Maoist's Hollow Rhetoric of Lifting Nepal from Penury to Prosperity

By Ajay Pradhan | October 20, 2008

Is the governing Communist Party of Nepal - Maoist (CPN-M) in disarray? Mutually incongruous statements have recently come out in the media from the party supremo Prachanda and his second-ranking aide Baburam Bhattarai.

Finance Minister Bhattarai is quoted by the Kathmandu-based Nepali Times on October 13 as saying at a talk program in Washington, DC recently that "our ultimate goal is communism... I don't want to be dishonest." Bhattarai was in the U.S. capital to attend the joint annual meeting of the Board of Governors of the World Bank and the International Monetary Fund.

In the recent weeks, when he was in New Delhi, Bhattarai pleaded for foreign direct investment (FDI) in Nepal. Prime Minister Prachanda himself has, on several different occasions, stated Nepal welcomes foreign capital investment.

While in the U.S., Bhattarai traveled to Cambridge, Massachusetts and gave a talk entitled "Penury to Prosperity: A Talk On Nepal's Economic Future" at Harvard University. He dreams of lifting Nepal from penury to prosperity and yet unabashedly states that his party's political goal is to turn Nepal into a communist state. Not going to happen. Mr. Bhattarai ought to quit day dreaming. How about being pragmatist and moving away from the far left edge of the political spectrum? He can give swaggering political statements about his political objective, but he cannot convince the global community that Nepal, under the Maoists' long-term rigid and ideological agenda of establishing a communist state, would be a safe bet for foreign investment.

Nepal needs three things for economic growth. First, much needed capital for increasing productivity. Nepal can raise this capital, for example, by inviting FDI. Second, foreign markets for Nepali goods and services to grow Nepal's economy and earn the much needed foreign currency to pay for import of goods and services that Nepal does not have. Third, productive workforce. Nepal needs to create a productive workforce rapidly. Foreign investors with lot of capitals will not come to Nepal if Nepal cannot provide trained workers and open up royalty-generating productive resource base. These are the three essential elements for putting the country on a path of economic development. Nepal needs no miracle. If politicians are willing to be pragmatic, then Nepal can achieve success.

One essential precondition for FDI is for any foreign company, whether owned by foreigners or by non-resident Nepalis, to be able to invest in Nepal without the fear of their capital investment ever being nationalized. Nobody will come to invest in Nepal if the country's finance minister blusters in international arena that his party's political goal is turning the country into a communist state where the state could deprive the owner of the company the right to property. The second essential precondition is the ability of the foreign company that establishes an affiliate company in Nepal to exercise control (in terms of percentage ownership and voting rights within the company) over its foreign affiliate.

In order for a country to grow economically, its government has to play less obstructionist role and more of facilitator's role. Hard-nosed socialism, let alone communism, will not afford the free-market confidence that the foreign investors need and want. By any which name, government intervention and ownership of public enterprises is a recipe for killing market competition and efficiency.

What Nepal needs is a free market system with only oversight and enforcement role for the government when market fails. Nothing more. No government ownership of Nepal Oil Corporation. No monopoly ownership of electric utility company. No government ownership of Nepal Telecom. No government ownership of Nepal Airlines. No government ownership of commodity production and supplies distribution enterprises. No more monopolies.

It's a shame that Nepal government more or less has a monopoly ownership and operational controls over these enterprises and yet can't provide the basic supplies and services that people need. It's a shame that Nepal government owns Nepal Oil Corporation, the monopolistic behemoth, whose only job is to import, store and distribute fuel oils, and still runs into massive perennial revenue loss, yet rewards executives and staff with fat bonuses, while fuel scarcity forces consumers to line up for hours to be able to purchase a few liters of gasoline. It's a shame that the government owns the only electric utility in the country and still almost all homes in Kathmandu, the country's capital, have to endure power outage for 4-8 hours a day, 6 days a week. When you are in that kind of situation, you have to wonder if Nepal is yet in the 21st Century.

In all these enterprises and more others, we need less government control and intervention, not more. How do the Maoists like Prachanda and Bhattarai think of growing the country's economy when their political dream is to establish a communist state? We don't have to look much beyond Nepal's neighbors to see that it is by introducing liberal economic policies that both India and China have been able to remove bureaucratic hurdles for transaction and investment and put the countries on a path to achieving double digit growth rates. India liberalized its capital flow policies in trade and investment sectors and is now reaping the benefits in terms of high economic growth rates. China liberalized its economy in 1979 when Deng Xiaoping trashed Mao's stifling communist economic policies all but in name. Soviet empire collapsed in 1992 under the dead-weight of failing communist economic policies.

Maoists' robotic use of rhetoric and propaganda of fighting feudalism in Nepal is getting a little tiring. Nepal must focus on increasing productivity, growing the economy and creating wealth. If you don't have wealth, not any kind of wealth and land redistribution is going to put the country on the path to prosperity.

Gone are the days of closed economy of communism. Nepal needs international partners to help gain economic momentum. This is the era of globalization. Mr. Bhattarai, quit your swagger, be a pragmatist, and stop being a hurdle to taking the country on a road to liberty, human rights, freedom of assembly and speech, multi-party political competition, right to property, and open economy with little government control. It's only with open mind, not closed, that Nepalis will be able to lift the country from penury to prosperity.