Econ-ity » May 29, 2015

Daily Archives: May 29, 2015

Dissecting the state-led reconstruction and recovery program

Development partners have, for many years, engaged in devising a workable Disaster Risk Management Program in Nepal. A lot has been said and written about the ‘disastrousness’ of the program in recent days. It is therefore not a surprise that after a month following the first quake, we still have 70 VDCs that have not received any form of relief. Once this immediate relief is dealt with, the obvious switch is towards reconstruction phase. Our Finance Secretary, Mr. Suman Prasad Sharma has lent some of his thoughts about what the institutional mechanism should look like, as we make the switch.

The proposal is, derived from what we have seen as the international post-disaster practice, we create an Extra Ordinary Mechanism (EOM); then we customize it a little bit. The following modality has been proposed:

Access limitations due to geographical challenges will seriously impair the capacity of a standalone EOM at the center entrusted with the mandate for reconstruction and recovery. Hence, a strong central agency of about 25 to 30 people, with an experienced executive supported by multidisciplinary experts, and headed by a strong political leadership, must be established to formulate and coordinate programs, monitor implementation, and manage fund flow. Program implementation must be entrusted to line ministries and their respective units, through the funds made available by the central agency. It is imperative to keep this reconstruction agency above line ministries in hierarchy in order to avoid intersecting communication lines.

Here, some historical observations about central planning seem to have been overlooked. One, there is a lot of path-dependency i.e. first the “strong central agency” devises plan, develops fund flow mechanisms, devises its own version of check-and-balance mechanism, then mobilizes the line ministries, who will again go for the CDOs and VDC secretaries, and finally the people. Notice how there is no local representative of the people to either communicate the ground information to the planners, or to take ownership of state-mechanism. Here, it is no more necessary to discuss why there are still VDCs that are yet to receive any form of relief being channeled through the government.

Two, there is a lot of noise in the process, i.e. a lot of information gets lost in the process of it being transferred from the bottom-up or top-bottom in a tall hierarchy. As we move from planning to implementation (and further into the number of sub-national implementation bodies), we will have already faced a number of unforeseen circumstances, customized the service to (hopefully) the best of the bureaucracy’s knowledge, and probably many other complexities. In the end, what was planned and what is delivered will likely be two very different things.

These problems of excessive path-dependence and noise render central planning an inefficient mechanism; and very little needs be told about it when we are talking Nepalese political leadership and bureaucracy.

Interestingly, some foreseeable differing views have been acknowledged in the article as:

Those against EOM suggest a new agency will be susceptible to rivalry with existing agencies; they fear of a lengthy process required to set up such an organization; and creation of yet more communication channels resulting in unwieldy coordination mechanisms.

Consequently, a justification to the need of EOM has also been provided:

But the alternatives are worse. Existing institutional mechanisms are marred by sluggish decision making, long process-oriented delivery systems leading to frustratingly slow implementation, sub-optimal procurement efficiency, serious lack of horizontal coordination, unmotivated staff and their frequent turnover, and trade unionism, to name a few.

This here, seems to be a tall claim to make. It appears, what has been suggested is the creation of an institution that could very well fall to the same endemics that the existing institutions have been succumbing to. More bureaucracy might not be the solution to an inefficient bureaucracy.

It is definitely a commendable thing to do what the secretary has done – starting a discourse on the institutional mechanisms that need to be put in place to deal with such emergencies. It is indeed with great intentions that the new institution has been proposed.

However, as the bureaucracy tries to deal with the situation in a regular bureaucratic manner, we seem to have been overlooking the unprecedented (and frankly, popularly unexpected) voluntary initiatives started by the energetic youth of the nation. This energy, without proper guidance/ management might very well die down. Therefore we need to acknowledge their efforts and convert the volunteerism of the youth into a capital. There are furthermore, a number of community based organisations, private institutions and other non-government organisations that have already been working to bring relief and help reconstruct the damages borne by the people and communities. While this discussion on the institutional mechanism is taking shape, it will be very important to bring these parties on-board, and also pay attention to what the people on the ground really need help with.

Akash Shrestha

About Akash Shrestha

Akash Shrestha is Coordinator of the Research Department at Samriddhi, The Prosperity Foundation where his focus areas are petroleum trade and public enterprises. He also writes newspaper articles, blogs and radio capsules, based on the findings of the studies conducted by The Foundation.

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To Broker or Not To Broker

Recently, a friend of mine had to take trips to the customs office at the Tribhuvan International Airport, one of the 31 main customs offices across the country, for receiving a boxful of miscellany from the land of the eagle. After getting her authorization number from DHL, she, along with two others, went to TIA one fine day to claim her package. A haranguing encounter then unfolds. She describes with ill-disguised unease the sheer number of brokers, almost all men, swarming towards her in hoards to ‘help her’ get through the further nightmare of going through the customs office. They willingly offered their services for a fee; the nominal of which was Rs.500. Anyone else may have cowered, but this lady friend was a feisty one, a journalist no less, thus she fought her way into the customs office through the crowd and asked to see an official who would help her get her package. How hard could it be, really?

Turns out, very. What was unprecedented was that the customs official would send her back into the crowd of brokers outside. She recounts him telling her, ‘Tapaile broker ko sahayata liani parcha baini’ (Read: “No way are you getting through this without a broker”). The procedure apparently warranted the need. The Customs Act 2064 (2007) does not mandate the need of a broker. The Trade Facilitation Agreement of the World Trade Organization as of 2013, also termed the ‘Bali Package’, is the most recent of its documents that states explicitly under sub-heading 6 of Article 10: Formalities Connected With Importation and Exportation and Transit, that ‘Without prejudice to the important policy concerns of some Members that currently maintain a special role for customs brokers, from the entry into force of this agreement, Members shall not introduce the mandatory use of customs brokers.’ Nepal has been a member of the WTO since April 23, 2004.

In continuation of my friends’ anecdote, she and her two friends then had no other option but to return to the chaos that awaited outside. The inevitable swarm took them in again and they emerged harassed with one man promising to get all three people’s packages out for a well-bargained fee of Rs.500. The minute money changed hands, the broker took over. He filed for them the Customs Declaration Form that allowed officials to charge duty based on the transaction cost. He would also smooth-talk officials into letting his ‘customers’ in line first for other associated form fillings. Everything seemed to be going according to plan until the broker got into a final cabin with a computer to get the last of the deal off their backs, came back with a computerized note and said, ‘Hernu na baini, computer le ta ajhai 565 rupiyaa magyo’ (“So the computer just asked me to rip you off an extra Rs. 565 even though you’ve already paid me”).

Brokerage is a legal profession in the country but the way it is implemented at the TIA is only exemplary of the fact that because rules are laid down in such a way that we are barely able to conceive it, brokers happily devour the chance to act as fee-carrying middlemen. Even if there is a certain duty for the imports, there should really be no demand of a fee to claim that which you are rightfully filing and paying in excess for. International bodies have time and again called for a ‘simplification, harmonization and standardization’ of trade and custom laws. But what do these words truly mean? Simplification involves the removal of all unnecessary and repeated laws, processes and procedures. Harmonization is setting national plans and policies in line with resolutions of international forums and conventions. Standardization is developing universally understood and agreed upon codes of conduct. Simply put, in this instance, the laws need to be put in a language more easily conceivable by the general public and the use of brokers should be completely optional and not enforced by practice. For a well-educated person to be turned away from simple formal inquiry and being told to resort to a middle-man only highlights the levels of lethargy of these bureaucrats.

The Doing Business Report 2015 by World Bank Group ranks Nepal at 171 among 189 economies under ‘Trading across Borders’, a further drop from the 2014 rank of 169. A comparison between Singapore, which is ranked at the top stop, and Nepal reveals a frustrating gap and evident bureaucracy when it comes to trade. Looking at imports only, document preparation, customs clearance and inspection, ports and terminal handling and inland transportation and handling take a mere total of 4 days with a total cost of 440$ in Singapore, whereas the same procedures take a total of 39 days in Nepal with a reported cost of 2650$. An argument for the recognition of Nepal as a landlocked country may come into account when talking of days taken to import/export, but Austria, another landlocked economy takes a total of 9 days for imports handling. Even India has a much lower total cost, though not ideal, of 1250$ for import procedures. The number of documents to be filed for imports alone is 11 in Nepal compared to 3 of Singapore.

The customs department needs to look at international good practices of trade and follow from instances of Greece and the US, who allow electronic submission of forms and processing, use risk-based inspections and have a single-window policy.

The Customs Reforms and Modernization Strategies and Action Plan Nepal, 2013, outlines wanting to come up with a ‘Broker Management System’, the details of which are few and sketchy. It is ironic that the document begins with the Department of Customs’ supposed mission statement which states, ‘We strive for customs services to respect clients’ time and value for money’.

Labisha Uprety

About Labisha Uprety

Labisha Uprety is a Research and Communications Officer at Samriddhi. She enjoys debating and likes her tea black with a little sugar.

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A for Accountability: Understanding the Need for Market-Led Education

Originally published in Prespectives, The Himalayan Times on May 10,2015. 

School Leaving Certificate (SLC) examinations, to a large extent, are as important an identity stamp as anything else in Nepal. We group ourselves with strangers on the first meet by asking when they passed their SLCs. We don’t really ask for the other person’s age anymore; we infer it according to when they sat for their board examinations. We all have chances at five destinies; distinction, the first, second or third division or well, a non-destiny. In 2014, it was reported that only 28.19 percent students from public schools passed the SLC examinations compared to 93.12 percent students from private institutions. What causes or is causing this massive divide between the two?

Legalized private schooling entered Nepal only very recently; it was only after the third amendment of the Education Act in 1980 that private schools were allowed to operate in the country. Previously, in 1971, the state had nationalized all existing private schools and introduced standardized curriculums and operations. Inability to meet demands for a growing need of education from the public then caused the state to give in to private education as a supply alternative. Private schools are generally seen as a preferred substitute to public schools even now, a comparison based primarily on board examinations’ results, but that which connects and addresses numerous other sub-problems. A World Bank Report on Education in 2011 identifies a number of these sub-problems. These are inclusive but not limited to: high politicization of the teaching force, frequent transfer and changes of District Education Officers that cause changes in education rules and regulations, formerly nationalized schools, after 1971, have lost community ownership to a large extent and are seen as government ‘owned’ schools and a highly centralized education system structuration among others.

It is interesting to note that public schools in Nepal, more or less, go by the book and have comparatively airier and studier infrastructure than their private counterparts. It should also be noted that private school teachers are ‘less trained’ than their public counterparts (84.1% fully trained public school teachers, as opposed to 75.1% fully trained private school teachers in the Central region, Nepal Education Figure, 2014). They also provide free education up to grade 10 since 2000. Why then are people and more interestingly, the poor, also choosing private education over public education? What does a market-led education system provide that a state-controlled system does not?

Accountability. Both parents and teachers are accountable to each other because of a direct exchange of money for the service. The teacher’s length of duration of stay at the institution and pay is dependent on his/her performance and rate of absenteeism. An absence of a direct fee paying environment in public school causes parents to think that their obligation to educate their child ends with enrollment alone. Parents are more likely to be actively interested in the performance of their child and the teachers of the institution because they are spending hard earned cash for the service, thus willingly follow-up with their child on day-today school activities. Conversely, public school teachers are paid by the state regardless of their physical presence in the school and usually choose to turn up sporadically. He/she has little or no fear of being fired due to absenteeism as public schools operate from seemingly perpetual funds. A private school teacher is hence more likely to teach well because he/she is under constant watch by parents and the management alike. For a non-quality teacher shall mean dissatisfied parents and eventually, pulling the child out of the school in question.

On a similar line of questioning, does a larger classroom translate into better education? Surely no parent in their right minds would send their child to a less-spacious private classroom. But they do. Larger classrooms mean more number of pupils in the same class, thus more students that a teacher has to look after. Private schools have smaller student-teacher ratios, perhaps because of smaller classrooms, but because of which the teacher can better keep an eye on all children and also engage them well in academic interaction. Aggressive politicization of education has ultimately led to an erosion of public school infrastructures, where school appointments are nepotistic as opposed to meritocratic. Parents look thus, to be choosing accountable institutions with possibly fewer amenities than be handing over their children to the unaccountable, physically larger public institutions.

The process for registering a private school is wrought with bureaucratic hurdles and rent-seeking behavior on part of school inspectors and officials. A number of provisions such as having to seek letters of approval from similar schools beg revision. No school will want to invite and ‘approve’ competition while this is exactly what public schools lack. When a private school application is rejected, there are no formal reasons given for the decision thus the prospective school-head is unaware of what he/she is to do differently next year when re-applying. The District Education Office also takes 3 months to give its decision when it comes to private school registration which is decided on the basis of a 2-3 hour visit by a school inspector during the said duration after a lengthy procedure of stipulated documents procurement and submission. It is understood that private schools too need to follow basic guidelines when it comes to infrastructure upholding, but as previously stated, sturdy infrastructure does not always lead to quality education. Accountability on part of the teacher and parents does, which private schools are impressively better at providing in Nepal.

Labisha Uprety

Labisha Uprety

About Labisha Uprety

Labisha Uprety is a Research and Communications Officer at Samriddhi. She enjoys debating and likes her tea black with a little sugar.

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Doing Business In Nepal: Ins and Outs of Opening a Private School in Nepal

Education Rules, 2002, and amendments following it necessitate presenting seventeen different documents to establish and run a private school in Nepal.  The process to prepare all these documents involves reaching out to a number of government offices to get approvals. This article intends to talk of the time and cost factor associated with it, at length. A snapshot of the private school registration process is presented below: School Registration Process

Firstly, a school needs to be registered as a company and acquire a certificate that proves successful registration of a company which takes around 3 days and requires a registration fee in accordance to capital invested. But similar to other legal procedures in place in Nepal, common men fail to comprehend the technicalities, and turn to a law professional.  One usually hires an external lawyer which could take up to 5 days for a charge of Rs.5000-10000 as lawyer consultant fee. After obtaining registration certificate from the Office of Company Registrar, Personal Account Number (PAN) registration is required which adds up one more day.  Next is to obtain a recommendation letter from VDC/municipality.

In order to ensure the so-called “friendly competition,” it is necessary to obtain letter of approval from two similar schools which adds up more than a week. If we dig down a little into this requirement, this holds the potential to creating a syndicate, and a cartel in the education system in the country. For a person running a company, the lesser the number of competitors, the higher the prospect of profits. When law requires any new entrant to get permission from the existing players, the existing players can very well collude and bar new entrants from entering the industry. With possible new entrants at check, the existing players can then manipulate the fees, facilities, teaching standards and everything else that they are responsible for providing.

Coming back to the registration process, when the DEO calls for letter of application, one needs to submit the application form which costs RS.1000 along with all other stipulated documents before end of Poush (December). Within three months of submission of form, the DEO sends a school inspector to inspect the doc­uments and infrastructure of the said school, the school management board and other facilities to be provided by the school, who then, submits the report to the DEO. Once the decision is made, the DEO calls the founder of the school to officially grant  permission to operate said school, 30 days prior to the commencement of new session.

Thenafter, one needs to make a certain amount of security deposit at one of the stipulated banks. After submission of the deposit slip, the DEO gives the permission to establish and run the school. The total time consumed to obtain all the documents is 23-25 days and an additional 3 months (of waiting for a process that is concluded in 1 day) to acquire permission from the DEO, and the total cost incurred to register a school is minimum Rs. 56,000 and increases upon the type of school and level being registered.

However, DEO does not inform those schools which have not been granted permission to operate. One needs to follow up with DEO to know the verdict and the reasons for not granting approval are also not specified.

Interviews with school-heads during the research saw a number of them reflecting on the cumbersome and generally long process of opening a school with a sense of need for change. Instead of approaching OCR, DEO, VDC/municipality, SMC in order to collect documents, it would rather be easy if the government followed a one stop policy and made SMC as the only institution to grant the permission. The procedure of having to obtain letters of approval from the VDC and other schools is the most complained about step by the applicants as it is very time consuming and having to take approval letter from three places deems unnecessary.  Plus, it takes three months for the DEO to give its decision. It is also necessary to clear out issues on why a school is being rejected as it gives direction to where the applicant needs to reform in order to apply next year.

Deekshya Nakarmi

About Deekshya Nakarmi

Deekshya Nakarmi is Communications and Outreach Assistant at Samriddhi, The Prosperity Foundation. She is a student of Development Studies.

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