Dr. Bimal Koirala looks back on his experience in implementing economic reforms as the Secretary and Chief Secretary of His Majesty’s Government. He retired from the civil service a few months ago and is at present the Chairman of the Management Development Centre of the Management Association of Nepal. Excerpts:

What were the problems behind the slowdown in economic reforms in Nepal?

Bringing economic reforms is not easy. Strong political commitment assumes the key role. Bringing reforms means achieving a change from the existing state. But our tendency has been not to opt for change so as to be safe from risks. If you opt for reforms, you have to wait for results from the reforms and meanwhile you have to face the protests. That is why you don’t get the required support for the reforms. Technocrats or bureaucrats have to create ‘political space’ for politicians to go ahead with the reforms. My experience is that it takes time to create such a political space. This is why even the most urgent reforms are not being implemented fast enough.

The period when you were the Chief Secretary of the government was politically very cataclysmic. How do you recall your experience in guiding the implementation of the economic reforms programme in Nepal during those crucial days?

The reforms started in 1990, which I regard as the first generation reforms, were designed to bring about macro-economic stability. It focused on eliminating the unnecessary restrictions seen in our economy and creating ‘fiscal space’ so as to address the problems such as poverty. So, it provoked opposition only from the policy makers’ level.

The second-generation reforms that we initiated in 2000 are more about institutional reforms. Such reforms by definition affect the individual; hence it demands managing an individual’s resistance to reforms. If politics cannot grant the reformers enough power to face that resistance, the reform process becomes weak. I had the opportunity to work under many finance ministers committed to reforms. They had their own good vision. Backed by their committed approach, it was easy for us to create space for the same and we were able to go about addressing the risks associated with such reforms.

However, in several instances, the handling of reforms and the associated risks was weak due to the lack of political commitment. This delayed the reforms. For example, the state-owned corporations have been adding burden to the national coffers. Though it is realised by all that the government should be free from the responsibility of running public enterprises, various interest groups are opposing any progress in this direction. Consequently, it took more time to manage those oppositions. And as the political gut needed for this was not expressed clearly, various economic reforms felt necessary were slowed down.

Look at the issue of decentralisation which requires the centre to share the authority with the districts. This is affected by the silent agenda of the centre to retain as much power as possible. The centre fears that if all the powers are shared, it will have to remain powerless.

Though it is realised that the bureaucracy should be made accountable, the steps needed to increase the accountability are not taken due to fear among the bureaucrats that this will limit their available space to manoeuvre. Therefore, institutional reforms too have taken a long time to materialise.

Would you mind sharing some examples from your own experience?

In order to make the civil servants accountable, we came to the conclusion that the role and duties of the government employees and the politically appointed leaders should be clearly defined. With this, it will be easier for the political leaders to measure the job performance of the individual bureaucrat against different performance indicators. But such delineation of duty couldn’t be effected due to some trivial issues like employee transfer. This reform has not been effected till now. If you give a target to the bureaucrat to be achieved in a certain time, you should also give him some authority on the human resource that he uses to achieve the target.

The logic is that a bureaucrat should be held accountable for failure or success of the work. Those who deviate from their work should be punished. If a minister and a secretary blame each other for the failure of a work, the administration should not be held accountable. The person should be held accountable.

I made such a plea to the government about three years ago, but nothing has progressed so far towards that direction. There are plenty of other initiatives like this that have lost track due to different vested interests.

It is also said that the major hurdle in implementing reforms is the government bureaucracy while the political leadership is committed to the reforms. How do you comment?

Political leadership initiates the reform programmes and the government employees take the responsibility of the management and implementation. There are many examples of delay in reforms due to the political leadership and the employees. When employees do not carry out reforms promptly and the people do not get the desired result in time, people develop an aversion towards such reforms agenda. The political leadership should take the ultimate accountability for this. It is also true that in many cases, employees are passive towards implementing reforms.

In several instances, bureaucrats have disowned the economic policies and the reforms programmes. They try to stay away from implementing the reforms reasoning that these programmes are initiated by the politicians and donor-driven. Moreover, we have not trained employees on how they should go about the reforms and what their responsibilities are. Only a small proportion of the employees are committed to reforms. Most of them want to rule rather than to serve.

However, though both the political leadership and bureaucracy are responsible for delayed reforms, more important hurdle is the lack of the political commitment.

Another problem has been that the spirit of reforms has not been understood well by the bureaucrats. Every ministry should lose a certain extent of power in order to fully implement decentralisation, but no one is ready to do this. When every secretary is hell bent on retaining his empire, political leadership should come out strongly against this tendency. I had started amending 16 laws and regulations that were found as posing hurdles in implementing decentralisation, but they are still not changed.

What is the major problem with the bureaucracy in this regard? Why couldn’t bureaucracy remove these hurdles?

First of all, it is necessary to specify the job responsibilities of the civil servants. Today a peon serving in Pyuthan needs to come to Kathmandu if he wants a transfer. With this type of centralised approach, it is not possible to deliver services properly. The elected local people’s representatives that are the front-line agencies for service delivery should be given enough powers. But today we don’t have elected people’s representatives in the village/municipality level. Moreover, they are without any authority. So they have to refer to the Secretary even for trivial matters.

Secondly, there is the need for entirely reorienting the civil service. The existing attitude of the civil service is that they are rulers. This has to be changed. The distance between the state and the citizens should be narrowed down by taking help from the civil society. The government should only act as the facilitator and providing the bare minimum services such as judiciary and security of the life and property of the people. The incentive system should be designed appropriately to encourage this.

One very high profile reform agenda during your tenure as the Finance Secretary and Chief Secretary was the financial sector reform. One crucial component of this reform was action against the wilful defaulters. But the central bank and the government failed miserably in this. Why?

It is the lack of political will. As the financial sector was in a very poor state we initiated such reforms. The question we asked ourselves before designing the reform was on whose behalf we should work: thousands of depositors who are losing their money or those few who are not paying their loans? It was agreed that the government’s responsibility was towards the depositors. And the reforms were designed accordingly.

But we couldn’t be bold enough in its implementation. The political leadership couldn’t dare take actions against wilful defaulters nor could it create a situation that would encourage the repayment of loans. Due to this the reforms could not be carried to the logical conclusion.

The financial sector reforms were started with a pious objective. The two state-owned banks were already in ruins. The government could have pumped in more money into them and reform. But it was neither practical nor a healthy thing to do. It could not pump in money because the government had no capacity to invest such a huge amount of money. More importantly, such an investment would rather mean supporting the defaulters. Moreover, it was necessary to break the conventional operation model of these banks to make them competitive in the present context. Though the operational of these banks is improving, there is still a lot to do about past wrongdoings. Therefore, the results have not been as expected, but I am optimistic. However, if we remain shaky as we are now, there will be less to expect from the investment on reforms.

Reforms in Nepal are perceived to be donor-driven. What is the truth?

I don’t agree that all reforms activities are donor-driven. It is also true that had we started the reforms on time, the donors wouldn’t have asked us to go for reforms. However, it is to be understood that there cannot be reforms by careless disbursement of money. So, when we ask for money to be used for these areas where we have not been careful, the donors will put conditions on how we should spend that money.

We opted for decentralisation not because the donors asked us to do so, but because the elected representatives at the lower levels demanded it. Also the civil service reforms were initiated by us, but it did not go ahead due to various vested interests and now the donors are asking us to go ahead with the same reforms. Likewise, we have responded to the civil society’s appeal and started the reforms for good governance. Yes, it is the weakness on the government’s part not to have publicised such policies and results of our own achievement. Here again the political leadership is to blame. Our failure to reform gives the space to the donors to dictate the policies to us. So, this is how reforms get donor-driven.

We should also understand that if we accept the suggestions of the donors we have to be responsible for the results from the implementation of such suggestions. Reforming NOC was initially our own agenda, and not that of the donors. But we did not go ahead with it, and later the donors started asking for the same and we also started listening to them. It implies that we do not own the reforms or we are not concerned about the reforms. Please note that the donors didn’t come to help us out of their own interest. We asked them to come and help us. And it is good that they have agreed to help. They have given us a blank cheque for funding poverty alleviation programmes. We can use this fund for the purpose we find appropriate, but we are not able to utilise that money wisely. So, we are letting them question our performance.

How is the situation now?

There is no option for the nation than to go ahead with the reforms. And we shouldn’t delay. Our financial state is in ruins. General expenses have increased dramatically so that the government may have to take loans to pay salaries. Security expenses have gone up alarmingly. To come out of this quagmire, we have to have reforms. The more we delay the formidable the challenges become.