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August 2015 Cover Story

Published on: 2015-08-23 15:58:00     1423 times read    0  Comments

In a roundtable discussion on the draft constitution titled Economic Concerns in the Draft Constitution organised by Samriddhi, The Prosperity Foundation and Nepal Economic Forum (NEF) experts discussed the importance of having a sound economic stance along with social and development related issues in the constitution.

Calling for a clear economic view especially because the constitution is being drafted in a time where much political debate is centered on Nepal’s graduation from Least Developed Country (LDC) status to a Developing Country, Sujeev Sakya, moderator of the event said the draft of the constitution seems to want to steer the nation away from the liberalization reform that was initiated in the early 1990s.  

Similarly, Dr Hemant Dabadi, senior fellow from Samriddhi, the Prosperity Foundation argued that the constitution is too long; not relevant or considerate to what has worked in other countries; lacks focus, direction, or goal; and there are too many promises that the county or its government may not be able to follow through on.

“The other major discrepancies in the constitution seem to be the acceptance of  ‘backwardness’ of certain groups as an unavoidable phenomenon instead of having a vision of the nation that is devoid of such segregation. Along the same lines, having provisions regarding foreign aid in the constitution brings forth the view that it is an intrinsic aspect of Nepal,” he said. He also pointed out that the constitution does little to clear doubts on the federal arrangement and that the ambiguity on fiscal issues and natural resource use may lead to squabbles between nation and state.

President of FNCCI, Pashupati Murarka , while expressing concerns on the repeated use of  ‘regulation’ in relation to the private sector while words such as ‘promotion’ were used in relation to cooperative or public sector, introduced the audience to the fact that the constitution recognizes progressive taxation while simultaneously failing to assure property owners the freedom from expropriation. 

Manoj Kedia from CNI gave examples from around the world in favour of having a vibrant market economy for growth. His examples of China and Russia’s revised strategy served to give evidence for the importance of having a market led economy. “The constitution is clearly unaware of the increase in the cost of business it is likely to impose on private actors,” he said, adding that “another noteworthy aspect was the incongruity in tax related laws, i.e. between the tax jurisdiction of state and central governments and the draft’s lack of focus on conflict resolution.” 

Niranjan Shrestha, from Nepal Young Entrepreneurs Forum raised concerns about the constitution leading towards the prominence of crony capitalism in the country. “This constitution would increase the cost of doing business such that business owners would be inclined to garner political support in order to reduce their cost and gain access to a larger market share,” he said.

Well known economist Madan Dahal felt that the draft of the constitution lacks an economic focus and an economic direction. “I find that given our country’s small market size as denoted by GDP the welfare-state aim of the constitution may be pushing youth and manpower away from being economically productive members of society,” he said. 

Instead of aiming for welfare status, Dahal stressed that the constitution should have been geared towards creating an environment of (economic) participation. On the subject of federalism, he stated that an 8 state model may not be sustainable given the size of our economy and budget and that all states should touch both India and China. 

Dr Rup Khadka, Chairman of the High Level Tax System Review Commission stated that the matters related to autonomy and efficiency of the tax regime of the country is lacking in the draft. “Autonomy and efficiency in tax collection is important for its mobilization,” he pointed out. 

Key Points of the Debate:
- The draft has a skewed economic vision and unclear about the desired direction for the country’s growth. 
- A welfare model is purported when the country is not capable of doing so
- The document is pessimistic of the contribution the private sector can play in the country’s growth in a time when evidence from around the world clearly highlight the role it can play.
- The constitution proposes an inferior tax regime and inadequately addresses harmonization of state and national government’s role.

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