The eighth Five-Year Plan ignores the devastating effect of the Indo-Nepal impasse on the economy. Is it possible to plan for the next five years pretending that the economy has been unaffected? Until the impasse ends, it is doubtful whether planning for more than a year at a time is meaningful, especially with regard to the fulfillment of basic needs. A divorce from planning and budgeting is a natural phenomenon in which unprecedented pressures can exist on price levels, revenue mobilisation, wage and salary levels, balance of payments, and the exchange rate, etc. The way the economy has been mismanaged, it would not be unreasonable to expect the GDP to slide for two to three years before it looks up again.
As an economic document, the planning dimensions lack hard-core analysis. There is no debate on the feasible growth rate of GDP and its consequences on savings, gaps in investment ratio and balance of payments, revenue, GDP ratio, ICRS, labour, capital and land productivities, etc. As a political document, it does not tell us how politics will itself be fortified to face the challenges. In particular, how will the bureaucratic and political absorptive capacities used to implement plans will still be made effective, efficient and honest? How will the government’s deteriorating finances be arrested by measures other than the rhetoric of privatisation?
As a strategic document, the planning dimensions defeat its own purpose with its populist approach, which consists of ambitious objectives, spreading resources thinly everywhere, ex-tolling state handouts for the poor, ignoring the need to give definite priorities to strategic and tactical goals, objectives, and means, ignoring issues of internal consistencies in planning and the need for trade-off and resolution of conflicts, providing for a cacophony of policies under the meaningless banners of “national,” “regional,” and “sectoral” policies.
As a macro-planning document, it fails to rise above the various sectoral plans and their programme budgets. It may have swallowed the data provided by the government: for example, that agricultural production has increased by 4 to 6 percent when there is no sign of the green revolution. Lastly, the inequities arising from HMG’s refusal to reform its tax policies and systems, including the impact of deficit financing on the absolute poor, needs careful evaluation . A fiscal regime based on tax holidays and luxury imports, supported by recourse to monetarism, can hardly lead to self-reliant growth with equity, and is a doubtful strategy for development , as far as eradicating absolute poverty goes.
As for development goals,the directive principle of the constitution should suffice: to create a society that is just, dynamic, and free of exploitation. The following objectives have been proposed: eradication of absolute poverty by 2000 AD; moving up to the ranks of developing countries by 2000 AD; accelerating the growth in resource mobilisation for a greater self-reliant growth, and significantly improving the investment climate; population control; and removal of inequi ties.
It is essential for each objective to have time-bound targets to gauge the results of the planning exercise. These targets should be conceived as a hierarchy of responsibilities for each major echelon of decision-making. Key persons would then monitor the performance of those below without duplicating responsibilities. When planning systems develop, the leader-ship at different levels could possibly take on more responsibilities. But the need now is for selectivity and focus, keeping in mind macro-parameters for the upper echelon, and micro-parameters for the lower echelon to, as it were, manage by objectives and results.
Our development strategy isn’t explicit. No econometric models of the economy are used to portray its structure and the effects of likely changes in various parameters and variables. Economic calculations are necessary but not sufficient. A strategy must be developed to cope with the inadequate absorptive capacity and also inadequacies in political will. These strategic economic variables may be considered: land management; enhancing the Science and Technology base together with Research and Development capability in agriculture; cottage industries development; fertility control; employment creation, especially in the informal sector; and export promotion.
What about policies? There is need for the National Planning Commission to intervene to promote market mechanisms towards decontrol, delicensing, deregulation, and deconcentration. The investment climate needs to be radically ameliorated. The Federation of Chambers of Commerce and Industries President’s speech on its 23rd anniversary and its Industry Commerce Patrika, July- August 1989, thoughtfully considers development strategy, taxation policies, and trade and industrialisation. It would be most beneficial for the NPC to digest these.
However, a warning is needed. The orientation of the FNCCI is presently limited to the needs of the formal, organised sector, and those of the micro-entrepreneurs of the informal sector have not really entered the FNCCI’s perception. The FNCCI is also excessively given to the tax- holiday mentality, which tends to make it dependent on the government for its favours and patronage. Tax holidays are neither necessary nor sufficient for a broad-based private-sector development.
My primary arguments are : that the planning methodology has weakened over the years to a non-rigorous, populist statement of principles, which is proving to be counterproductive ; that since so many sectors have perspective plans (e.g., irrigation, forestry, agriculture, education, health etc.), it is doubtful that the NPC has been able to create a whole that is greater than its parts or to coordinate effectively through the derivation of internal consistencies; that the uncertainties of the present Indo-Nepal impasse make it foolhardy to plan for five years.
As for the admirable attempt to incorporate into the plan the employment variable, for long the ‘yeti’ or missing link, I would refer the reader to the 1981 ILO- ARTEP study on Basic Needs and Employment in Nepal. I would add that the employment problem, in terms of improper, under or non-utilisation of human resources, is so acute that it may be advisable to force the pace of urbanisation to make use of this potential. A rapid rate of urbanisation would create on its own a market for import substitution opportunities. Lastly, there is a crying need for thorough research on the role of the informal sector. I believe that these micro-entrepreneurs can be true nation builders, if given a chance to thrive and develop.
Madhukar S.J.B. Rana is President of Management Association of Nepal.