Senior CPN-UML leader and former Finance Minister Surendra Pandey (Republica)
Senior CPN-UML leader and former Finance Minister Surendra Pandey, who is also the member of party unification coordination committee, holds interesting views on economy and land-related issues. How should Nepal manage its economy under a federal set up? And what is the progress in unification between Maoist Center and UML? Thira L Bhusal, Mahabir Paudyal and Rudra Pangeni caught up with him to discuss a wide range of political and economic issues.
By expanding recurrent expenditure and lowering capital spending, we are heading towards a terrible situation.
The role of Finance Minister is not merely to keep record of expenditure and income and present it to the parliament.
Who created the land in the first place? Can we expand it? We cannot. Land actually belongs to the government.
If the parties compete in raising social security allowance this way, we will be bankrupt. It does not promote entrepreneurship but makes people dependent.
None of the leaders have deviated from unification process. It is time to reach a decisive conclusion.
The budget for next fiscal year is expected to reach close to Rs 1,500 billion. Revenue can only meet half of it. How are we going to manage the rest?
Expanding budget is not a big problem. Based on today’s context of budget size and revenue sources, finance minister can expand or contract size of annual budget by Rs 100 billion. Revenue target can be extended. We can also expand foreign aid. We can increase domestic borrowing but we should be cautious as it might create liquidity crunch. Government can also collect money at the higher interest rates for managing economy. Whether we will be able to manage Rs 1,500 billion is not important. The important question is how we spend the money allocated, particularly for capital spending. Foreign assistance component accounts for 35 percent of the budget but by the end of fiscal year it comes down to 20 percent. This is because foreign assistance is conditional. We have to allocate matching fund for receiving such grants or we need to comply with all the conditions to get such funds released.
What is the guarantee that we will receive as much foreign aid this fiscal?
Foreign development partners have made huge commitments. Government has not yet started projects of committed US $ 900 million (over Rs 92 billion), according to a recent data. The World Bank has announced US 1.4 billion for three years and ADB has pledged another 1.3 billion dollars. India has announced to expand grants by over 70 percent. There are several such assistances. The important thing is how we spend.
A large part of money goes to recurrent expenditure. Major projects are financed by foreign assistance. Slow works in projects lead to low spending. Common development projects take 11 years to complete while the national pride projects take three more years. This is the reason we have failed to generate expected employment and growth.
Recurrent spending, which is already skyrocketing, will see further expansion in federal set up. Where are we heading?
By expanding recurrent expenditure and lowering capital spending, we are heading towards a terrible situation. Ministry of Finance, Finance Minister and the government are not merely a record keeping agency of government treasury. The budget announcement is not only about tabling such records for the next year. But this is what we are doing all these years. Through the budget the government should come out with plans, policies and programs for utilizing all the money available in the country including foreign direct investment and remittance in the best way. We should be cashing on in all the money and expand benefits. Role of finance minister will be crucial in this.
Government officials have been saying federal system is going to be burdensome economically. It will indeed be a burden if we do not change the way of doing things. We have lagged behind because we never encouraged entrepreneurship and production. If we go about this way, we will face a crisis.
Earlier you said state should be able to utilize the public money in the best possible way. How can we do that?
Even small things have big impacts. For example, if a home minister is aware of economic issues, he would also link security with business. If a police man personally harasses a businessman or industrialist, what role can a home minister play? It will be his duty to take action against those who harass business people. A business person won’t invest until he is given full-proof security.
This kind of basic awareness of economy and security seem to be lacking among media outlets as well. We all need to stand on the same page on economic issues. Now the focus of every sector should be on our economy. Economy is something that we create. It does not flourish on its own. Our problem is that we do not distribute what we can and distribute limited resources such as land.
You have been advocating for government ownership of land and that an individual is not entitled to its ownership. What is your argument?
There are various practices of land use around the world. Capitalist economists in Nepal seem more conservative than elsewhere. They wrongly propagate that communists seize private property. Land is not a private property. Government levies tax on land one uses. If a gold mine is found in your land the government seizes it.
Who created the land in the first place? Can we expand it? We cannot. Land actually belongs to the government. I am not talking about communist country. The capitalist countries of Europe and America also have practices of regulating land use. Buying, selling and ownership of land are heavily regulated.
Do you suggest that we have no land regulation in Nepal?
It seems we have not. In the past, kings and Rana rulers decided what to do with the land. We started to frame laws to regulate land only from the 1970s. Our economists, who have earned degrees in some of the best schools in the world, have misinterpreted private property. They have seen private properties in those developed countries. But they never tell us what private property actually means there. Land is a regulated property. For example, who owns the underground land? Who owns the sky? They are the government properties and the government determines how to use them.
We take bank loans using our land as collateral. This is a wrong practice. This is the reason behind skyrocketing land price in Nepal. Land is rarely used in other parts of the world as collateral to obtain loans. Homes or any other assets or projects on the land are used as collaterals. If you stop using land as collateral for bank loan, land price will drastically decrease.
Like I said, most countries do not allow land to be used as collateral for obtaining bank loan. Perhaps we imported this practice from India. Homes and other assets built on land can be used as collateral but not the land itself. The land actually belongs to the government.
But how can we do away with this system?
It takes time. We should change the mindset first. Even capitalist countries have high regulation in almost every activity. During my visit to Belgium I learned many things. If a citizen wants to purchase land, he/she can take loan only from the banks. People cannot use personal money or money borrowed from others for this. This has ensured 100 percent transparency. There are no chances of anomaly.
Not only citizens and economists but also political leaders do not know this ground reality. They have not realized the fact that we have not been able to set even the fundamental things right.
Banks and financial institutions easily lend for purchasing vehicles even at low interest rate while an entrepreneur has to struggle for it. Why does this happen?
The problem lies in our mindset. Businessmen and industrialists should be competitive but they demand reservation and protection. They want limited competition and bar others from coming into business.
We have lived with faulty mindset for years. Large number of families, mostly Brahmins, lived risk-free lives. They did not dream big. They were happy with getting food to eat and certain comfort. We all live with this mindset. We don’t want to take risks. As a result, youths are suffering today. If a youth wants to start an enterprise he may not be supported by his family and neighbors. So our young people do not feel encouraged to start enterprises. They end up in the Gulf and Middle East for menial jobs.
To help young people we should have a provision of providing seed money in a range between Rs 50,000 to Rs 500,000 with rigorous monitoring. Government can allocate Rs 10 billion for the purpose at first and make a public call for projects. Government can say recipients of funds should not return the amount but will have to go through a heavy monitoring. May be only 20 out of 100 may be successful but this will lead us to the right direction. This will generate employment.
You say so but programs like Youth Self-Employment have almost failed, often misused by political cadres.
The problem is somewhere else. Bureaucrats did not find the ways to take such programs to those who want it most. They should have monitored but they created hassles.
You argue that we need to root for only few national pride projects instead of many. Why?
I started the Kathmandu Tarai Expressway when I was Finance Minister. This expressway will radically reduce the cost of doing business, particularly in Kathmandu. If you complete this project of a little over Rs 100 billion and target completing this project in four years, annual allocation of Rs 25 billion is required. Allocating few millions for several mega projects does not help to make national pride projects successful. The country should focus on this project and few others like Nijgadh Airport, mid-hill highway and major hydropower projects.
The government has been introducing one after another program that could potentially cost a lot to national treasury. How will it affect national economy?
The government has been acting quite irresponsibly. It has no mandate to do what it has been doing. Programs like lowering eligibility age for old age allowance and raising grants for earthquake victims have to be introduced through policies and endorsed by the parliament. The government has been doing it arbitrarily. It has bypassed all the processes without any care for how it will impact the economy.
This has been done at a time when the need for reviewing social security scheme has been raised. We need to study this issue properly. If the parties compete in raising social security allowance this way, we will be bankrupt. It does not promote entrepreneurship but makes people dependent on the state. We need to set criteria regarding which age group and economic class of elderly deserve how much as social security allowance. It won’t be wrong even if Rs 10,000 is provided to the person who is above 80 and who has nobody to take care of. Such person needs better state protection. But what will happen if you give the same amount to the person who is well-off and able to earn for himself? If we cannot properly regulate this system, it will only add burden to national economy.
Why is party unification process being delayed?
It is not delayed as reported. We are sorting out issues of portfolio management. First, we need to agree on ideological issue. What will be the guiding principle of the unified party? We need to come to a consensus on this, which needs discussion but it won’t take much time to sort out. Until the general convention, we will have to create transitional organizational structure. And we will have to draft the party constitution to guide the process until the general convention. Pushpa Kamal Dahal and K P Oli have been discussing in different phases but we do not any conclusion so far. So we are thinking of constituting task force and working towards that end while top leaders also keep sorting out these matters. This will take unification process to the logical end. There could be various options to settle the leadership issue. May be one of the two leaders (Oli and Dahal) will become the chairman and other co-chairman, or both of them could function as chairmen or both as co-chairmen. We are discussing various modalities. Government leadership is not a big issue. The two leaders could become the prime minister in turn. Regarding party leadership, we are discussing every available option.
It is said some UML leaders have been rigid against unification process in recent times. Is that the case?
Like I said, unification process is not complicated as reported. None of the leaders have deviated from this mission. But it is time to reach a decisive conclusion, which will happen soon.
Visit of Indian External Minister Sushma Swaraj raised a lot of speculations.
It’s clear; she came to meet a friend (Oli). We don’t need to read too much into this. I am aware of the media debate regarding whether her concern was to stop Nepal from becoming close to one country over another. For Nepal, both China and India are best friends. We should not maintain relation with these countries in such way that makes one of them unnecessarily suspicious about our motive. In other words, we should not be ‘pro-China’ or ‘pro-India.’ We should be ‘pro-Nepal.’ We do not have ill intention towards any country. And we expect reciprocity in this regard. Nepal needs support from both China and India.