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A few take-aways from ‘The Use of Knowledge in Society’

1. Entrepreneurs have the best knowledge of their circumstance, and not the planners

When the government comes up with a plan to promote tomato farming in Kavre with a view to use the tomato produce to make ketchup and sell this local Kavre ketchup all over Nepal and also export abroad, the government does not possess the best knowledge about the properties of tomato that grows in Kavre. The farmers in Kavre don’t aim of exporting their ketchup and growing rich because they know that their tomato has a thick skin and cannot be used to make ketchup. Their tomato is best suited for making salads and pickle, and that is where they see their market.

2. People have ‘free will’ and therefore, their decisions cannot be predicted by studying economic trends

You might love ice-creams and you’ve been having one every day for the last 2 years. Your friend knows this and brings you an ice-cream today. For some reason, today, you feel like skipping it. There is no law that enforces you to eat an ice-cream every day. You have ‘free will’ and the decisions you make today can be different from the one you made yesterday for just about any reason. Now imagine, the government trying to bring a program for entire population of Nepal.

3. Central planning is bound to collapse and give way to networks that promote voluntary cooperation

Let’s think of an economy with a central planner A. A has 3 immediate subordinates, who in turn have other three and so on and so forth, thus forming a hierarchy of command and control. Even assuming that A is a benevolent planner, he’d still have to collect the information about the bottom-most layer in the economy via some of his subordinates, who in turn do so via their subordinates. Now one, so much information gets lost in the process of it being transferred to the planner A (ever watched the telephone game in Sony TV as a kid, where 5-6 people have to communicate a 20-30 word message and how they mess everything up?) And two, while the info is being transferred, the circumstances of time and place would have changed by the time the info reaches the planner and a concrete program in implemented. This problem of ‘inefficiency’, ‘waste’ and ‘path-dependence’ leads to either ‘separation’ of the hierarchy into smaller, more efficient and more manageable hierarchies; two, the hierarchy collapses as centralized control from the top down is lost; or three, by ‘transition’, the system now begins to deal with the increased information and increased complexity by flattening the hierarchy, forming ‘networks’.

4. Price is a great communicator – a marvel!

Price system carries with it the vast amount of information (and without losing any important bit), much of which is lost in a Planned Order. Price system can make adjustments to the changes in circumstances of time and place, without every individual (or for now, let’s keep it to the planner) having to delve into the all the specifics that is causing him to behave in a certain way. This system creates new values for every individual with every tiny change in the circumstances, creates new incentives and provides sufficient avenues for all to prosper.

5. If you look around, ‘Spontaneous Order’ is all around us

Now here in the ‘network’ (that is formed when the system begins to deal with the increased information and increased complexity by flattening the hierarchy) the relationship between any two individuals is that of free exchange, that is co-operation and voluntary. This, in Hayek’s view, is a ‘Spontaneous order.’ This ‘Spontaneous order’ is a result of human action and not planners’ design. If you seek examples, think about the language you speak, or the money you buy things with. No single planner created either of these things. Years of cooperation between human beings created these things.

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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Your Right to Information. Or is it?

right to informationWith regards to the ‘Right to Information,’ the Interim Constitution of Nepal 2007 reads, “Every citizen shall have the right to demand or receive information on any matter of his or her interest or of public interest.”

So the law respects the fact that as a citizen of the country, you and I have the right to acquire information on anything that directly or indirectly affects us. But does writing something in the constitution guarantee that the thing actually gets translated into practice? Here is an example of how the reality makes fun of the law.

I am currently doing a research on the banning of new taxi registration in Bagmati Zone (in 2000) and its effects on consumers. This is where it all begins.

After talking to a few people that have major stakes in the transportation industry (people like the taxi entrepreneurs, consumer rights advocate, bureaucrats and taxi drivers), I learned that in the year 2007, the Ministry of Transport and Federation of Transport Entrepreneurs made a deal whereby it was agreed that,

1. No public vehicles would be allowed to ply the roads of Bagmati without prior consent of the federation

2. Transport fares would be revised following every revision in the petroleum product prices

3. At the end of every fiscal year, the transportation fares would be revised

(for the time being, we will not delve into the gravity of this agreement. If it is true, then this is a government backed cartel and it has huge implications in the consumers. But we will leave it at that for now)

Now, until I see the agreement for myself, I cannot rely on something that someone says and use it on my research, right? And so begins my endeavor to get my hands on the agreement. And the joke begins to unfold.

My first instinct then was to call the Ministry of Transport. So I dialed 197, the Nepal-telecom authorized and largest inquiry service provider of Nepal, to get the phone number of the Ministry. I was told, the number was 01 4211920. I go on and dial the number. They tell me it is Ministry of Labour instead. Here is what must have happened. Previously, there used to be a single ministry by the name Ministry of Labour and Transport and now, these are separate ministries. And I asked myself, shouldn’t the inquiry service have updated their database? Or rather, shouldn’t the ministry have notified the telecom itself?

So I went back to my computer and googled it out. I call up the right ministry this time, and talk about the agreement. They tell me, ‘there used to be this labor and transport ministry and now we are a separate ministry and while in the process of resettlement, some papers might have gotten here and there… so we might not have the document you are looking for. I suggest you call the department of transport management. They should have the paper…’ Again, not what I had expected to hear, but I was not very surprised that they said what they said.

Then I ring the Department of Transport Management. They tell me, ‘All gazetted officers are in India to attend some program and will be back in September only. All we are left here are a few non-gazetted officers and we do not have access to the kind of documents you are referring to. You should call back in September (after September 1).’ Now this took me by some surprise and I was beginning to get furious at these bureaucrats. I wanted some information and the constitution guarantees that I be given the information. But none of it was any help to me.

Then I thought of approaching it from the other end. I called one of these people from Federation of Transport Entrepreneurs. Again, I am told that these guys have their plenum and it will keep them busy for some time. Once again, I am told to call back sometime in September.

It is a shame that all these institutions put together cannot guide us to a single agreement that defines how we commute to our work places. Maybe the bureaucrats are not accountable enough to people. Maybe the document holds the key to unraveling a big fraud committed by the government with the federation as an accomplice and thus it is being kept from the public’s reach. Maybe, the bureaucrats are extremely busy to respond to a public’s inquiry. I will leave it at that and let the readers judge it for themselves.

However, this is not the only case where a public cannot find the right information when it asks for one to the bureaucracy or the government. Go to transport management office and ask for the process of acquiring a green number plate. Go to Nepal Oil Corporation and Ministry of Commerce and Supplies and ask for the documentation done when they decide to hike petroleum prices in Nepal. Go to the municipality, the Department of Commerce, Department of Cottage and Small Industry and the Inland Revenue Department and ask for the process of registering a Kirana Pasal (mom-and-pop store.) Nowhere will you get the complete information from a single resource person. The Citizen Charters (nagarik badapatra) will be a decade old and officers won’t value your time and effort one bit. And there goes your right to information!

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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Doing Business in Nepal: A Case Study in Tourism

China and India are set to be among the three largest economies of the world by 2020, accounting for 27% of world GDP in PPP terms. And what’s more? They are travelling. All we have to do is become the coffee-shop between two huge corporate houses, whose staff likes to venture out of the routine jobs every once in a while. But is doing business in Nepal so easy, including the tourism industry? The World Bank’s Doing Business report positions Nepal at 105th in terms of ease of doing business.

Here we will look at a case – the ground realities of the process of acquisition of green number plate licenses that travel and tour operators require.

Ground realities

The number plates are issued after a two-tiered process. First of all the applicant tour operator applies at Tourism Industry Division (TID) under Ministry of Culture, Tourism and Civil Aviation for a permission to apply at Transport Management Office (TMO). Excessive corruption, red-tapism, redundancy, lack of accountability in part of the concerned agencies are commonalities in practice.

Process of acquiring green number plate

Process of acquiring green number plate. CLICK on the image to get a better view.

Lack of Accountability

To begin with, all government agencies are required to host Citizen’s Charters (Nagarik Badapatra) at their premises as a measure of accountability towards the citizens. The charters posted at the TMO premises are a decade old and do not reflect the true processes that are followed at present. Besides, economic ordinances can make annual changes in details like vehicle tax. These issues are not addressed in the citizen’s charters posted at TMO premises. Therefore, if an entrepreneur were to follow the guidelines as mentioned in those charters, he/she would be misled and would be rendered unable to acquire the desired services from TMO.

Most procedures required at TID are repeated again at TMO, only increasing the scope of discretionary powers held by bureaucrats at different sections of TID and TMO. This, complimented by lack of information sharing between these agencies can cause the files to be stuck at one section or the other. For example, while the Travel Section at TID verifies all clauses as included in its 26-point check-list before writing an application to the TMO requesting that a green number-plate license be issued to the applicant tour operator, the road-test procedure conducted by the Technical section at TMO requires the applicant to undergo the similar set of processes to produce the same information all over again.

Too much information (to gather and comprehend)
Interaction with personnel posted at different sections of TMO (who are paid to have that information and share it with the applicant) revealed that they were unsure about the complete procedure for the acquisition of green number plate licenses. A number of personnel shared that they have been transferred to TMO only three or four months back (as of May, 2014) and admit how they themselves do not fully understand the steps that need to be followed yet.

The aforementioned problems lead to one, corruption and two, lawyers taking unfair advantage of the entrepreneurs’ lack of access to information. Some tour operators also expressed how they have been asked to pay a sum exceeding Rs. 100,000 at TMO being told that their vehicles do not meet the technical specifications even after being cleared by the Travel Section at TID.

Possible reform measures
Now we see, the faster the tourism entrepreneurs can acquire licenses – to operate their businesses – the better for the economy. Easy access to information for entrepreneurs and accountability on government agencies’ side is the combo that is the need of the hour. Certain steps can be taken to deal with the aforementioned issues.

A client (tourism entrepreneur) focused manual that includes a list of required documents and processes involved in the process of acquisition of a green number plate license can be developed as a short-term measure. This manual needs to be available online and should be updated as per the change in economic ordinances, for example, the tax codes. This needs to be seconded by an updated citizen’s charter at TMO premises. The concerned agencies (TID and TMO in this case) need to develop a mechanism whereby they share relevant information among themselves such that redundancy and excessive red-tapism can be avoided. Training of personnel at TMO is required at the moment, as evinced by the interaction with the personnel themselves. A medium term focus can be coming up with a one window policy to hasten the process. This will require some homework to be done on the government’s side and will thus take some time. If implemented, however, this will also help cut off the complexities, redundancies and room for corruption.

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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