Weak institutions blamed for slow economic reform

Kathmandu, November 22:

Despite economy liberalisation, it did not benefit to the larger good of people yet as the growth momentum could not continue after mid-1990s. Eve-n after the restoration of dem-ocracy, growth rate could not be sustained due to lack of participatory approach and weak democratic institutions, a study conducted by a group of intellectuals, Dr Dilli Raj Khan-al, Dr Pushpa Raj Rajkarnikar, Keshav Prasad Acharya and Dilli Ram Upreti, states. ‘Understanding Reforms in Nepal: Political Economy and Institutional Perspective’ is the assessment of major outcomes of reforms since 80s, which is published by the Institute for Policy Research and Development. The book focuses on the forces that led to initiation of reforms, its basic ingredients and how it was carried forward. It clearly states that the growth trend during mid-90s could not continue and did not turn out as an effective tool in reducing poverty, rather the gap between the haves and have-nots escalated further.

The foreign exchange crisis emanating from financial chaos and burgeoning resource gap during and in the aftermath of 1979 referendum were the compelling factors leading to the initiation of the first phase of reforms (1985-1990). “While assessing the reform process, people’s participation was hardly seen,” states the book, “Sensitive decisions were made in an ad-hoc way that resulted in weak reforms.” The research states major problems in reforms process as a very poor linkages between the agriculture and non-agriculture sector. During the first half of the 90s, share of agricultural GDP declined by almost ten per cent. There was a big surge in the contribution of manufacturing, trade, transport and services sector. During the period, export–oriented industries expanded very rapidly. After 1995, not only has there been a negligible shift fr-om agriculture to the non-agriculture sector, the non-agricultural sector has defied the liberal policy environment.