The importance of stakeholder dialogues for economic development:

Mr. Chairman, Excellences,
Distinguished Guest, Delegates, Participants, Ladies, and Gentlemen,

Let me first express my gratitude to the organizers of this international conference - the Federal Ministry for Economic Cooperation and Development of Germany, GTZ and Planning Commission of the Government of India - for giving me this opportunity to speak a few words. I am invited here to speak on the role of stakeholders in economic development. My academic background is not economics, but law and advocacy. I strongly feel that economic development of a country rests on the management of its politics. However, politics and economy are so much tied up together that it is difficult to discern one from the other.

The concept of economic development in Nepal was implemented only from 1956 when the country launched its first five-year development plan (1956-60) with ending more than one-century-old Rana oligarchy from the country. However, this late start in economic development was further delayed by the imposition of monarchy led, authoritarian rule for 30 years (1960-1990), with some make shift political reforms to accommodate growing public discontent until the mass movement in 1990 abolished it. "Politics for development" was the catch phrase used by the regime. A couple of observations are made on Nepal's failed exercise in development. These included (1) lack of adequate resources and infrastructures for development, (2) use of inappropriate development models, (3) bad politics and (4) anti-development traditional values and cultures held by the society. However, the real reason for development failure was the excessive reliance on state as a major force for development where as state it was very weak. Liberal inflow of foreign aid is invariably tied up with the expansion of state machinery rather than production or employment generation. The expansion of state activities in sixties and seventies is also due to a deliberate policy measures designed to ignore the appropriate role of the private sector or the forces of the market in economic development. There were three policy ingredients. First, it was assumed that private sector could not undertake the tasks of development. This is the question of capacity. Second, it was assumed that private sector would not undertake development works due to low profit, high gestation period and heavy investment requirements. This is the question of motivation. Third, it was also assumed that private sector should not be involved in development activities, as there are social goals to be fulfilled. This is a normative question. These three underlying values – private sector cannot be, will not be and should not be – played a crucial role in thwarting the role of the private sector in the economic development of Nepal. I do not blame squarely on the avid policies of the then political masters and civil servants for cultivating this kind of attitude towards the private sector. Even the private sector should take some blame. First, very little information on private sector was available. This is applicable even today. Second, private sector too decided to remain out of public sector detection radar – for fear of taxation and inviting government control. Much of the private sector, even today, preferred to remain small and informal. Efficiency ascribed to scale of operation is sacrificed for gain in corporate control. In a true sense of the term, private sector did not pursue a wealth maximization function in the economy.

The growing public discontent in 1990 abolished authoritarian monarchy to be replaced by a constitutional one. The change in regime in 1990 and the prevailing dogma of market economy, Nepal opted for a near reversal of state dominated economy. Liberalization, privatization and globalization became three mantra of development. Deregulation of market and sudden injection of the private sector and foreign money helped to augment economic growth rate. Earlier the growth rate hovered around 2 percent per annum; it was increased to 6 per cent per annum during early 1990s. However, the growth attained was not distributed evenly. The consequence of this non-inclusive economic growth rate was that the rich became richer and the poor became poorer. This led to increased economic disparity in Nepal. Almost U-turn from state domination to a reliance on market forces did not helped to resolve development issues in Nepal. Hence, a third way like a more socially responsive and people oriented economic system would be a way out. In this concern does the German experience play any role?

Earlier the economic costs were coming from state-failures; the reversal to market economy only added the costs of market failures. Take the example of dozens of privatized public enterprises. Hardly, one or two are operating today. Besides corruption in privatization deals, the privatization concept turned out only as an option to shift responsibilities (huge financial losses, managing responsibilities, labor discontents etc) from the public sector to the private sector. In a country where private sector is not yet professionalized, closure of the privatized units is a natural course to follow. Those who were in favor of privatization they themselves did not have adequate analysis of public private sector reality and they failed to translate privatization principles in practice. In adition to these facts, fundamental things were lack of institutional capacity, lack of dialogue technique and lack of homogeneous relation with public sector as well as with masses of the people.

Recently published report from ADB speaks Nepal having a highest economic inequality in the region. Had it not been economic failures of the successive regimes, we will never have attained political success. The political success is not going to last long if we cannot attain economic success. In addition, this is where, I think, this conference can help to contribute.

Now it has to change in to public-private-partnership [PPP] system as a transitional economic policy. This policy would lead towards socialist economy, whereby the social market economy will be taken into account such as that used after World War II in West Germany. We are in favor of ppp through dialogue not only in politics but also in economic sector too .For this purpose we should have homogeneous negotiating culture, Dialogue friendly environment and supportive infrastructure. We should recognize both public and private sector but without good collaboration between them result may not be positive. This 21st century is full of negotiating culture recognition of proper respect; honor and identity each other so we should take this in account for economic development.

By the same reasoning, Maoists cannot also move ahead without garnering the support of other political parties. So dialogue is necessary and public and private sectors are equally important especially in our country it is because public sector itself in transition. Because of this situation, we proposed PPP [Public-Private-Partnership]. This unique situation brought to fore a need to enter into a dialogue process to resolve all kinds of disputes in Nepal including economic development.

CA election results have put, once again, dialogue process at the centre. To resolve all kinds of conflicts in Nepal appropriate tool would be dialogue. For economic development, public private dialogue is necessary. Where there is weak public sector, private sector also may not in strong position so collaborative effort is needed. Therefore, for the purpose of the welfare state we need public & private sectors initiative through dialogue for common understanding on people centric approach.

Our experiences shows that, throughout the conflict period private sectors were very vocal for dialogue and had pressured on public sectors to hold a meaningful dialogue not only in political solution but also in economic development.

Political dialogue was not taking place but others dialogue related with economic development were there, for example dialogue with student, labor and others stakeholders were in everywhere. Through this culture private and public, both sectors are familiar to dialogue culture. The result was well-organized labor force and professional private sector. It has demanded institutionalized each other too. We know whatever achievement we have been exercised now all are by product of dialogue and anywhere role of private sector is recognized.

Finally, always politics is in command, without good and people centric politics, recognition of public private role and its institutionalization process cannot achieve economic development. Let this realization come sooner than later. With this remark, I like to end my statement here and, once again, like to thank you all for giving me your attention.
Thank you.