By Lok Nath Bhusal
The overriding objective of development efforts in Nepal is poverty alleviation. The Tenth Plan (2002-2007) is a manifestation of Poverty Reduction Strategy Paper (PRSP), which is the government’s main medium-term strategic roadmap for tackling poverty. This blueprint is a major substantive policy statement to integrate all development activities towards reducing the population below the poverty line from 38 percent at the beginning of the plan period to 30 percent by the end of the plan, and to further reduce the poverty ratio to 10 percent in about fifteen years’ time. Built upon the participative framework, PRSP is a comprehensive policy statement processed out from the preferences of various stakeholders. At its best, it is intended to reshape our conventional wisdom about fighting the causes of destitution in a more systematic way. The plan has unveiled a poverty reduction strategy based on four strong pillars: high, sustained and broad-based economic growth, social sector and rural infrastructure development with emphasis on human development, targeted program with emphasis on social inclusion, and improved governance. A closer look at these four pillars suggests that we are trying to realize an environmentally sound and market-led prosperity with a renewed government intervention for the provision of public goods and social security with public sector managerialism.
In line with the mainstream economic convention, our approach of allowing private sector to lead the economic activities falls under pillar no. one though state intervention is desirable if market fails to produce efficient outcome. This pillar aims at addressing the income poverty, poverty arising from low income. This is consistent with the hypothesis that market is efficient for the provision of private goods provided competition exists in the marketplace. PRSP advocates an energetic private sector that is capable enough to row the economy. It is common classic and neo-classic economic tradition that relative to government, private sector is more prudent and parsimonious at capital accumulation, which is the engine of growth at the initial stage of economic development. This tendency has been observed in today’s advanced economies at their initial stages of development. Realizing this empirical evidence from the advanced economies, PRSP assigns a dynamic role to market for the operation of economic activities both in the traditional and modern sectors of the economy. The basic areas of operation under this pillar are income generating activities, agriculture, irrigation, forestry, land, water, micro-finance as well as vital areas like trade, infrastructure development and environmental protection. Privatization, liberalization of government regulations and restriction such as trade, and other deregulating measures combined with various capitalization policies are some of the explicit efforts made in this regard. As a result, today’s fast-moving marketplace is rapidly taking market share away from public organizations, even from public monopolies in the past. Nevertheless, we are demanding state regulation by putting the word sustained, which implies conservation of environment, a public good. As market ignores the social cost of pollution, its production or consumption tends to be socially inefficient. To equalize marginal cost and marginal benefit, taxation is essential in case of negative externality and subsidy is needed in case of positive externality. Furthermore, PRSP puts its emphasis on growth-enhancing government regulation to offset monopolistic power, destructive lobbying, cut-throat competition, institutional rent seeking, and ‘rich-win and poor-loose’/inequity in the marketplace; economic system can only be revitalized if competition forces are structured and managed very well.
Under the prevailing capacity of the market, state has to shoulder the responsibility of developing social sector and rural infrastructure; pillar no. two, which aims at providing basic services and amenities for improving the quality of life. Although PRSP urges for the involvement of private sector wherever feasible in these vital areas, market, owing to its profit motive, is reluctant to make investment. Also, since the intervention in these areas largely falls under the public goods domain, provision of education, training, health care, nutrition and reliable public information, as the major components for social sector development, is considered to be the state obligation. The economic rationale for this is simply the need of capable human recourses as the economy is set on track- the contribution of factor productivity on national income growth increases than that of conventional inputs as the economy progresses towards advance stages of development. Moreover, physical infrastructure especially in the rural areas has to be established by the government, and its justification is the hypothesis that provision of public goods is necessary for the efficient market operation. A common instance can be the emergence of land market after the state establishes a transportation network. Though state intervention seems to be the only option in the absence of market, there exists a very big room for partnership with civil society organizations (I/NGO) and even with the private sector provided state is cleaver enough at making breakthroughs in terms of productive policy measures and new managerial initiatives.
Mainstreaming the groups- women, dalit, marginalized and people from the remote areas- which could not be included in the development process in the past are supposed to be included through targeted programs under the third pillar of the PRSP. This pillar is built upon the hypothesis that each citizen has to be provided with an equal and equitable environment in order to develop his/her latent human potentialities for creating a desegregated society in which every member is able to make informed choices. As inequality of opportunities and exclusion from socio-economic and political processes, which result into poverty, often disrupt socio-economic stability, state must act both as an aggressive provider and a facilitator in breaking this vicious circle. Concretely, PRSP emphasizes on programs for social inclusion and economic empowerment through various distributive policy instruments targeted to hard-core poor, asset-less, women and disadvantaged. The main thrust of this pillar is to bring the excluded groups into mainstream of development through targeted programs for their upliftment. A special type of program such as ‘security and development program’ in the conflict affected areas is an instance to this end. Here, government intervention is most desirable as a provider despite the heavy involvement of vibrant civil society organizations, including the I/NGOs, which are considered to be better equipped in building up the capacity, skills and competence of poor and excluded people. Indeed, PRSP has provided a wide space to civil society organizations for carrying out various people centered development works by addressing issues such as social exclusion, poor governance, infrastructure deficiency, social sector development, conflict management, peace building and so forth in partnership with local autonomous bodies. Obviously, these interventions would result into the creation of more egalitarian Nepal.
The 4th pillar of the PRSP advocates for enhancing new managerial initiatives within the whole governance system with a noble objective of reinventing our government; ensuring good governance, which is the most vital for the success of all other three pillars. In an era of value for money, competitiveness, change, and innovation for efficiency and effectiveness, PRSP emphasizes the entire government structures, systems and processes to be reengineered through various complementary reform agenda. Theoretically, big bang reforms are considered to be more productive and efficient compared to marginal changes if public managers and policy makers deserve sufficient rationality, having perfect knowledge of causes and consequences of an operation within one’s jurisdiction. Unlike the Weberian bureaucratic model, PRSP recognizes the deficiency of complete rationality in our public bureaucracy, and focuses on the incremental changes in a number of public sector operations. PRSP urges the public institutions to strive constantly to improve their performance. The most fundamental one is to energize and revitalize bureaucratic ingenuity to match the private sector management which operates based on the marginal analysis – at the optimum point marginal cost always equals to marginal revenue. PRSP advocates for transforming our huge, rule-driven bureaucratic monster with inertia, snail’s pace, and monumental waste to smaller, efficient, effective, and mission-driven organizations having promptness, professionalism, innovation, flexibility, and frugality in their service delivery. Control of corruption and irregularities through enhancing the institutional capacity of the anticorruption watchdogs such as CIIA and National Vigilance Center, promoting mechanism to ensure accountability and transparency through Citizen Charter, public audit etc. are additional measures intended towards ensuring credibility of the government. Fiscal and financial reforms are devised for guaranteeing fiscal discipline and value for money, and decentralization and local autonomy has been coined as the major instrument for popular participation. Essentially, all these are the determining factors for good governance.
To conclude, form the closer look at our PRSP policy statement, it appears that our policy document clearly captures all strategic areas for poverty reduction, an overarching objective to be achieved by appropriately combining the efforts of state, market and community. Overall policy works towards good governance, provision of public goods and intervention where market fails are the major areas of government’s involvement. Supply of both private and public goods wherever possible under broad public policy framework constitutes the role of market. Basically, the mushrooming civil society sector as a result of liberalization policy in the early 1990s has been operating in those areas where both state and market largely remain absent. However, it also operates in partnership with state and market in a number of circumstances; they perform both supplementary and complementary role. It must be recognized that I/NGOs’ active participation in development has been crucial in the form of their contribution of sizable amount of resources and expertise in some selected development issues.
Under the four strategic pillars, PRSP, as a substantive public policy statement, consigns each of the institution with their clear roles directed towards the challenging but achievable objective of poverty reduction in Nepal. As a result, the latest statistics of Nepal Living Standard Survey has shown significant reduction in poverty head count (31% in 2003-04 compared to 42% in 1995-96), incidence of poverty by 10% on average, and poverty gap. However, Gini coefficient—the statistical measure of inequality of distribution of income and assets across various income groups in the population– has risen from 0.34 to 0.41 point for the same period implying an emergence of an asymmetric society. This situation clearly demands for a foremost state intervention through the intensification of its redistributive policies, which ensures resources to shift from the affluent to the deprived segment of the society. To sum up, effective monitoring and evaluation of the development programs and projects must be accorded due priority for the success of the PRSP.
Affiliated to the National Planning Commission, Bhusal is currently pursuing Graduate Studies under the FASID/GRIPS Joint Graduate Programme, Tokyo, Japan. Please send your comments to [email protected] or [email protected]
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