Thank you for sending me your speech. I am glad that Kantipur editor Narayan Wagle has been decent and courteous enough to correct the error in reporting your speech in his paper. I hope he will be equally graceful to his own fellow citizens when his paper sometimes shows an inclination to interpret facts and statements to suit a given political inclination.

I agree with the fundamental thrust of your argument made in your speech at the annual convention of the Management Association of Nepal. The basic thesis that conflict should not be used as a pretext to postpone changes and development programmes in the economy and the society is a perspective that we in Nepal should seriously consider. In fact, your standpoint has a general application in most countries where the level of conflict remains below an “unmanageable threshold”.

At present, Nepal is a country and a society in transition. We have realised, perhaps for the first time that we are a nation of ethnic minorities shackled in a mode of production that is semi-feudal and is in a process of transformation to a more liberal capitalistic formation. The problem that we face is that we have to make this transition rather quickly. Restoration of democracy after 1990 brought back our sense of dignity and freedom and encouraged us to explore our own identity as a nation and a people. In this process we found that the proverbial social harmony and peace that we were so proud of conceals, in fact, a whole structure of oppression and exploitation typical of a feudal system. It is reflected in the distribution of political and economic power between different ethnic groups all across the nation and the expanding tentacles of neo-feudalism in the guise of modernity. It has indeed been painful to be aware that the values characteristic of. Nepal’s ancien regime remained relatively intact even after the restoration of democracy. The net result has been the present derailment of the constitutional process in the nation.

Democracy was restored in 1990. Now we know that it was not enough. The task in the future is to reinvent democracy so that the sovereign will of the people which is the basis of a legitimate government remains more than a veil to hide the state’s predatory character and of those who lord over its functioning. The political economy of this transformation is not going to be easy and role of the bureaucracy and what is now labeled, as “good governance” is crucial in this process. Unfortunately bureaucratic behavior these days is shrouded in uncertainty and indecision and has become victim to a sense of resignation and indifference based on an expanding culture of centralised rigidity and ascriptive values characteristic of a bygone era.

Reinventing democracy in Nepal amounts to a second democratic revolution. A reinvented democracy now must be able to link the ideological frame of a parliamentary multiparty democracy with the mechanism of providing economic power to the small and marginal farmers, small entrepreneurs in the rural areas and the emerging business class that is outward looking, modern and willing to compete in the international market provided the state is willing to act as a helpful partner. These are issues related to the political economy of the country requiring a radical change in power sharing between the different organs of the state both at the central and local level, the market and the civil society. More specifically, the present centralised unitary structure of the Nepali state has proved to be an easy instrument for our rulers to manipulate state policies and resources for the benefit of a few. This has to change. First, a new form of fiscal federalism that allows some form of a quasi-federal structure of state has to be an essential component of the new design — a reinvented democracy. Under this set up at least 30 per cent of the resources mobilised by the state sector should belong to local institutions or the new quasi-federal institutions for the development of their own region or meeting local needs. Second, administrative and political devolution necessary to support this new structure of fiscal federalism must be guaranteed in the constitution. Third, new institutional links to forge an alliance between rural farmers, small entrepreneurs and agro-related industries

will have to be an essential component of the new order so that the rural population becomes an equity holder in the new wealth being generated in the nation.

The involvement of the poor in the ownership of new enterprises ranging from small village level enterprises to large corporations in the up market value chain should be a major component of the reinvented democracy since this can help social cohesion and stability. Fourth, public-private partnership programmes ranging from the development of large infrastructure to small projects like rural electrification to rural health care in the countryside must be a part of a reinvented democracy so that the nature of government intervention goes on to empower and enable the local communities, local government and the private sector. These are difficult tasks but they can be attempted even in the present state of conflict provided the government has the vision and commitment to the values necessary for this purpose.

Dr Lohani is co-chairman, Rastriya Janasakti Party