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The unseen cost of Public Expenditure

It is now a commonplace in Nepal that the public services are in state of despair – the roads are dilapidated, public education & health services are well below par, the civil service is infuriating, and the State-Owned Enterprises are at a sorry state to say the least. And yet, every successive government is obsessed with collecting more and more tax from the people against their hollow over-promising claim of fixing things. This is straight unjust; and very few people have any expectations from the government. If you are any concerned at all, it only provokes you – the taxpayer – to disregard the government entirely.

The cause of this frustration is not just the bad public service we are receiving – the public service that does not acknowledge the sacrifice of the taxpayers’ fruits labour. There actually is a larger unseen economic loss that each of us is facing. Government generally has to bear a huge administrative cost before it can deliver whatever level of services or public goods it is “supposed to”, and, this inefficiency is even more severe in case of our own government that has to spend as much as 80% of what we pay as tax in order to only fulfill its administrative (to run different administrative units that collect taxes, plan where to send that money, then channel the disbursement of that money, etc. – assuming there is nil corruption) and financing expenses. Thus, it only leaves mere 20% as residue to actually finance its promises of public welfare and services. It is a huge opportunity cost that we are all bearing with. Imagine in how many different ways you could have put the NRs. 100 (say) you pay as tax to use if only you were able to use it as per your own preferences. That NRs. 100 could have been used to serve your own needs and the needs of those others whom you’d have dispersed your wealth across in case you could choose freely where your tax money could be spent.

But then the government has a justification to that as well. It generally uses the false claim of having generated so much employment (directly and indirectly) through public sector as a pretext to keep its clutches on the wide varieties of services and sectors it is taking charge of. Read the Yellow Book (annual performance review of the state-owned enterprises) produced by the Finance Ministry annually to see how the government often cherishes employment generation as one of the major successes through State-Owned Enterprises despite their sorry state. But in all this fanfare, very less of us realize that genuine employment would be generated anyway in letting the free choice of the taxpayers take hold. After all, Government is simply holding up Human Resources in grossly unproductive sectors that could be mobilized in other industries able to generate output that market values. So, it ultimately means that the effect of doing away with some of the unnecessary service responsibilities undertaken by the state is not plain unemployment, but it is the transition from the kind of employment generated for the sake of generating employment to the kind of employment generated for the sake of generating wealth and employment essential for economic progress. However, it is also obvious that the laid-off employees of the public sector have to get around with self-enrichment if they have to shuffle to industries outside of their former industry.

Allowing free choice to individuals in terms of how their fruits of labour are consumed has more to offer compared to entrusting the government to fix all our problems, even more so in case of our own country. One of the possible ways to obtain this advantage of free choice would be to reconsider the role of our government, i.e. what services does the government provide to the people If the government has lesser things to do, then it only needs to collect lesser tax, and thus, lesser waste of resources in the form of administrative costs to sustain its structure. This could be a double bonus for Nepal given the government’s weak capacities – it frees up more resources to be spent on other areas, and the government can solely focus on the limited number of jobs that it has to deliver.

Prience Shrestha

About Prience Shrestha

Prience works in the research department at Samriddhi Foundation. And, he attempts to specialize in the field of Development Economics

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So Politicians Are More Equal?

Bir Hospital What exactly distinguishes a normal ‘person’ from a ‘very important person’? Is it the money, power or self-proclamation of standing out as a very important person? Are we all very important or such a title is reserved for a few political personalities and bureaucrats? In our context the latter is mostly true. If you are not involved in politics then you are just a person who is meant to serve the country selflessly without asking questions. Only then can you truly call yourself a proud Nepali.

For quite some time now “equality” has been a major agenda of most of the political parties in the country. They do not, however, seem to practice what they preach. How can treating few a people as VIPs and the rest of us as general people be called “equality” in any way? Yes, equality is essential. But the kind of equality that the parties are preaching for needs to be defined—perhaps their equality means the equality in the eyes of the law. But law in our country is just a tool easily manipulated by those in power. There have been instances of political figures openly challenging the court, law and the police—and these are the ones revered as VIPs.

It has not been long since 16 mountaineering support staff and guides lost their lives in the Everest avalanche. The government announced a relief of USD 400 to the families of the deceased. A mere sum of USD 400 is promised at the demise of the Sherpas while on the other hand if a VIP sneezes he is rushed in an air ambulance to the most facilitated hospitals of Nepal and abroad, the expenses for which is borne by the government through taxpayers’ money. In this context, I would like to cite government’s decision to pay all the expenses for Mr. KP Sharma Oli.  He was airlifted to Delhi then to Bangkok for treatment. He is just one of the many VIPs we have to endure and take care. Like Mr. Oli former minister Govinda Raj Joshi and Siddha Raj Ojha were also provided with NRs 5 lakhs each and the expenses of the air ambulance service was also paid for. Do you see any equality in these two cases? Those Sherpas who risk their lives and promote tourism were provided with mere USD in compensation for the lives they lost while the VIPs were given tremendous amounts of money for treatment.

How is life of a Sherpa any less important than that of Mr. Oli or those former ministers? These VIPs are already provided with a handsome salary and a lot of other benefits. Why can’t these VIPs, like any other Nepali citizen who falls ill, treat themselves without any government assistance? If these VIPs cannot afford the treatment how can a normal citizen afford it?

While 25 percent of the people live under the poverty line and most Nepalese have a very low level of income it makes it impossible for them to get any health care. The awful memories of hundreds dying of diarrhea in the Jajarkot district cannot be just done away with. You might also have seen a number of newspapers reporting people asking for help in order to raise enough money to transplant kidneys or live a few more years post cancer diagnosis. Why does the government ignore these helpless poor people when it is readily available to help these VIPs?

No country or government is going to stand if there is no population to fund and support it. If the general people are always treated as sheep they will retaliate and when they do systems are bound change. If people can vote and bring these people to the top and make them VIPs, they can as well bring them down. “सबै नेतालाई चेतना भया”

Koshish Acharya

About Koshish Acharya

Acharya is a student of social sciences and has been associated with Samriddhi, The Prosperity Foundation for the last three years.

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Re-thinking Public Enterprises in Nepal

When public enterprises were first introduced in Nepal during late fifties and early sixties the scenario was quiet different from what it is now.  The presence of private sector in the market was negligible and thus it made sense for the government to take control of the economy and establish several public enterprises. The government, in order to fulfill its duty of serving the people along with providing them essential goods and services, established one enterprise after other. The rate of establishment was such that at a point in time there existed 61 public enterprises–from water and food to cement and air services and everything in between–most of them monopolized the sector. Their number has been reduced to 37 today but their return in terms of goods and services to the people and profit-making for the government is questionable.

Almost six decades have passed us by and  instead of improving the services these enterprises have imposed an enormous burden on the taxpayers as well as the government. While the debate on public enterprises continues–some favor putting in more efforts and improving the management while others opt for a complete privatization. While this happens in the backdrop,  we bring to you facts on public enterprises that simply cannot be overlooked or neglected anymore. Since resources (esp. monetary) is already scarce in the country it would not be wrong for us to ask the government to use the resources in productive areas rather than pouring in taxpayers’ hard earned money into ineffective enterprises.

Public Entreprise Infograph

 

Koshish Acharya

About Koshish Acharya

Acharya is a student of social sciences and has been associated with Samriddhi, The Prosperity Foundation for the last three years.

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