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Economic Concerns In The Draft Constitution

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Kathmandu, July 15, 2015: The first draft of the constitution of Nepal was released to the public by the Constituent Assembly last week. This drat was released to the public and the political parties have expressed hope of generating comments from the public to make necessary changes in order to finalize the draft.

With hopes of engaging the public and the private sector, Samriddhi, The Prosperity Foundation and Nepal Economic Forum (NEF) organized a roundtable discussion titled “Economic Concerns in the Draft Constitution” on 7/14/2015. This discussion hopes bring to light the importance having a sound economic stance along with the social and development related issues present in the constitution. A clear economic view is especially important because this 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.

Debates and discussions, starting from the period of civil unrest in the mid 1990s, revolve on issues related to human rights almost without fail. Yet, even with the close tie of private property ownership with human rights, the former is often ignored. Sujeev Sakya, who moderated the event, set the tone for the discussion by bringing to light the fact that this draft of the constitution seems to want to steer the nation away from the liberalization reform that was initiated in the early 1990s. The fact that the constitution defines Nepal as a “socialism-oriented” country without ever describing what it means and the repeated use of the word “regulation” in reference to the private sector justifies Sakya’s statement.

Dr. Hemant Dabadi, senior fellow from Samriddhi, the Prosperity Foundation started the deliberations with his presentation. He 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. Similarly, he pointed, this 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.

Mr. Pashupati Murarka, the president of FNCCI, was next to speak and he introduced the audience to the fact that the constitution recognizes progressive taxation while simultaneously failing to assure property owners the freedom from expropriation. He expressed 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.

Mr. Manoj Kedia from CNI gave examples from around the world in favor 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. His concern was that the constitution is clearly unaware of the increase in the cost of business it is likely to impose on private actors. Another noteworthy aspect, he said, was the incongruity in tax related laws, i.e. between the tax jurisdiction of state and national government and the draft’s lack of focus on conflict resolution. Mr. Niranjan Shrestha, from NYEF, said that his main concern was that this constitution may lead towards the prominence of crony capitalism in the country. His justification being that 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.

Mr. Madan Dahal, Professor of Finance from TU, felt that this draft of the constitution lacks an economic focus and lacks economic direction. Moreover he finds 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. Instead of aiming for welfare status, he posited, the constitution should have been geared towards creating an environment of (economic) participation. Regarding 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. The fact that energy literally flows from the hills which in turn facilitates production in the Terai should be accounted for, he stated.

Dr. Rup Khadka, Chairman of the High Level Tax System Review Committee, accorded with the tone of the other discussants and stated that the matters related to autonomy and efficiency of the tax regime of the country is lacking. Autonomy and efficiency in tax collection is important for its mobilization. After his deliberation the floor was opened for discussion.

In conclusion, the debates and deliberations centered on the following pointsThe 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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