Media Watch :
Political economy of disparity to integrity: Nepal’s scenario1

Suraj Raj Kafle

Central Secretary, B.P. Thought Academy


Wearing the leans of political economy, various fences to political-economic disparities in Nepal are explored though secondary scholarly references. Different supporting literatures for the productive politics and economics as an integral part of development are investigated to overcome from these existing challenges. The research is expected to serve as a scholarly reference for politicians, business leaders in the private and the public sector organizations, social workers for making decisions about policymaking and strategy setting for, what should be the political economy of Nepal.


Politics, economics, disparity, integrity, literatures

Definition the term

It is necessary to know about the matter political economy. Let us move to carry

 on its definition that, it is about the basis of political power and its uses for economic ends. In varying combinations, forces and legitimacy are the sources of political power. Power can logically be seen as an intention in itself, so that both force and claims of legitimacy will be used to increase, keep and spread out power. The sole cause for political power is to facilitate on people‘s necessity. Let us look on political science literatures that, politics is all about the study of power and authority, and the exercise of power and authority. Power, in turn, means the ability of an individual or group to achieve outcomes, which reflect his objectives. Similarly, authority exists whenever one, several, or many people explicitly or tacitly permit someone else to make decisions for them in some category of acts. In another way, we can say, politics is about power and influence. It is a struggle of contending ideological viewpoints on the allocation and distribution of resources. It determines who gets what, when and why (Natufe, 11-14, 04, 2011). Again, see on economist‘s views that they must not only know their economic models, but also understand politics, interests, conflicts, passions, and the essence of collective life. If economics is the study of the optimal use of scarce resources, political economy begins with the political nature of decision-making and is concerned with how politics will affect economic choices in a society. As we know, politicians are the policymaker and are social welfare maximizes, once an optimal policy is derived, this is the policy that will be carried out.

I felt hard to understand in real scene the internationally theorized definition of political economy as a student of Nepalese political economy. It is very difficult task to blend the Nepalese political economy matter just having international experience of the knowledge. There is no such rule followed by our politician or policy maker weather they are politician of economic policy formulator or not. That is why, I have decided to follow past and present political situation along with the economic decisions and results to explore the article‘s objectives.


The subjective and objective secondary data are collected systematically, proceeding the standard norms of academic research guideline. As the research, tools and guideline followed are historical, hard and soft copies of secondary data of scholarly literatures have been scrutinized applying mixed method approach. The objective statistical data has been followed by positivist approach where as the subjective interpretation of politics and economics of political economy has obviously been tried to make clear by non-positivist approach. Ultimately, both designs have been blend and interpretated as per the non-positivist paradigm.

I have followed valid secondary sources of information to get answer of the research question, ‗why, how politically, and economically large proportions of Nepalese people are deprived if, then how do we overcome from these problems’, utilizing academic research guideline, as I had to answer it through the lens of Nepalese political economy.

Introduction and Analysis

Why and how political- economic disparities

I had to review literatures in hard and soft copies about why and how politically and economically large proportion of Nepalese are deprived if, then, I had to collect literatures of disparities the cause of deprivation in Nepalese political economy context. I felt myself that, it would be better to investigate the literatures from the period of Maoist insurgency that, secondary data of fifteen years might be enough for my study.

We are well known that research has to be done making systematic background, which I have followed as Nepal had passed through a very crucial time in history, marked by political instability and uncertainty associated with worsening security situation, having loss of about 15,000 Nepali across the country within ten years time interval. There were multiple effects that tens of thousands have been injured, orphaned or widowed and a staggering proportion of the people have been displaced from their native homes, rushing an internal refugee crisis. The mental trauma and suffering of the people is beyond calculation. The critical reasons behind the situations were crisis in ideological viewpoints among the political actors, mal-governance, massive corruption at all levels, social injustice, and exclusiveness of the diverse ethnic groups in the government machinery, what I believed has been taken as my agreement for the study journey.

The Maoist insurgency was born from a combination of political and economic factors is historically undeniable. But while the local grievances of marginalized populations, ethnic tensions, and poverty may all be important contributors, they are inadequate in explaining the rise of insurgency in Nepal. The political animosity between the ultra-left and those occupying the seats of power in Kathmandu { be they the royalists, the Nepali Congress, or the CPN (United Marxist-Leninists) { seems to be of paramount importance (Acharya, 2009 ). Now we came from long politically instable situation to federal democratic republic Nepal after widespread protests in 2006, led to the re-establishment of a multi-party democracy that in November 2006, Prime Minister Girija Prasad Koirala representing from seven political parties signed a peace agreement with the Maoists, which stipulated the participation of the UCPN-M in government. The monarchy was officially abolished in 2008, and elections to the Constituent Assembly were held in April 2008, fulfilling the two major demands of the Maoist movement. The CPN-M won the majority of seats and former rebel leader Pushpa Kamal Dahal was sworn in as the first Prime Minister of the Federal Democratic Republic of Nepal. Exactly, writer Dahal said about politics that, efforts to overcome political alienation from the status of raitis and recognition as nagrik. It was the result of social and political movements. These efforts were also aimed to bridge the gap between the ―objective condition‖ of people‘s existence and their own

subjectivity, as sovereign citizens (2004, June-July). Now, the process of constitution building is in last stage.

Multi-party democracy is quite new in Nepal. I think that they continue to operate in a highly centralized manner and the predominance of the older generation in top positions of power limits the potential for change. Informal mechanisms continue to play prominent roles in the making of public policy. Sources of political power remain personalized rather than institutionalized and patrimonial traditions and patron-client relations dominate all political institutions. The absence of elected officials at the local level and the consequent introduction of the All-Party Mechanism (APM) have facilitated the spread of patronage systems. Current levels of political violence, insecurity and impunity are the result of competition over state and criminal resources, which drive the patronage networks. The current interim post-conflict period with the focus on ―consensus‖ among the leaders of the major political parties and the absence of locally elected bodies, has allowed the political parties to capture much of the political space.

Theoretically, Political economy is visualized in terms of moral ethics, freedom, democracy, and obligation of governing body – democratic government supported by the civil society, the general people and the intellectuals. Instead, in practice we are facing disparity in political, economic and social life where we can see economic disparity in many forms including disparity in the ability to consume, the ability to earn income, and the ownership of property-wealth. The magnitude of disparity, too, has different across these and their underlying sources. The changing political landscape with the policies of the government had directly contributed to this rising disparity. What Riaz and Basu attempted to say about the unequal treatment of the different castes and ethnic groups might have served as a major momentum for the Maoist insurgency and the resulting aftermath with complex political stalemate in this ethnically, culturally, and geographically diverse country (2007).

In Nepal, political agendas dominate deeds of politicians and deliberations of intelligentsia. Politicians here lack vision and understanding regarding the opportunities and challenges of the economy. Most of them believe that economic development will not be difficult, should the political system be ‗correct‘. This view is too simplistic.

Nepal‘s people are strongly attached to the principle of popular democratic rule. However, the levels of membership in or attachment to political parties are low, and direct political action—riots, strikes, and protests—remains the predominant way for interest groups to make demands on government. Then how the effective bargaining power of real people of wider variety can be assured in documented multiparty democratic society. If situation runs in such a way then the society will always politicalize and mobilize by the interest groups. The conflicting situation what we had bared six years ago would come in new way. We can assume strong and the potential rise of militant Madheshi regionalism in Terai and movement regarding nonsense cast based federalism.

In an informal discussion at the ground of TC colleges, my professional friends raise, ‗there is widespread agreement that the entire system is corrupt, and ordinary people have little hope from the state machinery for ensuring equity, justice and sustainability. Overall, the state appears incompetent to do anything about combating corruption, since the state machinery itself is engulfed by corruption and its important actors sustain themselves through alliances with criminal elements of different kinds‘. It means there is no expectation to the rulers.

I felt that political economy of frustration has been galvanized in every sector of growth as Nepal is going to be a failure state where there are very little subsidy in health, education, and other necessities that adversely affected the bottom rung of the population, thus further polarizing the society. Even the most needed investment in infrastructure such as roads, while beneficial to the rural poor, does not appear to significantly help reduce disparity in Nepal due to

its larger benefits accruing to the rich (Jacoby 2000). Other contributing factors for disparities include the massive government inefficiencies and corruption that are plaguing the entire bureaucracy and political apparatus. In Nepal, corruption in the public sector implies that the social elites, public officials, and businesses can reap the benefits at the expense of the poor quality of public service, a common source of frustration for the masses. Equally important is to examine the international political economy forces that influence the domestic economic structure through aid, education, employment, investment, migration, and trade, among other things. However, very little will be reached the targeted and needy groups. In frail democracies like ours, most of those endowments will either be stolen by corrupt officials and greedy politicians or misused by intermediaries.

While looking through the eyes of political economy of inefficiency of central civil service apparatus, it suffers from a weak management structure, with limited delegation below the ministerial level, poor supervision and accountability, the dominance of personal networks, and inappropriate skills. The ratio of managers and professionals to support staff is very low, the wage structure is very compressed, and there are other problems of incentives. Analysts point out that the politicization of the civil service, a non-transparent evaluation system and, rewards and punishment unlinked to performance result in little incentive to bring about behavior change. Governance problems in today‘s context are exacerbated by insecurity. Post-conflict restoration of security has been hampered by the lack of central political will and strategy to address the overall weak rule of law (Tamang & Malena, 2011).

In the context of political economy in Nepal, ―more politics, less economy‖ is the major characteristic displayed in the national sphere. Politics by Nepali politicians is below standard (Jeevan, 2012). This is an age of globalization and time we are implementing the concept of global village. Politicians have to think about the better economic role of private sector but the sector has decreasing confidence to deliver support and protection from the polity. The principal political problem lies in the government‘s inability of effective exercise in authority, to solve the acute problems of political disorder, and to generate a sense of relative security and stability on future policies. Failure to make progress discourages new investment and encourages capital flight, and because most large-scale economic enterprise is in the terai, it is relatively easy to transfer capital and productive enterprise over the open border from Nepal into India.

There is no rule followed according as the principle of political economy in the context of Nepal. As we have the definition Stuart Mill‘s attempts, ―Political economy informs us of the laws that regulate the production, distribution and consumption of wealth. Political Economy is to the state what domestic economy is to the family. The science relating to the moral or psychological laws of the production and distribution of wealth‖.

There were high hopes and expectations that the restoration of democracy after the April uprising would mean people get justice of twelve years old armed conflict, build people‘s friendly constitution having guarantee of end of discrimination, exploitation, and abolition of semi-feudalism and semi-imperialism. However, frustration and alienation developed immediately after the formation of one and another government and their activities, and the role of political parties in power struggle and unwillingness in timely making constitution.

Ten years of People‘s War between the Maoists and the state during the insurgency, had increased the level of poverty as most of Nepal‘s resources went towards security expenses – buying modern arms and ammunition, fighter helicopters, mobilization of security forces, and so forth. So-called democratic system could not fulfill the basic rights of the poor, ethnic groups, and downtrodden people, which would be possible only through the achievement of Janatako Naulo Janabad.

Politicians here lack vision and understanding regarding the opportunities and challenges of the economy. Most of them believe that economic development will not be difficult, should the political system be ‗correct‘. This view is too simplistic. Economic policies in this country will be guided for long by leftist romanticism or populism, not by rules or realities of market.

Politically, Nepal has three major revolutions but by the point of political economy of survival, there has been such dramatic change. There has been no revolution at the level of livelihoods. The poor remain poor, families receiving remittances are better off, and, in some cases, can access land that traditional property owners have abandoned. An overall land reform remains a distant aspiration.

We found that Nepal is being increasingly incorporated into the market economy, as indicated by the commoditization of land, labor, and money. It remains to be seen whether the commoditization of key factors of production and the transformation that accompanies it will be beneficial to the rural poor and marginalized groups in Nepal. We argue that the incorporation into the market economy of previously ungoverned spaces is likely to be fraught with tensions and ambiguities at the household, local, and national levels. Gramsci‘s ―interregnum‖ offers

A useful framework to understand the current state of Nepal, i.e., caught between the known past and the uncertain future of social organization, balancing the types and nature of traditional livelihoods, power relations, cultural norms, and values, while being propelled toward new constructs emerging from the transformation as it happens.

If transformation in rural Nepal is more about the symbolic and the ―awareness‖ aspects of social relationships and less about the structural dimensions of the human condition, the perceived disconnect between aspirations and reality is bound to escalate, with potentially serious consequences. Here what is going is that growing disconnect between aspirations and realities. In the absence of structural changes in the lives and livelihoods of people on the ground, especially if the current stalemate continues at the central political level, this gap is likely to grow further. (FICRN, 2010)

The aggregate level of poverty decreased by more than 10 percentage points between 1995/96 and 2003/04, corroborating a decline in the Human Poverty Index in recent years. However, a significant proportion of the population is poor or near-poor and malnourished {USAID, 2010).The present Nepal‘s economic statistical data is not satisfactory as todays Nepal growth pattern according to the latest Global Economic Prospects 2011 shows that in 2012, it is expected to have a nominal GDP of US$ 21.6 billion, population of 28 million and GDP per capita of US$ 697.3. Exports growth will initially decline to 5.6% and then rise to 7.3% in 2012. Meanwhile, imports growth will increase to 6.9% in 2012. Both exports and imports (as a share of GDP) are expected to decline in 2012. Exports are expected to be 9.9% of GDP in 2012. The figures for imports for the same period are 23.7%. It means that trade deficit is expected to increase further. Asian Development Bank has forecast Nepal‘s economy to grow by 4.5 percent in the current physical year because of good weather conditions helping faster growth in agriculture and remittance and tourism income helping to expand the service sector. Looking the latest figure of economy of Nepal published in Kantipur, Poverty is decreasing 2% annually, inflation is in decreasing order and 25.2 % people are under poverty Line which was 31.7 % in 2006 (13, 04, 2012 ). However, the industrial sector would be absent as a growth driver due to lack of improvement in power supply resulting in sluggish performance. (Kathmandu Post, P. 10, 12/04/2012). While analyzing the present government performance, it has been seen that up to March, the capital expenditure stood at 22.7 percent of the total allocated capital budget. The situation is that if the budget is not spent on specific headline then it will be transferred to other active development sector where there is much budget necessary for development.


How to overcome from these problems

After getting sufficient literatures of disparities, made to larger proportion of Nepalese from the history of the development of political economy specially from the Maoist insurgency days, I omitted the word ‗if‘ and searched the hard copy literatures of problem solving guidelines. The scholarly literatures secured on think tank volume are categorically mentioned and analyzed, so that the chips accommodated the policy makers‘ for proper deliberation of political characters to be economically viable nation. It means politics should also follow the norms and values of rule of law, democracy, human rights all the fundamental principle of governance. Then only, proper function of economic activities are possible.

The development of political economy is important to the system for enhanced production, distribution and timely adjustment in relation to the common law, national law and nation‘s indigenous customs and rites and government‘s capability in order to utilize the national wealth and resources through the annual budgetary process and good governance. Political economy therefore, visualizes in terms of moral ethics, freedom, democracy, and obligation of governing body – democratic government supported by the civil society, the general people and the intellectuals. (Pradhan, 2011). However, Nepal has been facing very unproductive environment where investors and entrepreneurs do not get any productive opportunity. Non-cooperation among competing political and economic forces has brought Nepal into crisis and growth disaster. It is essential to put growth as the first objective of the political economic system and remove features that are harmful for economic growth. System has to make sure that fruits of growth distribute more evenly among people and political parties must follow the rule of law in multiparty, inclusive democratic system.

It seems to us that the Nepali state is going through a qualitative ―step-change‖ in the way society is organized that are beyond the continual or ―normal‖ processes of incremental social change that are always at work in any society. The state is going through a transformative phase in which many existing social norms, patterns are being challenged, and many are being reconstructed. The process of current transition is leading towards major shifts in dominant political, economic, and socio-cultural relationships. That‘s why economic as well as political leaders should focus on the growth and development of these agendas without which other does not survive what Das mentioned about economic processes are everywhere political in that in order to operate they require political conditions, both at local level and from the state. These processes are also political in that there in egalitarian and exploitative character leads to political struggles over the ways that the economic processes work and over their distributive outcomes. Similarly, the political conditions require, and are incensed by, economic conditions (2001).

As our major challenges are to secure fundamental elements of politics, that they are obliviously, rule of law, democracy, human rights, inclusion, free competition etc, if these are settled then only economic policy, strategies, plan, program, implementation with monitoring and evaluation in proper manner happened in systematic way. Each party should respect the fundamental human rights and individual freedom. It should commit itself to establish the rule of law, strengthen laws for property rights, establish liberal system of tax and transfer, and ensure transparency in use of public funds and system of eliminating corruptions. (Bhattrai, 2005).

Political parties should run their organizations in true spirit of democracy and have a system of punishing corrupt party officials according to amount of such corruption. Any citizen should be able to make a case against such corruption. Extra resources should be channeled for education, health care, job security of the marginal groups. The nation should give each citizen an equal starting point by means of education and training and let their creativity and productivity prosper (Bhattrai, 24, 06/07/2005).

The time internationalizes everything. Nobody get free from global whim and dependency. What we have the situation is that without building trust with private sector and global actors it is impossible to exist what Darwin told about struggle for existence. That is why; the government and private sector should go hand in hand to develop mutual dialogue and trust. Future growth in Nepal will depend largely on the extent to which private sector investors have confidence in the government‘s ability to provide both support and protection. Development partners as economic energizer can play a key role in facilitating a dialogue between government and private sector with a view to developing a shared understanding of the constraints and the steps necessary to address them.

To improve entire socio-economic condition of rural people, we have to change trickle down model of development which in practice since1956. We have to try development honestly through decentralization and multidisciplinary approaches in which every section of population or community can be involved in their own development process. Without commercialization of agriculture, no one can hope rural development properly. I think enabling local community to identify their resources and let them to mobilize for local development can best support to infrastructural development concerning to the rural areas. It is essential to identify patterns of poverty, disparity, exclusion and vulnerability of the rural sector or rural community to prepare proper development plan for rural development and change in Nepal.

Developmental/economically Priorities sector

From a long-term perspective, Nepal has comparative advantage in three areas of products or services – hydro-power, tourism and agriculture/forestry. Diverting resources elsewhere is misuse of the scarce means, a point often overlooked by politicians. In fact, it is the proper mix of correct policies, efficient micro- and macro-economic management and prudent use of resources that propel economies to take off, not ideologies. It is the coordinated efforts of a dynamic market force and good regulatory oversight of the state that chart economies to growth, not political doctrines. In today‘s competitive world, economic development of nations or trade between them work on the rules of comparative advantage, which is the difference in cost of production between those nations.

Power is in acute shortage both inside the country and in the big North Indian market located within transmittable distance from our borders. Numerous snow-fed rivers crisscrossing the country and mountainous elevation enable us to produce over 80 thousand MW of clean and cheap energy of which about 40,000 is believed to be techno-economically viable. The surplus could be sold to India, where demand is continuously increasing.

In hydropower sector, Nepal‘s political economy is moving towards positive direction that in April 2, 2012, the government of Nepal has given the green light for China Three Gorges Corp.'s $1.6 billion hydropower project on the West Seti River. It aims to tap the huge hydroelectric potential from its swift-flowing Himalayan river system to provide electricity to its population, 60 percent of whom do not have access to electricity. Nepal's Independent Power Producers' Association says that Nepal has approximately 40,000 megawatts of economically feasible hydropower potential, only about 600 megawatts of which is currently developed.

Government has been focused its attention on developing the hydropower sector which will not only boost economic development of the country but also accelerate the overall development.

Development of hydropower can overcome the current power shortage in the country, speed up tourism and agriculture development, and enhance production capability of the country through rapid industrialization. The government has also asked Indian investors to invest in the hydropower sector of the country, promising that a conducive environment would be created for foreign investment and all woes of the investors would be addressed. Government has expressed their commitment to construct medium range power projects like the Upper Karnali and Arun

Third Projects, currently being considered by Indian power companies GMR and Sutlaj, by signing power purchase agreements.

Nepal, with opulence in geographical diversity and cultural heritage, has huge tourism potential. She alone offers what Switzerland and Tibet jointly offer. For neighboring Indians, Nepal has further attractions and concessions. With increase in purchasing power among Indians and Chinese, sky is the limit for Nepali hospitality industry. Unfortunately, apart from sector- and infrastructure-related bottlenecks, rampant acts of anarchy like strikes, extortions and chakkajams are poisoning this otherwise thriving but sensitive industry, a problem politicians have failed to address. Nepal has natural advantage in agriculture and forestry sectors owing to her geo-diversity and favorable agro-climatic conditions.

Despite limited availability of arable land, Nepal has natural advantage in agriculture and forestry sectors owing to her geo-diversity and favorable agro-climatic conditions. It is one of the poor agrarian countries; the sustainable generation of additional work and jobs is the prime way of reducing income disparity and poverty. Nepal badly needs more programmatic rural policies, including substantial allocations of public resources to agricultural development activities that are unlikely to be provided through the market and private enterprise. These include agricultural research, education, extension, large-scale irrigation and flood control, seed certification, etc. More effective policies to encourage agricultural development are needed both for economic growth and because this is likely to be the only major intervention government can make to arrest the increase in income disparity.

Beside this, our 20% GDP source in recent years come from oversees employments. If political parties in government feel responsible then they can formulate proper policy guideline to oversee job. They can strategically take those opportunities for short-term perspective. They can manage easy access, which pays more for unskilled manual labor than can be earned in Nepal. What we have achieved here is substantial improvements in schooling in recent years and the likely continued growth of overseas demand for more skilled employees; it is in the national interest to encourage and facilitate this kind of temporary migration and to make such opportunities more widely available by improving rural education. The important question, from the perspective of economic growth that how political parties define and interpret the concerns and needs of rural people.

Politically Priorities sector

Beside the aforementioned areas, there are many things to do in similar manner. We have in our front screen; there are many problems that have to be addressed. There are many political, social and moral problems among them the major are to agree on a new constitution and to deliver adequately on a very challenging and contentious commitment to introduce federalism. In addition, to address the issue of citizenship; to address problems after PLA integration to Nepal army likes to fulfill the task of Commission on Inquiry of Disappearance and Truth and Reconciliation, to discipline and control the youth wings of political parties. Other contentious issues are, to keep a lid on the smoldering, fragmented, and volatile politics of the Madhesh and Terai areas; to deal with armed secessionist movement on the eastern border; to alleviate major trade union militancy. Beside this, other are to handle the politically ―hot‖ issue of land reform; to deal with a large legislative backlog; and, to deliver sufficient material benefits to the poor of Nepal. These tasks are straining the political system.

Now, we have been governing by transitional political mindset in practical sense but theoretically or in legal term what documents and commitments of major political stakeholders amended reflecting the common core problems of Nepalese through the legislative assembly. As we know politics is the policy making for growth and development of society as a hole. The new 2010/11 to 2012/13 Three Year Interim Plan continues to emphasize good governance, inclusion,

and balanced and decentralized development planned around probable federal governance structures. Ranges of constitutional and legal provisions are also in place to: regulate public financial management and to ensure oversight and accountability mechanisms for political parties and civil society organizations. Several ministries have guidelines on the implementation of social accountability mechanisms including citizens‘ charters, social audits, public audits and public hearings.

The legislative parliament does not seem to be accountable to people and country. Instead, the culture of creating political deadlocks cannot be conducive to healthy democracy. The need is thus, fair politics with honest leaders who think the line of the political economists. As political economy starts with the problem of choice in a society with heterogeneous agents, but with a very different focus than multi-agent welfare economics. The focus is on the process by which it is decided what policy to adopt, and, more specifically, on what policy choice will emerge from a specific political process.

Present political situation is that the integration of the Peoples Liberation Army into the Nepalese Army is just been completed. Major political parties are trying to come on negotiation regarding the issues of federal structures and ultimately finalize the governing model. The dead line of constitution making is approaching that must have to urgently come to broader consensus, that is, no option but to promulgate the new constitution to provide impetus to economic prosperity.


―New Nepal‖ is the phrase frequently used in Nepal after the successful April movement mainly to reflect the expectation of people in terms of changes in the state‘s governing structures (e.g., federal governing system), process (meaningful participation of people in decision making of governing system) and outcomes (ensuring access of poor, marginalized and excluded people in economic, political and social security) (Uprati, 2006). While the political economy challenges can only be addressed internally within Nepal as part of evolving processes of state building and of political negotiation. Development partners have a key role to play in ensuring their interventions are conflict-sensitive and do not inadvertently contribute to undermining this fragile political settlement. Development agencies and the international community must learn to live with a highly ambiguous situation, and not exacerbate the challenge of effectively governing Nepal. Further analysis and dialogue are required to understand the governance and institutional factors that underpin the binding constraints identified in the growth diagnostic, with a view to releasing them. This specifically applies to hydropower, roads, agriculture, and the labor market—where the most severe constraints to growth have been identified. By better understanding how political economy and governance factors operate in these sectors, development partners will be better able to help government identify ―quick wins‖ and develop appropriate policies and institutional arrangements in these areas. This type of analysis will also improve awareness of risks and opportunity and thus increase the impact of proposed investments.

Networks of patronage have served to undermine efforts to restructure state and citizen relations, with the transitional period further strengthening the power of political party elites at the expense of institutional structures. It is clear that, without attention to political party reform and the institutionalization of a bureaucracy that has in place performance based incentives, rewards and punishments, efforts at strengthening accountability institutions. Government capacity to respond to social accountability initiatives is hampered by basic staffing issues, lack of requisite skills and capacities as well as lack of political will. The climate of impunity and weak rule of law, and the resulting lacks of sanctions, make it difficult to enforce social accountability.

Although the Nepali state has historically been exclusionary and unaccountable and even though the country still faces enormous governance challenges linked to recent conflict, ongoing political instability, underdevelopment, insecurity and corruption, the current transition towards peace and democracy offers great opportunity for positive change. The promise of a New Nepal,

Commitments from all the major political parties to deepen democracy and voices for change from the population as a whole serve as a foundation for the restructuring of state-citizen relations. A progressive framework of laws and policies, a rich history of associational life and a vibrant media sector further provide an enabling environment for social accountability in Nepal.

The concentration of political power in the hands of political party leaders, their current inability to provide strong cohesive leadership as well as heightened unaccountability at the national and local levels paradoxically offer entry points. Levels of dissatisfaction and frustration are high and with judicious guidance can be channeled towards the creation of new forms of productive, participatory and accountable relations between citizens and the state. Networks of corruption, patronage and criminality have heightened awareness of the fundamental unaccountability of both political parties and civil servants. There is an opportunity here to transform newfound citizen awareness and voice into active demand for the implementation and monitoring of laws and reforms in these two sectors. While there is no culture of transparency in the government, nor has there ever been systematic or regular attempts to access information. The overall lack of initiatives in the past to demand relevant public information and to inform and educate citizens about issues of key public concern is both an obstacle and an opportunity.

By better understanding how political economy and governance factors operating in Nepal‘s major development sectors, development partners will be better able to help government identify ―quick wins‖ and develop appropriate policies and institutional arrangements in these areas. This type of analysis will also improve awareness of risks and opportunity and thus increase the impact of proposed investments. Work with the government and private sector to develop mutual dialogue and trust. Future growth in Nepal will depend largely on the extent to which private sector investors have confidence in the government‘s ability to provide both support and protection. Here should be proper mix of correct policies, efficient micro- and macro-economic management and prudent use of resources that propel economies to take off.

Recognize the governance and political economy constraints to growth. Political economy factors will continue to constitute the main binding constraint to growth at the macro and micro level. Strengthening the political settlement through people friendly constitution and neutralizing conflicts by fulfilling task of truth and reconciliation commission will therefore be central to Nepal‘s growth and development.

Political process should be constitution with federal democratic republic, establishment of local and state government , Nepal friendly economic plan and policy where major areas should be hydro, agro, tourism and industries, short term plan on foreign employment, implementing land reform, and specific pro- poor policy has to be implemented in democratically elected inclusive-proportional political system.


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