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Experts discuss economic aspects of the draft constitution

Kathmandu, July 20: Senior economists, representatives of the private sector, bankers and other expert-stakeholders discussed the economic aspects of the draft constitution and their implications for the country. The discussion was organized by South Asia Watch on Trade, Economics and Environment (SAWTEE) to gather experts opinion on Nepal economic system that has been proposed in the draft constitution, and to prepare a set of suggestions to be considered when finalizing the constitution.

Dr Posh Raj Pandey, Chairman, SAWTEE, highlighted the provisions of the draft constitution that have implications to the economy and economic system. He said that the provisions of the constitution should be instrumental for the creation of prosperous and just Nepal. “But the draft—that will write the fate of generations to come—includes several contradictory provisions which may obstruct economic and social transformation as dreamed during the people’s movement ”,  he added. He pointed out that we have not assessed the financial obligations created to the state—as well as in defining governance structure and state apparatus—in ensuring rights, such as that of free health and education, of employment and food security, among others, enshrined in the rights of the citizens. He also questioned whether the cooperatives sector is a part of the private sector or an independent sector as provided in the draft. He opined that it would be unjust to an individual entrepreneur to provide in the constitution a provision to treat cooperatives specially and differently without any regulations, but regulate the private sector. He also cautioned that assigning banks and financial institutions to the federal states would jeopardize the growth and stability of the financial system. He further said that the draft constitution is not coherent with Nepal commitments at the international, regional and bilateral levels, such as providing national treatment to foreign investors.

Mr Pashupati Murarka, President, Federation of Nepalese Chambers of Commerce and Industry (FNCCI), demanded that the ‘socialist’ word used in the draft be termed ‘democratic socialism’ as there is no possibility for Nepal to deviate from the market-led economy. He was of the view that the draft talks about the rights of the labourers, while it is silent on the rights of the private investors. He demanded that the constitution explicitly mention that no industrial property will be nationalized. He further opined that the federal government should have all the rights of imposing indirect taxes and income taxes so that duplication of taxes will be avoided. He further opined that the prerogative rights on the natural resources conferred on the locals proposed by the draft will deter investment in harnessing natural resources.

Dr Shankar Sharma, Former Vice Chair, National Planning Commission (NPC), was of the view that the federal government should make investments on important sectors such as education, health and agriculture for equitable and sustainable development of these sectors that are the backbone of development for any country. He suggested that state obligations on sectors such as health and education should be based on state’s ability to provide such services as directive principles on progressive realization that the state can ensure such services on the basis of economic viability.

Dr Yuba Raj Khatiwada, Former Vice Chair, NPC and Former Governor, Nepal Rastra Bank (NRB), was of the view that the constitution should not be like a ‘plan document’ of the government. He was of the view that when the constitution tries to cover so many topics, the main focus gets diluted. He also pointed out that the issues that should be covered under ‘social security’ have been included in the fundamental rights, which will pose an unlimited responsibility of the state coffers at the cost of capital formation. He opined that the private property should not be nationalized by the government, while the natural resources should be owned by the state. He also suggested that the cooperatives sector, which has emerged as a very important segment of the Nepali economy, particularly in rural areas, should be viewed as one of the pillars of the economy. He further suggested that the new constitution should include air space of Nepal as the country’s territory.

Mr Hari Roka, former Member, Constituent Assembly (CA), shared his experiences—along with Dr Sharma—of writing the draft constitution during the first tenure of the CA. He opined that the state must have bigger obligations to its people and only socialism can ensure welfare state in Nepal. Similarly, MrDeependra Bahadur Kshetry, Former Member, NPC, and Former Governor, NRB, said that socialism is the ultimate stage which can be reached through the development of capitalism that guarantees welfare to the citizens. It is good that the draft encompasses the notion of socialism, he added.

Participants further opined that the draft is at times incoherent and inconsistent, and has also not prioritized sectors for economic development. It was agreed that the draft should be simple and not highly subjective, which could make it impossible to implement. Further, it was agreed that the federal states have been proposed without a proper homework on the overall economic efficiency. Importantly, the participants argued that the institutional mechanisms and provisions envisioned by the draft are too costly for Nepal, which may erode competitiveness and productivity of the economy, and escalate the cost of doing business. They viewed that the draft is silent about the movement of capital and is weak in regards to protecting private sector investments. They also argued that the draft is not able to adequately reflect on issues important for enhanced productivity of land—one of the important economic factors of production.  Importantly, the participants strongly argued the constitution should have provision for proper audit of political parties.

Dr Prithvi Raj Ligal, Former Vice Chair, NPC, speaking as the Chair concluded that the draft should lay the foundation for prosperous Nepal and must not deter the economic development process. At the same time, he argued that the draft constitution should efficiently address the aspirations of the people, more so of the poor and excluded segments of the society.

Altogether 39 experts participated in the discussion.

The suggestions  were submitted to the constituent assembly on 21 July 2015.

Media Coverage

·        Setopati, 21 july 2015

·         The Kathmandu Post,  21 july 2015