Nepal’s Poverty = Neglect of Madhes!
Nepal’s Poverty = Neglect of Madhes!
(Ethnic Factor in Economic Development)
–By Sukhdev Shah,
School of Economics,
University of The South Pacific,
Suva, Fiji Islands
The Madhes factor
There is no denying the fact that all successive Governments since the opening of Nepal in the 1950s have been indifferent to the plight of Madhes—the flat land area in the country’s South, bordering India, and home of about half of country’s 28 million people. Much worse, and for all practical purposes, the region does not even get recognized as being Nepal’s territory, except that it exists on the map of Nepal. The outcome of such policy of denial and neglect has been that Madhes region has suffered the consequences of colonial rule, generated internally, in much worse a fashion than British colonial rule of India. At least the British rule in India allowed locals to enter low- and middle-level of Government service jobs, and it created public facilities—transport, health, and education infrastructure–to benefit all. But, in Nepal’s case—from the beginning of Rana regime in mid-19th century, running through panchayat and Congress regimes up to the present day–exclusion, neglect, and deprivation of Madhes and Madhes people have remained as complete as can be said of any colonial rule that ever existed.
However, the loss to Madhes region from the misguided policies of the past cannot—and need not—be taken in isolation, since the isolation and neglect of Madhes over such a extended span of time have had much wider repercussions on the national scale, not just the amount of damage caused to Madhes population.
The major point of departure to pursue this line of reasoning–which, to my knowledge, has never been attempted– is to relate Madhes’ neglect to the poor performance of Nepal’s economy over the past years and decades that Madhes has been ruled as an internal colony. As has been pointed out above, Nepal’ economy has gone through a mediocre performance—reflected in the fact that the realized level of economic growth has just been a third to one-half of what could have been possible with available inputs, technology, and the amount of international support the country has received.
The contribution of Madhes’ neglect to overall performance of Nepal’s economy can be looked at in a number of ways but the main channels of effects can be categorized as those ensuing from the efficiency of resource use, human resource development, quality of governance, and on investment environment helpful for growth. Resource allocation effect: Given the overwhelming importance of agriculture to Nepal’s economy–source of livelihood for almost two-thirds of population—much of the development resource should have been invested in this sector, both for employment generation as well as output growth. However, the evidence is that agriculture was never made an investment priority and, further, most of whatever was invested in agriculture went to the wrong regions, in terms of value-added per unit of investment capital. Because of the vast tract of fertile line, easier transportation access, and plenty of irrigation potential, any amount spent on agricultural development in the Madhes region, for example, would be have been at least three times more productive than invested elsewhere in the country.
Equally important consideration for giving priority to agricultural growth in the Madhes region is for saving the environment—soil erosion caused by farming on steep slopes in the mountain region. There would have been no need to grow much of the field crops–rice, wheat, maize, barley–in the mountain region; this could have been supplied from Madhes production at a fraction of the cost, if Madhes agriculture would have been made a development priority but this was not allowed to happen for ethnic reason.
In addition, taking advantage of the temperate climate of the mountain region, there is plenty of scope in the region for specialization in the dairy farming and production of fruits and vegetables, much of which could have been sold to markets in Madhes and exported to India that allow unhindered market access to such exports from Nepal. Such potential for the development of the mountain region was, however, was not considered due, in large part, in view of the necessity to make the region self-sufficient in food production, including that of cereals that, as noted, could have been moved to Madhes.
The other important point that can be made concerning the arrested development of the Madhes region is the fact that adjoining regions of India benefited immensely from green revolution technology in the late 1960s and 1970s and that also could have been easily adapted to Madhes environs. However, bringing of green revolution to Nepal never figured in the Government’s development strategy. Such intentional neglect by pahade planners impoverished Madhes, and also ruined the mountain ecology, along with depriving the region’s population of much needed nourishment.
Many other cases of the arrested development of Madhes region can be pointed out, all of which can be traced to ethnic factors. Consider the garment industry. Resources in Madhes for the development of garment industry are as good, even better, than in Bangladesh. Over the past 25 years, garment industry in Bangladesh has been developed in to a multi-billion dollar export, of which there is not even a trace in the Madhes region. Some rudiments of garment industry were developed around The Kathmandu Valley, but the high labor cost and difficult access to inputs and markets made the industry uncompetitive and resulted in its stunted growth, eventually dying out.
Similarly, Madhes region had much potential for growth of Information Technology (IT) sector—like the establishment of call-centers—due, in large part, to the availability of educated workforce at wage level the fraction of level in India where IT industry has flourished. Also, the region had much potential for the development of a number of agro-industries—edible oil, dairy products, rice milling, sugarcane and tobacco processing, furniture-making—and tourism. Nothing of this sort ever entered the consciousness of pahade development planners who themselves were unaware of Madhes’ potential and its comparative advantage. Perhaps, they did not even feel a need to develop the region!.
Human resource development: Aside from the neglect of region’s material resources, human resource development has lagged considerably behind those of mountain regions, in terms of education levels, skills training, health care, public sanitation, and safe water supply. Despite the difficulty of access, sparse population, and a naturally cleaner environment, mountain regions have received a much larger fraction of development budget for education and healthcare on a per capita basis than has the Madhes region which, in large part, depended on importing such services from across the border in India.
Quality of governance: As has been noted, looking at the sheer misuse and abuse of development resources, quality of governance in Nepal remains very poor, which has operated in a vicious circle: poverty causing bad governance (i.e., enhanced bribery and rent-seeking), and bad governance, in term, causing poverty, in the way of preventing efficient use of available resources.
At Nepal’s level of development or underdevelopment, practically all societies suffer from the misuse of public funds and abuse of authority, which largely means personal enrichment of the few at the expense of everyone else.
However, cross-country evidence shows that the level of corruption and, generally, the abuse of authority are more pronounced in multiracial and multicultural societies, because differences among the people, in terms of ethnicity and race, give some justification for the abuse and exploitation of one group by another. Nepal’s case is no different, in terms of the heightened level of corruption and misuse of public money, at least a part of which can be sourced to ethnic differences, especially when ethnic exclusion and intimidation has been mandated by the State.
For example, the predominantly pahade government infrastructure in Madhes creates an environment for official corruption, as the local population does not happen to be “one of their own”—as could be the case in a situation of homogenous population. As is actually observed in Madhes, it is easier–and morally less offensive– for a pahade official forcing bribes and kickbacks on a Madhese public than if this difference did not exist. The evidence of this is the well-known fact that Madhes posting of a pahade government officer— especially at customs office, police post, as district chief or judge–is highly coveted placements, and people view this as a life-time opportunity for getting rich quick!
Similarly, a Madhese businessman seeking government license in Kathmandu, or a Madhes litigant bringing up case to a Kathmandu Court, would be more susceptible to bribery than if they had dealt with ethnic officers and judges in their own environs.
The other reason corruption has flourished in Nepal is a lack of regional competition and, in fact, the domination of one region by another region. If the situation would been otherwise—an environment that creates a level-playing field—people would generally opt for competition—merit-based claims on positions and resources —and will be less inclined towards corrupt behavior—peddling or buying of favors. Unfortunately, Nepal is mired in the corruption mess, contributed in no small way by ethnic-based influence- peddling. It is a well-known fact in Nepal that ethnic consideration plays an important role in job-selection, especially in places like Foreign and Finance Ministries, in armed forces, and in high-level police and secret service postings. I know of one Madhesi friend living in Washington, who otherwise superbly qualified for foreign service job, fails to get into Nepal’s Foreign Ministry, even after making several attempts. Bitter and frustrated, he migrates to The United States and then lands a staff position at The State Department within five years of migrating. Of course, he can not be proud of his Nepal origin!
Similar level of corruption is endemic in almost all spheres of government operations—award of tenders; loans from development banks; purchase of office supplies; selection of candidates for scholarships and overseas training; public works contracts–to name a few. In the absence of ethnic consideration, governmentdecision- making would have been more objective and hence more supportive of public welfare and economic well-being.
Investment environment: Any sort of social divisions, ethnic division included, are hurtful to investment environment, which very much depends on the safety of doing business in a country and expectation of earning a reasonable level of profit. The major inputs into this environment are largely the invisible stuff, such as law and order; quality of justice system; property rights; enforcement of contracts; fairness of tax collection; guarantee against expropriation. These features of social environment, together, are known as a country’s social infrastructure.
It is not difficult to see why a country suffering from social divisions and undergoing—sometimes related— political strife can not have a healthy or high quality social infrastructure. Most likely, in such a “divisive environment”, the law and order situation will be shaky or uncertain; justice system will be dysfunctional; and potential investors—domestic as well as foreign—will remain extremely uncertain of future returns on their investments.
In many ways, ethnic divisions have a sort of pernicious effect on incentives and long-term risk-taking—when making decisions relating to business investments or personal improvements—than all the other factors combined. And in the absence of right incentives, people and resources cannot be put to their efficient and productive uses, which will mean economic stagnation and the spread of poverty.
Again, it is the economy, stupid!
It was the late King Mahendra who first dreamed of making Nepal a Switzerland of Asia. Unfortunately, he died before he could do much to realize his dreams. He was followed by his son, the late King Birendra, who seemed much wiser to look around the neighborhood for a role model, and he found it in Singapore. He dreamed up making Nepal like Singapore, prosperous and modernized, starting from a low base of development, quite similar to what Singapore was in the 1950s.
However, the one thing—and quite an important thing—that these dreamers forgot—or did not want to mention– was that both Switzerland and Singapore are very diverse countries, in terms of the make-up of people and culture. But, unlike many other countries, they have found strength in their diversity and harnessed it in the best interests of the country they live in, with focus on the economy.
A Swiss, for example, can have many origins—German, Italian, French, Spanish—but all of them been given equal incentives—equal share, a stake—in making Switzerland great. Ethnic and cultural diversities between peoples make least of a difference for them being Swiss–and be proud of it!
Similar is the case for Singapore, which is a hotchpotch of peoples of many races and cultures—Chinese, Malays, Indians, Indonesians. But no differences are maintained or even recognized when it comes to serving national interest. The promotion of cohesiveness and togetherness–and honoring differences among its people– has been shaped into a State creed, which has worked as the principle force revving up people’s enthusiasm and driving up productivity growth. Common and shared destiny of the Singaporean people has helped lift the economy to European standards in just a generation!
At the other extreme are countries—including Nepal—which have treated diversity as an obstacle to growth and economic prosperity and turned inward and exclusive, trying to protect the purity of their culture—the dominant culture. The result has been nothing less than disastrous, at least that has been true looking at their peoples’ economic well-being. This need not be surprising—that a drive towards cultural purity and ethnic superiority tends to create a hostile environment all around, which can get reflected in open clashes or simmering anger–and frustration–of the victimized, deprived groups in society.
In a divisive environment, energies and creativity–of individuals as well as of society–get diverted towards protection of privileges, inherited rights, and status, rather than getting mobilized towards a common goal– call it nation-building, social improvements, winning, or at least taking advantage of, the rest of the world. Instead, such a society loses out to the rest of the world, in terms of enhanced economic dependency and political subjugation by outsiders.
Relating the above global view–of the merits of ethnic accommodation versus exclusion– to Nepal’s experience, it will be quite a narrow view to look at the on-going ethnic tensions in Madhes just in political terms and as a human or civil rights issue. A more important consideration ought to be its economic dimension. It is my strong view that, aside from the allegations of rights abuses and discrimination of Madhes population by pahade-dominated State apparatus, more serious concerns should be the consequences of such prejudices and biases on the country’s economic performance—its short-term stability and long-term potential. As the preceding analysis shows, Nepal’s economy has performed just at one-third the level of its potential, over the long period of time for which consistent data are available. This has hurt all groups in the population, with economic suffering exacerbated for Madhes population because of discriminatory policies. We are all interested in the country achieving high economic growth so that it can afford better living conditions for all its people. But, unfortunately, economic welfare cannot be promoted in isolation and in a divisive environment that has existed in Nepal now for many generations. Sooner this connection gets recognized and acted upon, greater will be the chance of preventing a fall from the cliff!
(This is an excerpt from an article)
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