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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.

Private Property Right – You have it, but you don’t

The freedom of an individual to keep ownership of the fruits of his/her labor is the fundamental principle of private property right. This right manifests in the form of lending the owner of a property, the freedom to use, dispose of, and transfer the ownership of that particular property to any other individual/group through voluntary transaction. It is one of the fundamental pillars of economic freedom – the harbinger of prosperity. The UN has also ratified it as a Human Right. Countries today guarantee this right to their people as their fundamental right through their constitution – the supreme law. So does Nepal. Or does it?

Mere addressing property right as a fundamental right does not necessarily guarantee it. Particularly so when the article instating the property right is quickly followed by the lawmakers’ favorite little word – explanation. This is usually where the lawmakers tweak the preceding texts in such a way that they promise something, but they don’t really have to keep the promise. The Constitution of the Federal Democratic Republic of Nepal lends us an example:

Article 25: Right to Property

“Every citizen shall, subject to laws in force, have the right to acquire, own, sell, profit from, or engage in other transactions relating to, property.”

And then (you guessed it right): Explanation!

“(3) … when the state acquires private land for purposes relating to public interest, the basis and process of compensation will be as per the law.

“(4) Nothing … shall be deemed to prevent the State in enforcing land reform, management and regulation for the purpose of increasing production and productivity of land, modernization and commercialization of agriculture, environment preservation, organized housing and planned urbanization.

“(5) As per the sub-article 3, when the state acquires any individual’s private property for public interest purpose, nothing shall prevent the state from using the property in any other public interest purpose than the one cited at the time of acquisition.”

Note: The above text is an unofficial translation by the author.

Since the constitution stipulates that the property expropriation1compensation be determined as per by the law, the compensation against the expropriation of private property per se is no more guaranteed by the constitution. It would depend on the Acts relating to the purpose that it is actually being expropriated for. And it is again possible (although not necessarily so) to amend the Acts to rid the state of the burden of compensation altogether. One recent example would be the government denying land-owners a compensation for the acquisition of their land by the state during the road expansion drive in Kathmandu. The constitution does not make it mandatory that expropriation only be allowed after complying with a due process, including a just, fair and reasonable compensation. Instead, it states that nothing shall prevent the state from expropriating private property for ‘public interest’ purpose.

Here are a few examples of how other countries protect private property, and make compulsory provisions for compensation if there ever need be to expropriate somebody’s private property:

Article 31, The Constitution of India 

“… it shall not be lawful for the State to acquire any portion of such land … unless the law relating to the acquisition of such land, building or structure, provides for payment of compensation at a rate which shall not be less than the market value thereof.”

The Constitution of the United States, Amendment 5 – Trial and Punishment, Compensation for Takings. Ratified 12/15/1791: 

“ … nor shall private property be taken for public use, without just compensation”

Compare these constitutional provisions with those of Nepal and it becomes clear that you and I, the citizens of Nepal have our property right, and yet not.

“The right to life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life.”

Man’s Rights, Ayn Rand

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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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Saving lives or endangering more?

This Autumn onwards, trekkers will have to compulsorily hire a guide or a porter. This is expected to ensure ‘safety of tourists,’ and the government is serious about the enforcement of this new policy.

How many people have died doing the Himalayan trail already? They still come, and it is not because Nepal has shown promise in providing safety/security to the trekkers. It is because they take it as a challenge to conquer the Himalayas despite all challenges that nature has in store for them. To them, it is adventure.

The recent earthquake has made one big statement; loud and clear! Nepal does not have a very good security or evacuation system in place, not just for tourists, but for everybody. So by making it compulsory for a trekker  to be accompanied by a porter and a guide, are we making the Himalayas safer for the tourists, or endangering the lives of two more Nepalese?

Two more things about the decision! It expects to: a) create more jobs, and b) increase tourist spending.

If we were really concerned about creating jobs, why not just start a mega-project on building roads in the Himalayas; maybe we can even put it under national priority, and we know this project is going to last forever, almost. The people in the Himalayas have jobs suddenly. The point is, most trekkers already hire porters. By regulating it, we are only making it difficult to be a trekker in Nepal. We make them feel like they are having their adventure under somebody else’s terms. Does anyone smell ‘baptists and bootleggers’ here?

On increasing tourist spending, I’m afraid we might be overestimating ourselves. Afterall, Nepal is not the only trekking destination in the world, You make it difficult for the people to enjoy Nepal, they will go somewhere else. This little post by a full-time traveler, who prefers the Himalayas to anything else, says a lot about people’s preferences and the implication of this decision on banning trekking without guide or porter

porters and guides

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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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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Linking democracy with development

Nilkantha Upreti, the Chief Election Commissioner, very truly pointed out recently that local bodies are the foundations of democracy. Technically, Nepal is a democracy; but we need to hold local-level elections to translate democracy into a reality that common people can relate to. What we have at present is a democracy that is quite far from this ‘reality that common men can relate to.’ The current system has created a disconnect between the people and the politicians. The people-politician link is missing; the tax-benefit link is missing; the democracy-development link is missing!

Why this has happened in present-day Nepal is not too difficult to fathom if we take some time to delve into what politics is about. Politics, from the perspective of individual politicians, never has to be about delivering; a politician just has to be good at selling promises. After all, how many votes a politician garners is a good measure of how successful an individual is, as a politician. And what earns them votes? Promises, not deliveries!

Cases to validate this belief are aplenty in contemporary Nepalese politics. All major parties promised to deliver the constitution within a year. They also promised to end load-shedding within two to three years, and three to five years, in Kathmandu and Nepal, respectively. The biggest party in the current government even promised to hold the local-level elections within the first six months of its coming to power. Oh, them promises sans delivery!

What is even more menacing in a democracy like the one that prevails in Nepal – the one without a people-politician link – is the potential it has to create a vicious cycle of ill-informed promises. Will you vote for a politician that now comes to you and says, “Forget about ending load shedding in Nepal in 3 years, that’s impossible! Let’s be realistic and try to create an enabling environment for hydropower developers so that we can hopefully end load-shedding in the next 10 years?” For a commoner who is not very well-informed about how an economy really functions, it is still very tempting to vote for the same old politician who promises to end the problem in 3 years, or who lures him into dreams of a handsome minimum wage, or who assures him a fat agriculture subsidy. And here is where the menacing power comes to life: the new guy will not make ‘deliverable’ or ‘economically sound’ promises as long as his competitors are making such palatable promises. Going against this popular practice puts him at a great political risk. The most probable scenario, if he defies the popular practice is that he fails to garner sufficient votes and becomes a political failure.

All of this has been made possible in contemporary Nepalese political economy because of the fact that we have not had a local-level election in over fifteen years now. The lawmakers we elected through the two constituent assembly elections are not representing the people to solve the day-to-day life problems of common men. Their mandate is to deliver the elusive constitution. Drafting the constitution is their job and problems like there being no course books in local public schools, locals’ taxes not being put to use to maintaining the dilapidated roads in the local levels despite there being three separate taxes for this very purpose (viz. vehicle tax, road construction and rehabilitation duty, and road maintenance and improvement duty), maintaining law and order, and resolving conflicts in the local levels “can wait!” F.A. Hayek sums up meticulously in his theory of ‘spontaneous order’ that even if the planners (the lawmakers in this case) wanted to solve these problems, the very fact that these people do not have knowledge of the ‘circumstances of time and place’ in the grassroots level renders them unable to solving the day-to-day problems of the common men. There is no institution in place that can link the people to their “supposed” representatives so that they can voice their problems and have something done about them. There is democracy, but the people are being left out of the political economic equation.

Coming back to the point that the Chief Election Commissioner was trying to make, it is the local elections that will link the people with their elected representatives. Local elections will foster accountability from the local authorities. It is not rocket science to understand that the mayor of a municipality is in a much better position to understand the problems the locals of his/her municipality are facing, and do something about it, than the lawmakers in the central government.

Local level elections will make sure that there is a link between people and politics, and between taxes paid and benefits received, by offering a check-and-balance mechanism. With the elected representative living right amongst them, it empowers the citizens to seek accountability and answerability from their representatives. The moment a mayor starts showing signs of shying away from his responsibilities, the locals can either vote him out and replace him with a more capable representative, or they can abandon the municipality altogether and go reside in some other municipality that has a better track record. Competition (thus arisen), just like in the realm of economics, can work in politics as well. It is this through this virtue of competition that local-level elections can create a link between democracy and development.

This article was originally published in Perspectives, The Himalayan Times, April 12, 2015, under the title “Linking Democracy with Development”. Click here for the original version.
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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Reforming NAC through strategic partnership

Lufthansa Group has been the cynosure for a few days now, for it has offered to partner with the currently state-run Nepal Airlines Corporation (NAC). On one hand, we have one of the largest carriers in Europe and on the other, there is a sick State Owned Enterprise that has been running on over a billion rupees worth of cumulative loss and if not for the Ground Handling Services (GHS) at Tribhuwan International Airport (TIA), would go on another millions of rupees worth of net loss every year. One of the first questions in a Nepalese’s head would be, “Why NAC?” Maybe the German group wants to create a new hub in South Asia. If so, why prefer Kathmandu over Delhi or Mumbai? Maybe it is all in the best interests of NAC, but should NAC be entertaining such unsolicited proposal (boycotting competitive bidding?) As per the information from the Ministry of Civil Aviation in Nepal, the matter is still pre-mature and we still do not have answers to lots of similar questions.

However, whether or not Nepal entertains this proposal from Lufthansa, this is very much the right time to talk about reforming NAC. Therefore, we will keep this discussion very specific and just focus on why NAC needs a strategic partner and what benefits can we derive from such a partnership.

Why a strategic partner?

Nepal Airlines Corporation is no more the same “national-pride” enterprise. As it stood only a couple of months ago, it came down from a fleet of 19 planes, serving 38 domestic and 10 international destinations in the mid 80s to a fleet of two Boeing 757s, serving 5 destinations and no operational twin otters for domestic service. Thanks to GHS, it brings in Rs. 2 billion annually for NAC. If it weren’t there, NAC very well faces a risk of bankruptcy. It bears heavy cumulative loss and unfunded liabilities. Complete government ownership means that all losses are borne by the government which is ultimately transferred to the taxpayers.

To add to this financial plight, there have been frequent cases of corruption, political intervention, nepotism, impunity, labor issue and operational inefficiency. As it stands today, Nepalese planes are banned in the European skies, which has greatly tarnished their reputation in the international arena.

Despite costly air-fares, insufficient Nepalese carriers and poor services, a great number of tourists fly in to Nepal every year. NAC has been unable to tap in on the prospects that these numbers offer. Now if you thought expanding the fleet again would do the trick in terms of tapping in, wait on just a second. Public Procurement Act (PPA), 2007 plays another nuisance in procurement of new planes and fleet expansion.

So what benefits will strategic partnership offer?

Interestingly, if done right, strategic partnership bears solutions to all problems we’ve just talked about; and even more benefits.

– Procurement decisions will be guided by the terms of agreement between NAC and its partner and not PPA, 2007. This will ease up procurement.

– Nepal can be transformed into an aviation hub from the current status of being a mere end-destination. This can increase traffic in the Nepalese skies. This will open up more employment opportunities as well.

– With business-driven partner, NAC will have a commercial orientation and will be directed towards a profit-driven modality.

– Code-sharing, which is a major practice in international aviation, will allow NAC to expand its service. It will one, market the services of NAC and two, generate additional revenue for NAC.

– Consumer benefits will also increase, due to greater network access and other benefits of strategic partnership like seamless travel via code-sharing, transferable priority status and more.

– NAC can acquire modern scientific technological and manual skill sets.

– With business-driven management, strategic partnership will also foster competition in the rural domestic destinations.

Of course, strategic partnership is not as easy in practice. There are important decisions to be made, in the process. What will the partnership look like? Maybe NAC board can play the role of a monitor while this partner takes care of the business side. Do we want a practicing airliner as a partner or just a management firm? How do we share risks and rewards? How much equity ownership do we hand-over? How do we deal with the employees that might have to be laid-off? These are some of the areas where Ministry of Culture, Tourism and Civil Aviation (MoCTCA) should take the lead and get the discussions going already.

To learn more about the costs and benefits of reforming NAC through strategic partnership, click here
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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Let the poor choose!

Government of Nepal has done a commendable job in taking up the responsibility of providing education – quality education, to be more precise – to all children in the country and transforming the country and lives of its people in the process. Programs like Education for All (EFA), Secondary Education Support Program (SESP), Community School Support Program (CSSP) and Teacher Education program (TEP) have been put together to enhance the quality of public education being delivered to the poor. After the School Sector Reform Plan (SSRP), 2009, the government has, especially, scaled up public expenditure into education sector and has also attempted to make the teachers more accountable. Now that SSRP has come to an end, it calls for evaluating the program in terms of how successful it has been in delivering the promises it put forth.

If we look into the results of School Leaving Certificate (SLC) examinations, which is one of the proxies we use in Nepal in measuring the success of schools and the level of education that has been imparted upon the children, we can clearly see that the public education has failed. Poor students who largely depend on publicly funded education system are not showing results that justify the level of investment that has gone into their education. Last year, of the total students that appeared for SLC examinations, only 28% of those that were enrolled in public schools passed the test while over 93% of those that were enrolled in the private schools in different parts of the country passed the test.

SLC results

Why has this been happening?

Public education in Nepal lacks an effective reward and punishment mechanism for teachers. Teachers neither get credited for the great inputs, nor are punished for being irregular at schools.

For a majority of the people in the rural parts, when their children go to schools, they become one of the first family members to do so. Therefore, the knowledge that their children are enrolled in a school implies (for these parents) that their children are getting good education. Especially in the rural nooks and crannies of the country, where monitoring can be a challenge in itself, there is no mechanism in place that keeps the teachers on check from submitting to their will of whether or not to run classes on any given day.

Even when some of these poor parents try to communicate with the teachers, the teachers have been (time and again) found to be indifferent towards their concerns. The popular defense for this is that this behavior of the teachers could be dealt with by offering them various trainings. But in having said that, it seems to have discounted the fact that GoN has already been running training programs (like Teacher Education Program) that are intended to developing attributes of teachers in these public schools. This hints that the teacher education programs could be running ineffectively and investments in these programs are not being best used.

Text books not reaching the students on time has also been a problem for the public education system in Nepal for years now. There are public schools in Nepal which do not get books and other study materials delivered to them as late as the last few months of the academic session. When teachers are not accountable towards the students and their parents, and have no incentives to deliver his/her best for these students, having no text-books only makes the situation worse as this gives public schools more reasons to take the future of these children for granted.

While the public schools have failed to deliver as per their spending, private schools have been luring more and more students every year and have also been growing in number. Parents all around the country feel that private schools deliver much better quality of education than the public schools do. A considerable portion of the remittance from the Nepalese migrant workers working in the Middle East going into the education evidences the desire of the poor to invest in good education.

Voucher system as an alternative

The flaws in the existing public education system will only come from a re-structuring of the system. Public education can definitely be made better with the right kind of commitment from all stakeholders.. What that means is that the poor are going to have to wait and depend on the very same inefficient public sector. The moral question here is: Does being poor mean that one necessarily waits for the government to choose ways to make things better for him?

The most economical way right now to revamp the whole public education and make it efficient and competent is by allowing the parents/students to choose schools on their own. As the data show, private schools fare much better in terms of imparting quality education to their students. School choice/ voucher system will introduce the must-have mechanism of reward and punishment in the public education. This will mobilize the teachers in the most effective way.

Under voucher system or the school choice program, the government funds individual students instead of funding schools. It funds the consumer instead of funding the supplier. Government selects the target families in terms of their ability to afford a quality education and hands them a voucher. The students can now choose to go to the school of their choice. This allows the parents to have their children in the schools that have been yielding the best results and are known for the education they impart on their students. When school fees need to be paid, these parents can produce the voucher that the government has given them to the school that they have chosen. In an article titled ‘Free to choose, and learn’ published by The Economist in May 2007, the principle of voucher system has been explained succinctly: “The state pays; parents choose; schools compete; standards rise; everybody gains.

This article was first published in Perspectives, The Himalayan Times, on January 19, 2015 under the title “Let the poor choose the education they want.”
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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