Interview from Kantipur

Ram Sharan Mahat has been at the centre stage of Nepali politics since the restoration of democracy in 1990. The technocrat-turned-politician first made his mark in the early 90s after he was appointed as the vice-chairman of the National Planning Commission by the Nepali Congress President Girija Prasad Koirala. Mahat has since consistently championed free-market policies. The former finance minister spoke to Akhilesh Upadhyay and Aditya Adhikari about the early 90s and his party's recent disenchantment with the Maoists.

Q: Is there common ground between the policies of the new government and the Maoist-led one that was in office for much of the past year?

Mahat: Even with the Maoist-led government, there are more commonalities than differences. Constitution making is our common agenda. Similarly, creating business confidence, restoring the confidence of the people in administration, delivery of service to the poor, reallocating resources to rural and backwards areas, special programmes for the deprived and marginalized sections. There are hardly any differences on these issues. But there is a huge difference between what the Maoists said and how they acted. Our problem with the Maoists was that their activities on the ground were contrary to what they publicly professed.

Q: So in terms of socio-economic side, there are commonalities between the way the former Finance Minister Baburam Bhattarai approached his budget and the way the new government will?

Mahat: There are more areas of agreement than disagreement. But we also disagree significantly with the Maoists on many issues. Their focus was on distribution, not on production. We believe in production. Without creating production and employment opportunities you cannot raise the economic status of the people. They believed that distributing government resources would take care of everything. Similarly, they believed in using their party institutions and politicizing government institutions to deliver services. We strongly believe that government institutions should remain outside politics and apolitical. And we believe in the market forces, private and foreign investments. They weren't very well disposed to this idea. They believe in government intervention even in production and trading. They believe in re-nationalisation.

Q: You are seen as the architect of the liberalization policies of the 1990s. While that created wealth, do you
feel that you could have done better with a better distribution of that wealth?

Mahat: Of course. But distribution of wealth takes time, it cannot happen overnight. We could have done better, but even with the type of development we saw in the private sector, the living conditions at the bottom have improved a lot. Look at the real wages in the rural areas. Now it is difficult to get labour for agriculture, the wage rate is very high. Real wages have gone up. If you look at the National Living Standard Survey (NLSS), it shows that the consumption level of people across regions, across ecological bases, of all income groups have increased significantly. Employment opportunities have increased, there is demand for more labour, more employment. So while it is true that market forces increase disparity, it increases the income level of the poor also.
To raise the economic status of lower income groups, of course, you need a separate package of economic reforms. More consideration needs to be given to the social sector -- health, education, rural development, agriculture.

Q: The Nepali Congress-led government that followed the UML government of 1994 seemed to have followed the UML’s redistributive policies. do you think that the policies of the Maoist government will have an impact on the policies of the new government?

Mahat: Even in the early days our development programme, our budget distribution and expenditure pattern, the focus was on creating infrastructure in rural areas. We strongly believed that without basic infrastructure in place -- like access roads, electricity, education, basic health services -- no matter how much you spend for the downtrodden, it will have no meaning. And infrastructure is not created overnight, it takes time. Now you have started seeing results. Karnali is accessible, you have road links to Kalikot, Jumla. Districts that were not touched by road networks 10-15 years ago now have road access not just in their headquarters but practically in all VDCs. Electricity has reached to far corners of the country. That has helped a lot in improving the status of the common man. Because of improved infrastructure in rural areas, people are now producing for the market. Even from the far corners of Nepal, you see agricultural production coming into the market. So our emphasis was different.
People think that the UML launched populist programmes and the NC didn't. But we also launched populist programmes in those days. But we are poor in publicizing them. Like, land revenue authority was given completely to the VDCs. Practically, we don't raise any revenue from land. It's supposed to all go to VDCs, but they have also stopped collecting it. This was a populist programme. We started giving allowances to widows. This was our programme. There is a general impression that such a populist programme was started by the UML, but that is not true. Similarly, my budget introduced education allowance to Dalit children. Now it has been continued. There is huge assistance from the World Bank and other donors to this programme. Dalit children up to high school get a small monthly allowance. So we also introduced such populist programmes because there was an impression that we were not very populistic and didn't do much for the common man.

Q: How do you view the performance of the Maoist-led government, especially on the economic front?

Mahat: When Baburam Bhattarai introduced his budget we made a number of criticisms. All our criticisms have been validated except on the revenue front. They have been successful there. But they have used all sorts of means to raise revenue, some artificial means too. Like, they have been extracting money from the Nepal Oil Corporation (NOC). NOC has outstanding loans from the bank, interest bearing loans, so instead of making NOC pay back or service the interest bearing loans they are asking the government to pay back the government loan, which we gave of course in expectation of getting it back. The previous government was also collecting income tax from many public institutions like the central bank and the telecommunications corporation in advance just to inflate revenue collection. Such artificial tactics have been employed to show a boost in revenue collection. But nevertheless, they have been successful on the revenue collection front.
Other than that, they have failed on the development side and they have failed on other fronts.

Q: They say that a major reason they have failed is because the other parties did not allow them to form local development bodies through which spending could have been channeled.

Mahat: That is a ridiculous argument. Local bodies have not been in place for the past six or seven years. They did not exist even last year, but the delivery of development expenditure was 100%. In fact, rural expenditure is mainly channeled through user's committees. Community is the main vehicle for implementing rural development programmes. This has been the case for the last several years. If you go to the rural areas, you will see roads being built almost everywhere with government money with local participation. Even in the absence of elected local bodies, development activities are taking place. In other words, alternative mechanisms are in place.
The Maoist-led government failed because they allocated budgeted programmes, ill-conceived, half-baked programmes, without much study. They didn't allocate funds in well-studied, well-prepared programmes. They allocated huge sums of money without any preparation. But how can you spend money? Of course, there are financial rules and regulations that need to be followed. This is why they couldn't deliver.
The Maoists also failed miserably on the price front. The irony is that at the international level prices have been declining. Prices decline during a recession. Indian inflation is almost at 0 now. Fuel prices have gone down. But Nepal's inflation rate is going up. This is because of government mismanagement. There is more purchasing power in the hands of the people without production. Production should go side by side with income. The emphasis on distributive policies leads to easy money in the hands of the people, which leads to inflation. Bandas, hartals, disruptions in the supply chain are also responsible for this.

Q: Will the new government revisit the Army chief controversy and try to find a compromise with the Maoists, or will this issue now be ignored?

Mahat: It can simply be ignored because the whole issue is over now. The Maoists have resigned over the issue. This means that they have admitted their mistake. In any case, the present Chief of Army Staff will not remain in place for too long; it is just a matter of months.

Q: There has been some talk of adopting a “Sri Lankan military solution” against the Maoists. Are these factors likely to affect the way the new government deals with the Maoists?

Mahat: No. The main point is that the Maoists should internalize the peace process. Since they are still indulging in violent activities, killing people, intimidating other party workers, seizing property, there is strong resentment towards them. So people are suggesting that some strong-arm tactics must be used. The point is that the Maoists should change their habits. If they don't then these kinds of suggestions may gain ground.

Q: Do you think that there is a need to now revisit the 12-point agreement?

Mahat: The 12-point agreement was the starting point. It wasn't everything. It was followed by the Comprehensive Peace Agreement (CPA) and other agreements. With the passage of time, as new developments arise, these should also be incorporated. So those who say that a new basis for consensus is necessary may have a point.
Also some of the provisions of the CPA are outdated. Like, it is not necessary to confine the Army to the barracks. They cannot be treated at par with the Maoist combatants. The monarch is gone; there is a republic. The Army should be allowed to function in a normal way. The reason why the Army had to be confined in barracks was because there was a lurking fear that they may intervene and side with the king when Nepal became a republic. That issue is not valid any longer. They have completely cooperated with the republican process. Their role in the transition was very constructive.

Q: How do you view the role of the United Nation's Mission in Nepal (UNMIN) in the transition?

Mahat: UNMIN's role hasn't been very effective. It has come to light that the verification numbers were defective. Not just that, UNMIN's monitoring was also weak.

Q: To give the other side of the story, UNMIN says that it had to stick to the limited mandate given by the Nepali actors and that all the parties were part of the verification process.

Mahat: Their mandate is limited, but they have not been effective in performing even their limited mandate. They don't even take the daily role call. We were told in the beginning that there would be barbed wire and CCTV cameras monitoring the movements of the combatants. This is part of the CPA.
We relied too much on them during verification. And it's not true that everyone accepted the results. The Nepal Army had protested when the results were announced. They had submitted in writing that it was not satisfied with the results.
UNMIN was also not very balanced. They got scared if the Maoists tried to scare them. Even their reporting was biased. We have highlighted that many times. We expected too much from them. I have also worked in the UN. I have seen how laid back their working style is.

Q: Does UNMIN still have a role in Nepal's peace process?

Mahat: It is difficult for them to leave until the process of handing over arms is completed. But if they have to continue they have to be more objective and balanced.