public finance and adherence to external oversight mechanisms.

Fourth, the government has generated constituencies for change by building political support through the moulding of disparate groups into coherent stakeholders in the state. Bringing in citizens from both ends of the caste hierarchy and indicating that development is a positive-sum rather than a zero-sum set of processes has allowed the government to push through wide-ranging reforms. Fifth, the current administration in Patna has used existing structures, rules and tools to work on behalf of governance rather than against it. This has allowed for 'quick win' initiatives and a benchmarking process against previous standards and outcomes.

Despite all of this, the changes in Bihar are as much perception as they are reality. Change can be as much about signalling intent as it is about implementation, and the current administration has put in place a carefully calibrated communications strategy to sell its successes. This is important internally – particularly in a society where a significant minority is illiterate – and externally, from where change can be catalysed and supported. To a certain degree, the story of Bihar indicates not what good governance can do, but what it cannot do. That is to say, a miracle has not occurred in Bihar, but tangible changes have taken place through implementation of efforts to build accountability. This has created a sense of hope that is, in turn, bolstering further change.

Momentum for change

Bihar's changes are idiosyncratic, of course, and cannot be replicated exactly in Nepal. It is worth considering, however, how Nepal might learn from the nascent transition to its south. In governance terms, Nepal has a set of institutions and legislation that could generate transparent and accountable government – the authority of the Commission for the Investigation of Abuse of Authority (CIAA), for example, is as robust as that provided by the Anti-Corruption Act in Bihar. A problem arises in terms of implementation of rules, however, and in ensuring that bodies responsible for transparent use of resources are themselves adequately staffed, monitored and overseen. At the same time, the Patna government has proven the malleability of a stratified society and has brought people together behind a common developmental agenda. It has proven that the political system can help all of society, and does not have to be about caste, ethnicity or geography. If the political will could be mobilised behind small but catalytic governance changes in Nepal in a similar manner, the multiplier effect on development could be significant.

In Bihar, the current government has understood that devolution of power to legitimate local bodies can allow for more nuanced and effective development based on inputs from citizens. But it has also understood that decentralisation requires a strong centre. Moreover, the government has begun to face the reality that effective and sustainable wealth creation comes from a balance between market-based growth and the reinvestment of some of these revenues in equitable social programming at the local level. If the discussion on the future shape of Nepal could be shifted to revolve not around considerations of federal boundaries but rather about citizen-centred development, similar changes are entirely feasible. In Nepal, the debate over federalism indicates that the form and function of government sometimes seem to have become confused. Federal systems can be highly effective, as in Canada, for example, or highly ineffective, as in Nigeria; the same can be said for unitary systems. The key is understanding the functions and levels of governance within a given system, and what government responsibilities need to be carried out at which levels and with which tools.

With regard to service delivery, a central developmental constraint in Nepal is the inability of the government to spend domestic or international resources. The government continues to commit to a variety of social programmes (often politically rather than functionally motivated) that may not prove affordable or sustainable in the long-term. At the same time, a significant constraint exists in terms of capital expenditure; in fiscal year 2010-11, for instance, the government spent just 39 percent of allocated capital funding. The juxtaposition of unspent government funds with lack of infrastructure and employment continues to fuel the sense that Nepal's political discourse is increasingly divergent from the realities of implementation.

Meanwhile, the reverse is true in Bihar. This is because the government has explicitly prioritised efforts to draw funds from the New Delhi government and to seal revenue leakages to fund catalytic infrastructure that benefits the population. Capacity has been built within the construction industry, and security has improved as public-private partnerships have been developed around roads and bridges. This has facilitated market-based activities, generated linkages among and between disparate communities, and generated a feeling of hope that creates additional momentum for change.

Development in Nepal remains a disparate and uncoordinated process in which separate projects are pursued simultaneously, implementation is often poor, and outcomes are less than optimal. Corruption and cronyism across a wide breadth of sectors are facilitated by a culture of impunity that pervades governance and the market alike, undermining the trust of the people both in political actors and in the market-based economy more broadly. The system continues because the legitimacy of political actors is derived not from delivery of services, or citizen-focused reforms, but rather from participation in these deeply entrenched patronage networks.

Bihar has slowly begun to overcome similar issues and to move beyond identity and group politics in a way that is illustrative for Nepal, particularly through developing specific programmes to build functionality and deliver citizen-centred reforms. It has started to shift away from a patronage system (in which leaders dispense favours in return for political support) to programmatic politics, where policymakers deliver benefits to all citizens. The programmes developed are far from perfect in terms of implementation, but they have initiated a process whereby rules have been set and parameters for action defined. This has helped to mobilise government, the private sector and citizens. In Nepal, a programmatic approach in just one or two sectors – rural irrigation, for example – could provide a means by which to improve coordination, increase expenditures and begin a similar transition.

Over the past five years or so, an emphasis on cooperatives as a central part of Nepal's future seems to have taken root, with the idea of these groups as a third and equal pillar of the economy (alongside the state and the private sector) articulated in the most recent government budget. The initial plans for their development, however, does not outline exactly how cooperatives will function in this way, how connections to larger-scale development plans will be made concrete, or how cooperative-led growth will be sustainable.

In Bihar, a dairy-cooperative model might serve as an example of how Nepal's cooperatives could be leveraged and expanded as part of a larger growth strategy. The Bihar State Cooperative Milk Producers Federation (Sudha) has built revenues from USD 73.5 million in 2001 to USD 136 million today, by bringing together some 8600 dairy outlets (with more than 450,000 members) covering 84 towns to export milk to West Bengal, Uttar Pradesh, Jharkhand and (more recently) Delhi. Twice daily, milk is collected from village dairy cooperatives and brought to district milk unions, which have plants to process the milk for urban consumers. Products are then packaged and marketed under the Sudha brand. The federation is now working to route the entire milk production in Bihar through the federation. Understanding how to build on local capacities within a broader framework of this sort might be instructive within the Nepali context.

Patna focus

This is all very well, one might argue, but what can Nepal do now to build on Bihar's progress and growth as it is happening? Where could real, politically feasible change be initiated? Here are an initial set of ideas across four key areas. First, Nepal can build on the gains in rule of law to the south. To some degree, security improvements in Bihar have had a knock-on effect into Nepal in a negative way, with various criminal elements having been forced across the open border to the north and inevitably effecting security in the Tarai plains. But there is also an opportunity for Nepal in this situation, by working with Bihari counterparts on collective, crossborder approaches to law and order. Efforts by Nepali customs and law-enforcement officials to raise standards, share information and build a network for knowledge-sharing would be useful. Currently, security issues in Nepal more broadly seem to be improving somewhat; if the rule of law can now be consolidated for the average citizen, the effect could prove catalytic for crossborder economic growth.

Second, Nepal must capitalise on the potential for economic symbiosis with Bihar. There are around 250 million Indians living within a few hundred miles of the Nepali border, and more than a 100 million in Bihar alone. The purchasing power of these consumers is significant and is increasing rapidly as a result of economic growth. The roads on the Indian side of the border still need significant work, but have improved over the past six years – clearly a potent trade opportunity for Nepal, if the right connections can be made. Arguably, a decent road connection from Kathmandu to Patna (and indeed to Lucknow) could transform the Nepali economy more than almost any other single action. At the border, India is streamlining customs processes and creating 'single window' registration points. Such straightforward services are noticeably absent in Nepal, though efforts in this regard would do much to facilitate trade, create jobs and improve revenue collection.

Third, the new government in Kathmandu must seek to better understand and capitalise upon watermanagement linkages. All 38 districts in Bihar in recent years have seen flooding, partially as a result of the absence of water-management processes – such as small and mid-size dams – in Nepal. Most of the rivers in northern Bihar have their headwaters or catchment basins to the north, but despite discussions between the Nepali and Indian governments to control flooding, no agreement has yet been reached. In part, this is due to the massive maintenance obligation that large-scale dams would involve. Yet water provides a key opportunity for crossborder – and indeed regional – growth, and the basis for broader cooperation between Nepal and its neighbours. In the absence of larger agreements with India on flood control, Nepal can begin to put in place the necessary economic and legal conditions for upstream water-harnessing processes and work further in support of hydropower generation. In the shorter term, microhydro development through a coherent government-led programme still presents the most feasible, and least politically divisive, means of harnessing Nepal's water resources.

Finally, Bihar and Nepal are closely connected geographically, making up part of the only open border in the Southasia region. Over time, this will lead to greater political linkages on an individual and collective basis. The effect that this might have on political issues and relationships within the Tarai remains to be seen, but the Indian sphere of influence will only grow in southern Nepal. Where possible, the government, business associations and civil-society groups in Nepal could consider laying the framework for regular dialogue with counterparts in Bihar to ensure understanding of these key issues, to put in place the mechanisms ahead of time to deal with potential problems, and to facilitate collaboration where feasible.

There remains a lack of trust between India and Nepal at the governmental level, which impedes progress on a host of issues. But India is not homogenous, and individual states have their own incentives and interests. As such, efforts are also required in Patna to build on areas of relative autonomy from the Union government, while Nepali politicians will need to understand that productive meetings in Patna are more worthwhile that mediafriendly trips to New Delhi. In moving forward, creating ways to generate trust at a personal level with Bihar needs to be a central component of the relationship between Nepal and its neighbour.

These are not easy principles to integrate into policymaking, or straightforward changes to make in the ways in which Nepal thinks about its linkages to Bihar. As pointed out, the government of Nitish Kumar also faces a plethora of difficult problems of its own. The central issue, however, is that Nepal and Bihar are bound by geographical ties that cannot be broken. For a collectively prosperous future, economic, cultural and political ties between Nepalis and Biharis must prove equally robust.

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Himal Southasian