By P.R. Pradhan
Nepal needs a mixed system, mixed economy
The open market economy has failed in the West. Researchers have appreciated the Chinese and Indian models for the role of state-funded government undertakings in economic development.
In Nepal, the government has decided to reopen closed industries and has already brought the decades-old Hetauda Textile Industry back into operation, while studying the reopening of other closed industries.
Prime Minister Balendra Shah appears keen to reopen these industries, whereas Finance Minister Swornim Wagle, who has been brainwashed by Western institutions, is against state-run industries and businesses.
Nevertheless, the success of China and India in properly operating government undertakings has proved that governments should also engage in business and run industries.
After 1950, Nepal, under the Panchayat System, adopted what was known as a mixed economy and, in the process of industrialization, opened several industries through direct government investment. Many of them operated at a profit. The major achievement was that the nation was able to provide thousands of jobs to Nepalis in these industries. King Mahendra and King Birendra focused on state investment in major industries and businesses. Nepal is still a less-developed nation, and free-market structures have not fully developed. There is also widespread business brokerage. Therefore, strong government intervention in the market is essential.
The present LPG shortage in the market demonstrates that the private sector always runs behind profit and, in the absence of an effective government intervention mechanism, the government faces problems. During the Panchayat days, the Food Corporation and National Trading Limited were established to supply essential goods to local consumers. These agencies worked successfully. However, after the political change in 1990, political parties rampantly misused these institutions, causing them to suffer losses. Other government undertakings faced the same fate. The private sector is always attracted to easy-profit businesses and has therefore diverted investment towards import trade, which secures a minimum 20 percent profit, rather than manufacturing and marketing goods and supplying them to the market. Manufacturing involves many problems, including heavy government taxation, high duties on imported raw materials, political extortion and trade-union disturbances. Therefore, after 1990, the government, on the one hand, began disposing of government undertakings, while the private sector, on the other, focused on import business. Finally, the country today is totally dependent on imports.
Recently, PM Shah held a meeting with some businessmen; however, most of those present appeared to be vested-interest and ill-intentioned businessmen. Talking about Nepal’s genuine business houses—Vaidya’s Organization, Jyoti Group, Amattya Group, Khetan Group, Golchha Organization, Mittal Group, among others—we saw no representation from them. Instead, we saw faces involved in earning profits in Nepal and investing those profits abroad. In fact, some key infrastructure projects, such as the reservoir-model Budhi Gandaki Project, Nijgadh International Airport and Nepal Airlines Corporation, require huge investment that the private sector alone cannot manage. Therefore, a public-private partnership (PPP) model should be developed by granting total autonomy to such projects. Moreover, existing procurement laws are not practicable and should be amended as soon as possible. First of all, the government should create a business-friendly environment by providing discounts and subsidies. Exporting palm oil or nuts after importing them from third countries does not contribute to the national economy in real terms.
It has been proved that the present political system does not work in building the nation; rather, it will further deteriorate the country. Therefore, we should consider adopting a mixed system similar to the Panchayat system (fusion of capitalism and communism focusing on socialism) and introducing a mixed economy focused on promoting industries through joint ventures between the government and the private sector.
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