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Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

Voluntary Land Consolidation for Enhancing Agricultural Productivity

Agricultural productivity is influenced by various factors: soil fertility, nature of seed, supply of inputs like irrigation, fertilizers, farm size and more. Other things remaining constant, farm size and agricultural productivity are positively correlated.

Studies around the globe have concluded that fragmentation of land into smaller parcels poses a negative impact in agricultural productivity as a result of increase in cost of production per unit output. Additionally, farm size fragmentation hinders commercialization and modernization of agriculture since transporting machineries and other inputs to a number of fragmented land parcels is not cost effective and similarly transporting harvested products from various farms increases the final cost of the product as well.

In Nepal, land fragmentation is deep-rooted in traditional practice of inheritance wherein parental land is divided equally among heirs. With an average holding of 0.68 hectare at present, division of parental land among the heirs is only going to further worsen the land-holding situation. According to Agriculture Census conducted by Central Bureau of Statistics, average land holding has declined to 0.68 hectares in 2011/12 from 1.11 hectares in 1961/62.

Consolidation of land can be a solution to land fragmentation; fragmented parcels of land held by different farmers can be treated like a single plot for commercial and large scale farming. Land consolidation can be achieved through a number of measures; mutual agreement, purchase and sales are commonly used measures. Latter option―purchase and sales—may not be feasible in Nepalese context primarily due to two reasons. Firstly, poor farmers may not be able to buy others’ land and secondly, small parcels of land that farmers hold serves a means by which they earn their livelihood. So, mutual agreements among farmers holding small parcels of land can be a better alternative for land consolidation as this mutual agreement would include land pooling of various fragmented holdings so as to form a single plot of land.

Land consolidation has been successful in many countries, most notably in Taiwan where agricultural productivity increased by 32 % after consolidation. In Moldova and Bulgaria, farmers with small and fragmented land have come together to form a cooperative. They conducted farming jointly, shared benefits and bore costs proportionally.

Nepalese farmers who hold small parcels of land may come together and get organized to lessen the impact of land fragmentation on agricultural productivity. If farmers could consolidate their small parcels through mutual agreement, economy of scale in agriculture is likely to be achieved which ultimately benefits farmers as cost of production per unit output will decline with joint farming. Further, Land Act 2021 also sanctions such consolidation. As per the act, ten or more farmers who intend to do collective farming will be given financial and technical assistance.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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How can government take away sustenance ?

Ayn Rand, the great defender of right to ‘life’ and ‘property’ holds following notion about these, “Right to life is the source of all rights ―and right to property is their only implementation. Without property rights, no other rights are possible. Since a man has to sustain his life by his own efforts, the man who has no right to the product of his efforts has no means to sustain his life.”

Property rights are laws created by the state with regard to how individuals can use, control, benefit from and transfer their property. Additionally, they are the rules of the game that define who gets to do what and who must compensate whom for the damages if any. Property rights refer to an exclusive authority of individuals with regard to use of a particular resource they own. Right to private property is one of the fundamentals of a market economy; an economy becomes prosperous when there is strong enforcement of property rights.

Property rights and economic prosperity have an inseparable relationship. The significance of having well defined and strongly enforced property rights is recognized as an indicator of prosperity. A strong system of property rights gives individuals exclusive authority to use resources as they see fit to enhance their standard of living. A property owner always considers the costs and benefits of employing resources in a specific manner, which we call rationality. This implies efficiency in economics. With clearly defined and strongly enforced property rights, cooperation among individuals replaces conflict as they try to maximize benefits through trade. Studies show that countries like Australia and New Zealand which are highly developed have strong system of property rights and countries like Nepal and Zimbabwe, which have weak property rights remain the least developed.

According to International Property Right Index (IPRI) 2014, a publication Property Right Alliance (PRA), Washington DC based independent research institute, Nepal is one of the poorest countries with regard to protection of private property. Nepal ranks 78th position out of 97 counties and lies in lowest 20th percentile. As per the report, Nepal lags behind in all three fundamental components; Legal and political environment, Physical Property Rights and Intellectual Property Rights.

‘Right to Property’ has been guaranteed as a fundamental right in the Interim Constitution of Nepal, 2007. In practice however, the state has not been able to protect this fundamental right of the people; going as far as violating the people’s right itself in some cases. Road expansion in Kathmandu is one of those cases.

Road Expansion in Kathmandu Valley: A blatant disregard to property rights

We all have wanted wider roads at some point in time or the other and the road expansion drive, at first glance, seems like a good move. There are, however, some serious concerns related to road expansion drive in Kathmandu Valley―violation of constitutionally protected right to property being one and non-compliance with the due process of compensation being the other.

Public Road Act 2031 has defined road as a public good. By definition, the State can acquire private land for construction and widening of roads in the public interest. But the state is supposed to acquire land before widening roads as prescribed by the Land Acquisition Act 1977, Public Roads 2031 and Interim Constitution of Nepal 2007. Regardless of what is written in the law, Kathmandu Valley Town Development Committee (KVTDC), in the year 2012, during the premiership of Maoist leader accelerated road expansion in such a way that it completely disregarded the existing laws of the land.

According to KVTDC, most of roads were expanded on the basis of road demarcation of 1976 (2033 B.S.) which is not a law in itself; rather, a set of decisions of Town Development Plan Implementation Committee envisioned during active monarchy. On the basis of these decisions, KVTDC marked private properties and blamed all people for encroaching public property. Thousands of houses built on legal grounds with the consent of municipal authority and village development committees were then demolished using force. As of today more than 500 cases remain registered against KVTDC, awaiting final verdict from the Supreme Court. In some cases, KVTDC even completely disregarded the law by not complying with the stay order of the Supreme Court.

Moreover, road expansion is also being carried out as per Guided Land Development (GLD) Program as prescribed by Town Development Act 1998. As per the act, state may carry road expansion with consent at least 75 % of stakeholders and compensation is to be provided by the beneficiaries of road expansion and Town Development Committee. However, in some cases, roads have been already expanded without any compensation. Thus, the provision of GLD has compelled minority whose property falls on road border pay the cost of road expansion. Though majority of the individuals are still waiting for the compensation, the bigger question here seems to be where we draw the line such that no one can encroach others’ property. If the government can grab our private land and destroy our homes, what will stop government in the future from taking away everything that we own in the name of public interest?

Considering all these aspects, we can see that there is much room for strengthening the status of property rights in Nepal. We stand at a point in the history of the world where protection of private property has been established as the fundamental aspect for economic growth and prosperity of individuals and the country. But then, here stands Nepal where the state itself has failed to learn from international experience.

This article was first published in Perspective, The Himalayan Times on January 4, 2015.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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Three Things that Nepali public sector can learn from private sector

The public sector generally operates under a different set of rules than what the private sector is subject to. Additionally, public entities enjoy the privilege of having great discretionary powers over matters of public concern.

Nepalese public sector is infamous for its inefficiency, lack of accountability, abuse of authority and nepotism; and scores of these malpractices have resulted into ever-increasing discontent among the general public towards state machineries and their performance. These days, widespread systemic corruption, ineffective and inefficient public service delivery and significant wastage of resources are pervasive in the Nepalese public sector and these attributes have contributed to a sharp decline in faith that the general public has in public entities.

On the contrary, private sector institutions are known for delivering better-quality goods and services with high customer satisfaction. What then, distinguishes the private sector from the public sector in terms of better service-delivery and customer satisfaction? Here are three things that set them apart.

1. Delegation of Authority and Responsibility:

Two of the most frequently observed problems in public institutions are absenteeism, and delay thereafter due to lack of adequate staff that can work on his/her behalf. But in the private sector, as there is competition, they cannot afford to let the circumstances be so. The notion of competition guarantees that private institutions refrain from letting customers go and get services from a competitor, which public entities need not care about.

I want to take this opportunity to cite an example from my visit to the Supreme Court. I had to spend three working days to access a piece of information. First day, officials said that concerned staff was unavailable and there was no one to substitute him at his desk. So I returned, having accomplished nothing. The second day was more troublesome than I had expected; no staff was willing to cooperate and I was asked to visit rooms after rooms. I visited several rooms as per their direction, receiving nothing but trouble after trouble. After all that trouble, one official says “Well, the concerned person is in a meeting. Come tomorrow!” ―what an easy thing to say! Finally, the third day, I had access to what I needed from the court and it was not easy either; I had to wait for hours to get this piece of information.

2. Power of reward and punishment mechanism:

By virtue of being human, an individual’s performance is determined by the incentives one receives. In most cases, better performance is an outcome of higher incentives.

For example, an acting manager of a corporate house always gives his/her best to ensure effective human resource management by maintaining objectively verifiable monitoring and evaluation indicators, keeping good interpersonal relations and so on. But why public officers can’t act like a corporate house manager is something that makes us wonder. The answer is simple; a public officer has no incentive in performing better. The public officer will not be punished by law if he fails to guarantee that a client receives the best service. But, in case of a corporate house manager, there are monetary and non monetary incentives; salary and bonus, annual leaves, recognition in job market, and most importantly, the threat of a punishment in case he fails to deliver as per his job description.

Moreover, public entities need not worry about revenue and capital investment as they are funded by the government. These institutions truly lack incentives, which lead to poor performance.

3. Performance Evaluation:

Performance evaluation of employees carried out to assess their contribution to an organization is one of the fundamental aspects of competitive private firms. This mechanism enables managers to make decisions about the employee’s contribution to the organization and remuneration for their performance.

Performance evaluation of employee in public institutions, on the other hand, is hardly practiced despite the fact that Public Service Act 1993 prescribes performance evaluation for promotion of a public servant. It is an alien concept in the Nepalese public sector. Moreover, salary and other incentives a public servant receives, regardless of their performance, are prescribed by legal documents and this further hinders performance.

In case of a public organization, a public servant has no obligation to perform as per targets since no objective performance indicators are set by the superiors. Return on human capital investment is lower in the absence of objective performance targets which ultimately results in poor public service delivery.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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Total Mockery of Property Rights

The road expansion drive that has been changing the face of Kathmandu has received applause from many who believe that nothing beats the happiness of plying vehicles on wider roads. Many pedestrians seem to be equally happy with the wider footpaths. A great job by the state – it seems. While we are talking about this expansion drive, I would like to urge the readers to keep a simple fact in their mind – “Nepal ranks 78th out of 97 countries in the world, in terms of Property Rights Index,” as per the International Property Rights Index Report, 2014.

There are, as the index reflects, some serious concerns related to road expansion drive—the violation of the constitutionally protected ‘Right to Property’ being one, and ‘non-compliance with the due process’ being the other. When a state cannot safeguard the constitutionally guaranteed right to property, the fundamental of state itself is violated. When people are insecure about their ownership of the fruits of their labor and the property they earn, they lose the incentives to earn. Violation of property rights, consequently, creates obstacles for economic prosperity.

Mr. Bijay Ghimire, permanent resident of Battisputali, Kathmandu has been fighting for over a decade to protect the private property which was inherited by his father. The first shocker came in 2003, when his phone rang and he was notified of the government plan to build a road over his private property. A few days later, municipality officials along with some locals and the police force came, asking that he give up his land. In a bid to protect his constitutional right, he took the matter to the Supreme Court, filing a case against the Kathmandu Metropolitan City. In November, 2006 the Supreme Court made a verdict in his favor. Court ordered Kathmandu Metropolitan City to acquire his property as per Land Acquisition Act, 2034. But municipal authority never respected Supreme Court’s order.

Mr. Ghimire again went to Appellate Court, this time against Road Division Office, Department of Roads, Sano-Gaucharan, Kathmandu. In June 2010, appellate court decided in his favor and ordered discontinuation of road expansion. However, as it stands today, the department has constructed a blacktop road without following due process of land acquisition – sheer disregard to the law of the land! He lost 11 aanas (349.69 square meters) of his private land, whose market value stands around NRs. 44 million. Further validating the Property Rights Index, the state has not paid a penny worth of compensation till date.

Moreover, Mr. Pradeep Agrawal’s two-story house in Lazimpat-3 was demolished in the year 2012. Though his house resided on legal ground, he was accused of encroaching public property and the blame put by the state authority on his family compelled him to bear heavy social costs. His relationship with his neighbors soured as a result of the accusation. Although he has only recently been compensated (which covered a fifth of this re-construction cost) for the state-endorsed demolition, he has not been compensated for the loss of land which has a market value worth NRs. 9 million.

Mr. Bishnu Man Shrestha, a resident of Tutepani, Lalitpur feels helpless as the road expansion drive has a massive loss in store for him. He owns eight aanas (254.32 square meters) of a triangular plot of land which faces roads on either side. If he complies with the notice issued by Lalitpur Sub-Metropolitan City Office, he is left with just 2 aanas (63.58 square meters) of land. As per the current market value of land, his property worth NRs. 15 million is at risk. And he has absolutely no hope that he will be duly compensated for his loss.

Mr. Bijay Gopal Shrestha, a resident of Khumaltar, Lalitpur has a similar story. The state authority marked his property for road expansion and he is now compelled to give up 19 aanas (604.01 square meters) of his land. The market value of his land stands at around Rs. 47.5 millions. He bought the land with his hard earned money and the uncertainty over the compensation scares him.

These two latter cases of road expansion are being conducted as per the Guided Land Development Program under the Town Development Act, 2045. As per this Act, individuals like Bishnu Man Shrestha and Bijay Gopal Shrestha are entitled to compensation funded equally by the beneficiaries of road expansion and the Town Development Committee. The prevailing Act also provides for stakeholders’ meetings. However, these individuals were neither informed about consultation meetings nor did they have a say in the process. Moreover, Article 16 of Town Development Act, 2045 states, “Government of Nepal, for implementing town development program, will facilitate Town Development Committee within the prevailing legal framework” and under the current legal framework, Interim Constitution of Nepal ensures the protection of property right.

When a portion of wealth is transferred from the person who owns it — without his consent and without compensation, and whether by force or by fraud — to anyone who does not own it, then I say that property is violated; that an act of plunder is committed….. It is not true that the legislator has absolute power over our persons and property. The existence of persons and property preceded the existence of the legislator, and his function is only to guarantee their safety….. The mission of law is not to oppress persons and plunder them of their property, even though the law may be acting in a philanthropic spirit. Its mission is to protect property.

– Frederic Bastiat, The Law

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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Even Subsidies can go Wrong

Subsidy policies brought by government authorities in the name of public welfare often contradict with their own spirits. While no government policy is implemented with a bad intention, there are, most often than not, some unintended consequences associated with these policies. There are plenty of examples around to augment this.

We know very well that ‘there is no such thing as a free lunch’ and subsidies are no exceptions to this.

Government of Nepal comes up with a number of subsidy programs annually and agriculture is one sector is never left out. Some observations on the agriculture subsides that are worth noting have been discussed in the following paragraphs.

Although agriculture is perceived as the backbone of Nepalese economy, the two-third of the total population engaged in this sector contribute to only about one-third of the GDP. This figure tells a lot about the agricultural productivity of Nepal and makes one wonder if agriculture should really be held as the national means of livelihood.

Government of Nepal spends a great deal of money in the name of protecting local farmers through subsidy programs. According to Ministry of Agriculture cash subsidy scheme accounts more than sixty percentage of total agriculture budget. However, the bitter truth is that agriculture productivity has declined sharply despite these protectionist mechanisms. One of the main purposes of these programs is to substitute the imports from India with the ultimate aim of achieving food security. Agriculture and farms in India are highly subsidized which result in lower prices of Indian agriculture products in the Nepalese market. Nepalese agro-commodities can in not ways compete with such low-priced Indian products. Given this fact, these is room for being critical to subsidies in agriculture with regard to their aim and substitution of imports of agricultural products from India.

Moreover, these subsidies have not been able to reach targeted groups. A primary reason for this is poor management of designated public institutions (Agricultural Inputs Company Limited and National Trading Company) and ineffective service-delivery mechanism. There is more to this disregard for the optimal utilization of scarce resources i.e. market distortion. With the supply of fertilizers at subsidized rates by government, entrepreneurs hardly dare to enter the fertilizer market as the price level of fertilizers supplied by the government reaches far below the market price level. Now, as a consequence of subsidy in the market, private sectors are compelled to exit the fertilizer industry. Along with the competition barriers, there are other things leading to short supply of fertilizers; one of them is the cumbersome process of getting a new firm registered for trading fertilizers.

One line of thinkers defend subsidy in some sectors, highlighting the benefits it brings to a specific target group. However, the alternative use of that financing should not be overlooked. One thing that policy makers ought not to ignore is that if the creators of the wealth were allowed to dispose of the wealth they create according to their own discretion, they could lead to greater value-creation for the society than they actually do when channeled to a specific target group via subsidy mechanisms.

Subsidy programs are often touted as being a populist move designed by the government agencies under the influence of the political leader so as to secure a place in the heart of a voter. One of the examples is the special priority given to agriculture in the annual financial plan right before second Constituent Assembly election. Hence, government authorities before announcing subsidy programs should rethink about the potential consequences and they better not ignore the concept of economics which asks for proper allocation of scarce resources.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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Why I think twice before paying taxes?

Mounting grievances and inefficiency of government institutions in Nepal which operate on taxpayers’ money makes us wonder if tax is really the necessary evil it is often touted as being. In principle, the rationale behind tax is justified. However, the current scenario does not do justice to the rationale.

Citizens have incentive to pay taxes as long as the benefits of what is asked by government in various forms of taxes is higher than the services rendered by authorities. But the government is not doing what it is supposed to do for compensating taxpayers’ giving up of their hard-earned money; we get much less services than what we paid for.

The notion of paying tax brings second thoughts to my mind. There are a number of reasons why:

Bureaucratic Inefficiency

As a Nepalese citizen, I pay my share of taxes and by this virtue alone, the authority is obliged to ensure effective and efficient public service delivery to me. Sadly, this rarely happens. The service delivery mechanism has a lot of loopholes; there is excessive red-tapism, no proper delegation of authority and the idea of good governance is limited to plans and policies.

Furthermore, the government has failed to create conducive environment for the private sector. A substantial portion of the fiscal budget is spent on different administrative headings than making capital investments on infrastructure. There is lack coordination between authorities which results in significant wastage of resources. For instance, roads built by department of roads are frequently dug down by others, once for drainage, again for water supply, and so on and so forth. Moreover, with dismally low results, wastage of resources inherent in Nepalese bureaucratic structures implies that our tax money is going down the drain.

Corruption in Public Sector

Corruption in Nepal ranges from nepotism to significant monetary scam. It is dispersed like an epidemic in almost all government organizations. Corruption Perception Index (CPI) published by Transparency International gives Nepal a score of 31 on a scale of 0-100, where 0 and 100 represent “highly corrupt” and “very clean” respectively. Abuses of authority, secret deals and bribery have lasted for years.

While the commitment of Commission for Investigation of Abuse and Authority (CIAA) is commendable, our tragedy still remains that the corrupted receive clean sheets due to dysfunctional mechanism. Moreover, recent CIAA report reads rampant corruption at local levels, particularly at Village Development Committees (VDCs), Municipalities and District Development Committees (DDCs).

I can’t foot Public Enterprises’ Loss and their Inefficiency

As of today, the number of fully and partially owned public enterprise has reached thirty seven, out of which sixteen operate in net loss. The total cumulative profit of fourteen public enterprises is about NRs. 65 billion and loss incurred by seventeen others is around NRs. 43 billion. Here, NTC alone accounts for NRs. 39.5 worth of cumulative profits. (Source: Yellow Book, Performance Evaluation of Public Enterprises: Ministry of Finance, 2014)

Janak Shikshya Samagri Kendra, a public institution that has the responsibility of ensuring timely production of subsidized education materials for public school students across the country has not been able to deliver for quite some time now. There have been instances when the books have reached students in the second half of the academic year only. Another example is that of Nepal Electricity Authority (NEA).Despite of a lot of money being poured in for the purpose of electrification it has not been able to cut down hours of load-shedding. Nepal Oil Corporation (NOC), similarly, has not been able to deliver—long queues in the petrol stations despite over NRs. 39 billion worth of taxpayers’ money floated to them being a constant reminder of that failure.

The more I understand government and its actions, the more doubts I have over having to pay taxes to fund its inefficiency.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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