A critique of Rodrik’s proposal for “smart” globalization

“Who needs the nation state?”, asks Harvard University Professor Dani Rodrik in a new paper. He concludes: We all do. His argument is that globalization’s ills stem from the “imbalance between the global nature of markets and the domestic nature of the rules that govern them”, and global governance is neither feasible nor desirable because: market-supporting institutions are not unique; there is a heterogeneity of needs and preferences with regard to institutional forms among communities; geographical distance limits the convergence of those needs and preferences; and experimentation and competition among diverse institutional forms is desirable.

He makes quite a compelling case against what he terms hyper-globalization—which considers globalization as an end in itself rather than as a means to prosperity—just as he did in his book The Globalization Paradox, published last year. And it is difficult to contest his conclusion that all of us need the nation state. However, some of the prescriptions he makes for achieving “smart” globalization, in the paper and/or in the book, should be treated with extreme caution. A careful, in-depth analysis and assessment of their possible implications is required, to say the least. Some issues with regard to a few of his prescriptions are briefly discussed below.

He recommends that countries be allowed to uphold national standards in labour markets, finance, taxation and other areas, and to do so by raising barriers at the border if necessary, “when international trade and finance demonstrably threaten domestic practices enjoying democratic support”. In The Globalization Paradox, he proposes that the World Trade Organization (WTO)’s Agreement on Safeguards be expanded in scope and converted into an Agreement on Developmental and Social Safeguards, which would provide members, developed and developing alike, the option of opt-outs from WTO obligations even for reasons other than competitive threat to domestic industry. Rodrik’s proposition is that the raising of barriers at the border to uphold national standards should be deemed legitimate only if “democratic process” has been followed. He even goes as far so to argue that authoritarian regimes must not count on getting the same benefits/preferences in the multilateral trading regime, and that such regimes must meet stricter requirements to exercise opt-outs. The emphasis on a democratic process is to guard against the erection of trade barriers at the behest of vested interests which do not represent the interests, values and preferences of the vast majority of the people in a nation.

The fundamental problem with this prescription is how to determine whether the domestic practices under threat “enjoy democratic support”. Even if one were to accept the notion that none (all) of the decisions of an authoritarian (democratic) regime enjoy democratic support—which itself is highly controversial—there still remains a difficult question: how do you judge a regime to be democratic or otherwise? While few would oppose the proposition that governments should take decisions rooted in the interests of the people, there are no universal principles of democracy; nor are there universally accepted indicators or metrics of democracy. It is one thing to use indicators such as the World Bank's World Governance Indicators, including the voice and accountability indicator, in cross-country growth regression or a gravity equation (to explain bilateral trade flows). But few regimes/governments will accept the use of such indicators to judge the legitimacy of their decisions to impose trade barriers. It is also an open question whether democracy should be measured in terms of outcome or process. Some (with the process in mind) might argue that India has a democratic polity because it has universal suffrage and witnesses periodic elections, while others (with the outcome in mind) might argue that a country plagued by rampant corruption, criminalization of politics, a raging insurgency and separatist movements, and where poverty rates are still high, and hunger and undernourishment rates match those in sub-Saharan Africa cannot be considered to be a democracy—at least a functioning one. Similarly, while some might argue that China cannot be considered as a democracy because it is a one-party state and its citizens cannot voice their opinions as freely as their counterparts in the West can, others might argue that if India can be considered a democracy then surely so can China if only for the simple yet incontrovertible fact that it represents the greatest growth and poverty-reduction success story ever (something admitted even by its rabid critics), and that a nation, which boasts the oldest running civilization in the world, should not be expected to have a domestic system of governance that apes Western political values and systems.

Moreover, even if Rodrik’s proposal were to assess the democratic legitimacy of every decision of a regime/government to exercise opt-outs on  a case-by-case basis instead of judging a regime/government in its entirety as democratic or authoritarian, the operational difficulties of making such assessments, even if the criteria could be agreed upon, would make the proposal, however noble in intent, a pie in the sky. Forget about India or China—imagine conclusively determining whether the protection afforded by the US government to its cotton farmers carries the support of the overwhelming majority of the American people (unless a referendum is held on the issue!).     

Just as standards concerning, say, labour vary across nations, so do ideas of democracy. It is somewhat paradoxical that in attempting to suggest a way to expand and preserve domestic policy space under a multilateral economic system so that nations can uphold their national standards in virtually any area, Rodrik tends to prescribe multilateral harmonization, as it were, of standards in democracy. Moreover, Rodrik’s persistent argument (which can also be found in earlier writings, including the book One Economics Many Recipes) that authoritarian regimes must not count on getting the same benefits/preferences as democratic ones in the multilateral trading regime is an open invitation to trade war or a breakdown of the multilateral trading system. Another issue is that the proposed Agreement on Developmental and Social Safeguards, while prima facie appearing to protect the policy space of developing countries, may in reality have adverse developmental implications for them, particularly the least-developed countries, by making it legal for developed countries to discriminate against imports from countries that do not have, for example, labour standards as their own. That the proposed agreement would also allow poor countries to take border measures to preserve their own national standards would be of poor consolation in the real world of asymmetric political and economic strengths of nations.

 

On proposed think tanks and politicization

• A news report has it that the government plans to establish two think tank organizations to carry out researches and provide inputs to the government on strategic, foreign affairs, governance and economic development. Top incumbent and former bureaucrats have also proposed the creation of six advisory groups on security, foreign policy, governance, infrastructure, economic development and social security.
• The creation of a strategic affairs think tank had been suggested by some patriots way back in the early 1990s but the proposal apparently did not appeal to “democratic” governments as they thought their foreign mentors would not take such an initiative favourably.
• Post-1990, political interference paralyzed existing research centres like CEDA and CNAS such that they are now a pathetic shadow of their former selves. Given this track record, the current caretaker government’s plan to establish two new think tanks raises pointed questions: Will the organizations be independent? Will political interference be the order of the day in these to-be-formed think thanks just as in other public agencies, even if they are autonomous in paper? Will they be yet another recruiting ground for political activists masquerading as researchers and buddhijivis? Such think tanks in other countries, for example in India and Sri Lanka, have considerable autonomy and appear to be staffed by competent people as opposed to political party activists, and have been providing valuable inputs to the government (e.g., in international trade negotiations or national economic policy making).
• The news report also states that the Prime Minister’s Office will maintain a roster of former bureaucrats who will be roped in to conduct studies on policy and governance issues. There is a tendency among ex-bureaucrats in Nepal to speak from all sides of their mouth and assume the moral high ground, spewing out hackneyed suggestions on policy and governance, thinking that all readers and listeners are naïve and do not know about their past omissions and commissions when they were at the helm in Singha Durbar. While it would be unfair to say that there is not a single competent ex-bureaucrat around, the point is that there are too many nincompoops of ex-bureaucrats, who peddle agendas of petty personal, factional, party and, even more dangerously, foreign, interests, and they should not be rewarded for their failings as bureaucrats by offering them consultancies in their post-retirement years with tax payers’ money. Given the track record so far, it is most likely that a Kangressi government will rope in “prajatantrabadi” ex-bureaucrats, a UML government “pragatisheel” ones, and a Maoist government “krantikari” ones. Will strict apolitical criteria be set and adhered to while recruiting consultants, or will the manner in which the super-jumbo economic advisory council of the prime minister was constituted be followed? Will the practice of doling out consultancies, including on economic issues, to people who do not even meet the minimum educational criteria be discontinued (eg, allowing people who do not even have a Master’s degree to write policy papers and provide policy “inputs” – wow)?    
• Will political parties and party-affiliated buddhijivis allow the existing Institute of Foreign Affairs to function autonomously and conduct studies on foreign policy matters? Will they make any effort to restore the past glory of CEDA and CNAS? If not, what is one to expect from the new think tanks except providing jobs to political party activists, intellectitutes and overrated ex-bureaucrats (and we have quite a few of them barking in the popular press)?
• There is only so much that a think tank can do. Assuming that the think tanks are allowed to function without political interference, the question remains whether the government will have the guts to heed the recommendations flowing from the researches, especially those that may ruffle the feathers of foreign patrons. The first order requirement is a political class (whether in or out of government) that takes national interests to heart--not a PM that signs a controversial investment promotion and protection agreement with a neighbour without due consultations at home and has the audacity to say he had taken a "gamble" on such a sensitive issue, not a political class that sees nothing wrong with a criminal export-orientation of hydropower policy in practice.  
• We live in a society where a top-ranking ex-bureaucrat who could not institute a mechanism to prevent salary and allowance from being distributed to “missing” combatants, who had the cheek to say that nowhere in the world are the names of tax evaders (who cheat the government of revenue by producing fake bills) made public, and who is given to defending decisions to make choice hydropower projects export-oriented even as the country is reeling under crippling load-shedding with the childish argument that if there is domestic demand for the electricity generated from such projects the agreements can be easily revised to sell the power to the internal market, is felicitated as if he were the greatest man alive in Nepal. And such people are likely to be calling the shots in the advisory groups and think tanks – help!

How about making Gurkha recruitment inclusive, ‘loktantrik’?

What will be the cost to the economy of halting recruitment of Nepali youths, mostly male, into the British and Indian armies, as planned by the current government? Gurkha remittances have long been dwarfed by the remittances sent by Nepali non-mercenary labourers toiling all over the world. But it has to be admitted that Gurkha recruitment still represents an attractive livelihood opportunity for many. The around 30,000 Nepali servicemen currently in the Indian army and the around 3,800 Nepalis serving in the British army may be remitting about NRs 6 billion annually. The transfer of pensions, as reflected in the current account of the balance-of-payments, are mostly transfers to retired servicemen or their widows numbering probably more than 150,000, and amounted to NRs 29 billion in FY 2010/11. The total transfers attributable to the Gurkha recruitment could be about NRs 35 billion annually (although remittances from British Gurkhas are declining since the British government decided to allow retired Gurkhas and their families to settle in the UK, and are set to fall further as retirees increasingly choose to take up residency in the UK). That’s about 8% percent of current account income in 2010/11 or 14% of "workers' remittances" sent home by non-mercenary workers, more than the current account deficits recorded in 2009/10 and 2010/11. Every year, the British army recruits about 175 Nepali youths, and the Indian army between 2,500-3,000. Amidst acute un/underemployment, being a mercenary in these foreign armies is as much an attractive option for a Nepali youth now as it was when Gurkha recruitment started in the early 19^th century. To this scribe, if the late King Mahendra—the architect of Nepal’s modernization as a sovereign, independent nation state against all external odds, the man who oversaw the removal of foreign military checkposts from Nepali soil—did not deem it imperative to end Gurkha recruitment then (though he must not have liked it), the case for ending it is not any stronger now.   

2. While the long-term goal should be to create enough decent and productive work for Nepalis on their own soil, the Gurkha recruitment is not the most serious of threats to our nationalism at the moment. The Maoists can help revive their severely battered nationalistic credentials by taking action on other more serious issues of national interest, some of which directly featured on or are intimately related to their long-forgotten charter of demands they had submitted to the government of the day before launching their people’s war in 1996. Addressing them would also help make serving in foreign armies less attractive. They include: ending the pro-export bias of hydropower policy in practice so that high-quality and relatively cheap electricity generated from choice hydropower projects, built optimally, is used for domestic consumption and industrialization purpose instead of exporting it at dirt-cheap rates and along with it exporting away all the potential multiplier benefits (without this, industrialization efforts will come a cropper; the industrial policy will be lame); regulating the open border, if not sealing it (there will at least be a record of who comes in and who goes out), to be able to better implement national policies, protect domestic industry if required and control cross-border crime, among others; strictly enforcing the labour law to secure formal sector jobs for Nepali citizens (those who think the 1950 treaty is a boon for Nepal, don’t get agitated at this suggestion; neither party has implemented the treaty in toto; moreover, the labour law has provisions for according priority to Nepali citizens for formal sector jobs, so if you think the provisions should not be there, then openly call for their removal). The act of giving free rein to militant trade unionism and presiding over an unprecedented scale of crime and corruption—which have eaten into the vitals of the economy—but rushing to end Gurkha recruitment by opportunistically appealing to nationalism serves only to strengthen the hands of samparanbaadi intellectitutes out to discredit other, more germane, patriotic calls (such as asking for the country’s hydroelectricity to be first used to meet its huge power deficit before mulling exports) as andho, ugra rastrabaad.

3. Although pushing for a halt to Gurkha recruitment without providing alternative employment opportunities would appear to be sheer irresponsibility, some reforms and precautionary measures in connection with recruitment practices and implications are in order. The government should ask the foreign governments concerned to ensure that the Gurkha recruitment process is inclusive, ending the bigoted practice of racial selection in the hiring of Nepali boys into the two foreign armed forces, particularly one of them (you know which). Indeed, Nepal’s national army, supposed to be in dire need of democratization and constantly told to be “more inclusive”, would beat both the foreign armies’ Gurkha recruitment practice hands down in terms of ethnic inclusiveness. The point is that all Nepali ethnic groups should have a fair chance of making it to the two foreign armies. The practice of according preference to certain ethnic groups because of the “history” of valour exhibited by their forefathers should end forthwith. That would be a great service to all those un/underemployed deserving youths interested to join the foreign armies but are at a severe disadvantage because of their ethnicity. But isn’t tradition something? May be; in that case, what would your reaction be if the communities that rule the roost in the Nepali Army were to insist on maintaining the status quo on the ground of tradition—after all, their forefathers had made a yeoman’s contribution to the establishment and strengthening of the national army instrumental to the nation's unification, and they too would love to rest on their ancestral laurels?  The current Gurkha recruitment process does not befit a country that is considered to be the mother of parliament or a country that prides itself on being the world’s largest (read most populous) electoral (if not functioning) democracy. Do they subscribe to the essence of the late KP Bhattarai's response more than two decades ago as prime minister when confronted during his India visit with the question as to why Nepal’s army did not recruit enough members of a certain community?

4. Are there any takers in the mainstream media, mostly manned by political party activists? Most unlikely. They are most likely to criticize the government’s decision to pursue a halt to Gurkha recruitment, but are most unlikely to even entertain the argument made here regarding the recruitment process. They would not want to rub foreign shoulders the wrong way, for all their superficial moral grandstanding. But then what can you expect from, for example, a bunch of Kangressi hacks who carried a front-page story asking if the late Bhattarai had gone senile simply because he would not subscribe to their partisan political views on another issue, but who conveniently forgot that (mis)judgment of theirs when penning eulogies to him only six years later. [The apparent revision to their judgment would not have come about were it not for their dear party’s trouncing in the constituent assembly polls, which produced results that rubbished the predictions of armchair analysts wearing political blinkers].

5. The Nepal government would also do well to monitor, and check, moves to use ex-servicemen for advancing ulterior extraneous interests and agendas, ranging from spreading the Word to fomenting ethnic discord to outright intelligence gathering. Setting up units for dispensing pensions and welfare benefits in strategic and sensitive locations is one way the Gurkha connection is being leveraged for the grinding of vested foreign interest axes.

6. Let’s not forget that Gurkha recruitment is not aid or charity; benefits flow both ways: Nepalis are getting paid for their hard, often risky, work entailed in serving in foreign armies where the risks they face are systematically higher than what their fellow soldiers of host-country nationality ever face. Theoretically, the foreign governments concerned have the alternative of taking in recruits from the families of ex-servicemen who have domiciled on British or Indian soil if the Nepal government actually bans recruitment from its soil. But let’s not forget that they would be loath to forego a well-established channel of influence with so many possibilities—for the same investment! The Gurkha connection is likely to remain.

From Maoism to Capitalism?

(My article published in  New Spotlight, December 9-22, 2011).

Faced with a choice between a package that may or may not impart him/her with employable skills, that too in a situation of massive un/underemployment in the country (and getting a job means having to work) and a cash reward of at least Rs 500,000 for, well, doing nothing, a rational person is likely to opt for the latter without second thoughts.

And the prediction that yours humbly made in a blog post has come true. During the Maoist combatant categorization process—pursuant to the 1 November seven-point deal between the political parties controlling Nepal—the majority of the combatants in cantonments are reported to have opted for integration into the national army, with those opting for retirement with cash a close second, and only a negligible number preferring the non-cash rehab package. While a maximum of 6,500 of interested combatants could be integrated into a separate directorate of the Nepal Army, the rest had to choose between a package of education, training and vocational opportunity (with the cost ranging from Rs 600,000 to Rs 900,000), and voluntary retirement with cash of Rs 500,000 to Rs 800,000. With the latest re-verification exercise putting the total number of combatants at 16,508—2,795 less than that verified by UNMIN—at least 10,008 combatants will have to be “compensated”. (At least because not all of those who want to join the national army may meet the minimum eligibility criteria, and the Maoists are insisting “late-comers” be considered too).

The cost to the treasury of the direct cash payment would be at least Rs 6.5 billion, taking Rs 650,000 as an average payment per combatant. On the higher side, it would run up to Rs 8 billion. Of course, the combatants who have opted for the cash reward are unlikely to get the full amount they are entitled to: they will have to part with a portion of it as a levy to their beloved party (50 percent going by media reports). One need not be surprised if most of them splurge the money on gambling and drinking or other consumptive activities, or simply spend it to meet basic needs. The possibility of turning to crime when the cash runs out cannot be ruled out. Quite a few may use the cash to get an overseas job, but not without the irony that combatants of a Maoist party that officially is in favour of creating employment opportunities for Nepalis in their homeland and that heads the government have to seek work on foreign shores with money from the state’s coffers.

Instead of doling out cash, it would have been sensible to provide only the option of productive work to those not joining the army. This would not only help the combatants themselves and their families in the long run, but also contribute to the economy, not least by adding to the GDP and opening up further employment opportunities. How? Here are a few ideas but surely party-affiliated buddhijivis, members of the National Planning Commission and the PM’s team of economic advisors, among others, should be able to come up with even better ones (or else hang up their boots)—vocational training, internship, subsidized credit and other incentives for setting up own business (cottage and small enterprises), employment in infrastructure projects, some sort of employment guarantee, etc.

Perhaps the Maoists, in yet another volte face, are now seeing wisdom, albeit perversely, in the neoliberal preference for direct cash transfers, supposedly least market distorting, as a support measure for “vulnerable” groups. By this logic, the combatants should be free to choose the form of rehabilitation; guiding them into economic activities will interfere with the free workings of the market. Marx displaced by Friedman in a revolutionary party? Dr Sahib leaders of Nepali Congress happy now? And the slogan of creating a swadheen economy can always be reinterpreted as per the demands of the dialectics of opportunism, right, comrades?

Notwithstanding all these, we are assuming that all the re-verified combatants in the cantonments were also combatants during the Maoist insurgency, and that integrating them into the Nepal Army or rehabilitating them will lead to peace. That’s a heroic assumption, although they have been “verified” as such. That a significant number of core fighters have assumed new avatars in other wings of the party has been a robust charge leveled by Nepali Congressites, among others. 

Then there is the issue of justice, but raising it runs the risk of being accused of attempting to throw a spanner in the works of a “historic” peace accord. Still, a cabbie—a janta ko chhoro to the core—confided to this scribe the morning after the deal: doesn’t the deal disincentivize earning a living through legal and peaceful means?

Parking Rs 500,000—the minimum amount of “reward”—in a fixed deposit account in a financial institution in Kathmandu fetching an interest of at least 12 percent will give the recipient of the largesse a steady flow of income of Rs 57,000 (after deducting 5% tax on the interest) per year, or Rs 4,750 per month, in addition to the capital of half a million rupees. From Maoists to Capitalists overnight – quite a transition! Moreover, that income is nearly thrice the per capita average national poverty line (the latest one used by the Central Bureau of Statistics for Nepal Living Standard Survey (NLSS) III, 2010/11) and also more than the poverty line for urban Kathmandu. It is also more than the per capita nominal Gross National Income for the year 2010/11. By the way, according to NLSS III, the poverty incidence in urban Kathmandu is 11.147 percent and that in the whole country 25 percent. With Rs 8 billion, at least 55 MW of hydroelectricity can be generated.

Nepal’s donors welcomed the deal. How about footing the entire bill in grant form, without diverting aid from other sectors, and/or providing employment to ex-combatants on donor-country soil in the true spirit of solidarity, humanity, compassion and all that jazz?  

BIPPA Blues

(My article published in New Spotlight, November 11-24, 2011)

The brouhaha surrounding the Bilateral Investment Promotion and Protection Agreement (BIPPA) between Nepal and India signed during Prime Minister Baburam Bhattarai’s October visit to India presented a spectacle true to the form of present-day Nepal. From a PhD-SLC topper head of government apparently failing to appreciate the substance and implications of the pact, to a lack of open debate before its signature, to coverage by the mainstream media in a consent-manufacturing mode bent on projecting the pact as the sine qua non for attracting Indian investment.

The national treatment and most-favoured-nation (MFN) treatment provisions in the BIPPA reinforce preferential treatment for Indian investors, who in practice are already treated on a par with domestic investors and enjoy more rights than do other foreign investors, thanks to the 1950 Treaty. A treaty that the Maoists, with “intellectual” fire-power from Bhattarai, once upon a time wanted to be scrapped but now are willing to accept in an adjusted and updated form. Nepal’s strategy should be to treat all foreign investors alike, regardless of their nationality.

The provision on compensation for losses (Article 6) requires each government to compensate the investors from the other country for any losses they incur due to war, state of emergency, insurrection or riots on a national and MFN treatment basis. This is, for practical purposes, more than national treatment, unless the Nepal government decides to compensate domestic investors similarly. Replacing “civil disturbances” with “riots” was trumpeted—with cheerleaders in the media—as a sterling achievement of the Nepali side, when in fact it does not require a brilliant lawyer to prove the equivalence of the two in many a circumstance, during international arbitration. A government of a least-developed country in perennial transition that is unable to maintain law and order has the cheek to pledge compensation to foreign investors for losses from its absence!

Media reports had it that the BIPPA would allay India’s concerns about the disruption of Indian investment projects, including the Upper Karnali hydropower project. The pact will not be able to address concerns related to disruption due to, say, load shedding, militant labour unionism, strikes, shutdowns, extortion etc, which are major concerns of all investors, domestic and foreign. Some “leading” dailies reported that whether to provide compensation for losses arising from incidents like strikes and shutdowns will be decided by a joint industrial committee comprising both Indian and Nepali businesspeople. The biased reportage was riddled with contradictions: the pact will encourage Indian investment by addressing security concerns; to show that Nepal has not given away much through the agreement, it is emphasized that compensation is confined to losses arising from war, emergency, insurrection and riots (thereby contradicting the hype about the agreement being key to attracting Indian investment into Nepal); and then it is let on that a committee shall decide on compensation for other types of losses. Since the agreement makes no mention of such a committee, what led the media to refer to it? Whose wishes were they articulating? Was there a letter of exchange to that effect?

Worst of all, the BIPPA could entrench a patently anti-development policy. Choice hydropower projects have been awarded to foreign investors to be built as export-oriented ventures even as the country is starved for electricity. There have been protests, including by a faction of the Maoists, against such projects. The means of protests have been violent at times, no doubt regrettable. But the policy that prompted such protests is also condemnable. The provision of compensation in the BIPPA gives the government a veneer of legitimacy in the form of “international obligation” to use force against such protests and/or use the state treasury to compensate foreign investors affected by the protests although such investment is not in the national interest in the first place. It may not be difficult to interpret the protests and associated vandalism as rioting. Or perhaps it is the putative joint committee that is to decide on compensation should they not be interpreted as rioting. The justification that the BIPPA will help bridge the huge trade deficit with India, which stood at 200.87 billion rupees in the first 11 months of FY 2010/11, is absurd. The immediate focus should be on channelizing all potential domestic resources, including remittances, into the productive, tradable (export and import-substituting) sector. Where foreign investment is essential (e.g., huge hydropower projects) it must be guided into priority sectors and uses (e.g., electricity for domestic use, not exporting away the multiplier benefits). Besides restoring law and order, developing hydropower for domestic use (load shedding is cited as the biggest constraint in business climate surveys), addressing other supply-side constraints, securing the removal of market access barriers faced in India and elsewhere, and obtaining improved transit facility are critical to increasing exports to India and beyond.

What is the PM’s position on the export-orientation of the hydropower policy? The media otherwise critical of the Maoists portray him as a pragmatist. There is a thin line between pragmatism and opportunism. Once upon a time he used to write fiery articles about how Nepal was forced into underdevelopment courtesy of the core-periphery relationship with its neighbour. Can he explain how exporting cheap hydropower can spur economic development in Nepal, which in his considered view is essential to strengthen nationalism? He reportedly broke down when visiting his alma mater, JNU, and said that he is what he is because of JNU, where he learnt Marxism. Does JNU Marxism mean keeping one’s own country underdeveloped while allowing its resources to be exploited by its neighbour—if the student happens to be a Nepali? Did he miss an opportunity to tell leftist gurus at JNU and CPI(M) comrades not to demonstrate “hollow” nationalism by protesting against Indian trade liberalization moves, including its free trade agreement with the European Union?  It seems that the Marxism taught at JNU is to be interpreted differently for different folks—one version (pragmatist) for Nepal and the other for serving the interests of its motherland.

Rehab package: Turning Maoists into Capitalists?

So as many as 6,500 of the Maoist combatants in cantonments may be integrated into a separate directorate of the Nepal Army, while the rest will be rehabilitated, according to the seven-point deal reached between UCPN(Maoist), Nepali Congress, CPN(UML) and major Madhesi parties. Assuming that there are still 19,000 UN-verified combatants and 6,500 opt for integration into the security force, 12,500 combatants will have to be rehabilitated. The deal provides for two avenues of rehabilitation that the combatants can choose between: a package of education, training and vocational opportunity (with the cost ranging from Rs 600,000 to Rs 900,000); or direct cash payment of Rs 500,000 to Rs 800,000 (to be made in two tranches in two fiscal years).

Faced with a choice between a package that may or may not impart them with employable skills, that too in a situation of massive un/underemployment in the country (and getting a job means having to work) and a cash reward of at least Rs 500,000 for, well, doing nothing, a rational person, in general, is most likely to opt for the latter without second thoughts. The more industrious among them may use the cash to get a job abroad (Middle East or Malaysia). 

The cost to the treasury of the direct cash payment would be at least Rs 6.25 billion, or, taking Rs 650,000 as an average payment per combatant, Rs 8.125 billion. (On the higher side, it would run up to Rs 10 billion). Of course, the combatants who opt for the cash reward are unlikely to get the full amount they are entitled to: they will have to part with a portion of it as a levy to their beloved party. One need not be surprised if most of them splurge the money on gambling and drinking or other consumptive activities, or simply spend it to meet basic needs. The possibility of turning to crime when the cash runs out cannot be ruled out. It is also likely, as mentioned above, that quite a few will use the cash to get a job abroad, but not without the irony that combatants of a Maoist party that officially is in favour of creating employment opportunities for Nepalis in their homeland and that heads the government have to seek work on foreign shores with money from the state’s coffers!

Instead of doling out cash, it would have been sensible to provide only the option of productive work to those who are to be “rehabilitated”. This would not only help the combatants themselves and their families in the long run, but also contribute to the economy, not least by adding to the GDP and opening up further employment opportunities. How? Here are a few ideas but surely party-affiliated buddhijivis, members of the National Planning Commission and the PM’s team of economic advisors, among others, should be able to come up with even better ones (or else hang up their boots)—vocational training, internship, subsidized credit and other incentives for setting up own business (cottage and small enterprises), employment in infrastructure projects, some sort of employment guarantee, etc.

Perhaps the Maoists, in yet another volte face, are now seeing wisdom, albeit perversely, in the neoliberal preference for direct cash transfers, supposedly least market distorting, as a support measure for “vulnerable” groups. By this logic, the combatants should be free to choose the form of rehabilitation; guiding them into economic activities will interfere with the free workings of the market. Marx displaced by Friedman in a revolutionary party? Dr Sab leaders of Nepali Congress happy now? And the slogan of creating a swadheen economy can always be reinterpreted as per the demands of the dialectics of opportunism, right, comrades?

Notwithstanding all these, we are assuming that the 19,000 or so combatants in the cantonments were also combatants during the Maoist insurgency, and that integrating them into the Nepal Army or rehabilitating them will lead to peace. That’s a heroic assumption, although they have been “verified” as such. That a significant number of core fighters have assumed new avatars in other wings of the party has been a robust charge leveled by Nepali Congressites, among others. 

Then there is the issue of justice, but raising it runs the risk of being accused of attempting to throw a spanner in the works of a “historic” peace accord. Still, a cabbie—a janta ko chhoro to the core—confided to this scribe this morning: doesn’t the deal disincentivize earning a living through legal and peaceful means.

Parking Rs 500,000—the minimum amount of “reward”—in a fixed deposit account in a financial institution in Kathmandu fetching an interest of at least 10 percent will give the recipient of the largesse a steady flow of income of Rs 47,500 (after deducting 5% tax on the interest) per year, or Rs 4,000 per month, in addition to the capital of half a million rupees. From Maoists to Capitalists overnight – quite a transition! Moreover, that income is 2.5 times the per capita average national poverty line (the latest one used by the Central Bureau of Statistics for Nepal Living Standard Survey (NLSS) III, 2010/11) and also more than the poverty line for urban Kathmandu. It is also more than the per capita nominal Gross National Income for the year 2010/11. By the way, according to NLSS III, the poverty incidence in urban Kathmandu is 11.147 percent and that in the whole country 25 percent. With Rs 8 billion, at least 55 MW of hydroelectricity can be generated.

Donor countries are welcoming the deal. How about footing the entire bill in grant form, without diverting aid from other sectors, and/or providing employment to ex-combatants on donor-country soil in the true spirit of solidarity, humanity, compassion and all that jazz?  

More on BIPPA and the media

A section of the Nepali media, including Nagarik daily, had reported that under Nepal-India BIPPA, compensation for losses arising from incidents other than war, national emergency, riots and insurrection--e.g., labour strikes and shutdowns--would be decided by a Nepal-India joint business/industrial committee. This scribe went through the BIPPA text posted on the website of the Ministry of Industry of Government of Nepal only to find no such provision. It is good that such a provision is not there. But this also ridicules the hoopla created by the media about how the BIPPA, by addressing India's security concern for the investment of its nationals in Nepal, will trigger a bounty of investment from south of the border and thereby help reduce our trade deficit with India, which stood at 200.87 billion rupees in the first 11 months of FY 2010/11 as per Nepal Rastra Bank. Unless one can interpret strikes and shutdowns and the locking up of managers as "riots". Or unless there is a letter of exchange to that effect.
Is this just poor reporting or something more sinister?
No attention has been given to the provision related to expropriation, which also includes indirect expropriation, in Article V.
One thing that one can infer from the brouhaha over the BIPPA is this: India, Nepal government, the media all believe that the security situation of New Nepal is going to worsen further in the days to come; insurgency, rioting, state of emergency, civil war are going to be the order of the day.
Let the fox guard the hen pen.