Maoists set to be at helm for long: Dr Bhattarai

Dr Baburam Bhattarai, who presented the budget that is said to be a departure from the earlier policies, believes that the Maoists will lead the state for many years to come. He talks on the budget, foreign aid and many other issues.

You are a fortunate finance minister to inherit a sound economy. However, don't you think that you have squandered away the legacy?
Dr Bhattarai: No, I don't agree that the economy is sound. We are one of the poorest countries in the world. For the last 60 years, our growth rate has been very sluggish. Average population growth rate and economic growth rate just cancel each other. One third of our GDP's share is still contributed by agriculture. We have a huge trade gap that has been rising. Industrial GDP is less than 10 per cent. We are heavily dependent on foreign aid. Thus, economy is not sound. Temporarily we may have positive Balance of Payment (BoP) but that is because we have no spending capacity and no industrial investment. In that sense the BoP situation cannot be taken as a sign of positive health of the economy. We have made a radical departure from the past. This is not the continuation of the past system. This is not the continuation of the past government. That's why I don't want to use this word inherited. After the declaration of Democratic Republic, abolition of the monarchy, the feudal political structure has been more or less dismantled. But the social and economic base remains feudal, especially in the rural areas. Even in the urban areas whatever little capitalism is there that is dependent capitalism, which has no national root. We want to make a radical departure from all this. Whatever we inherited from the past is nothing to be proud of. The general people have appreciated my efforts but those who have benefited from the past policies are making all the noises. I'm not bothered about that. I am concerned with the welfare of the majority of the people -- poor, marginalised, women, Dalits, Madhesis -- who are living in the underdeveloped regions. What they say matters to me.

You used to blame the successive governments for increasing the foreign aid dependence. But in the budget instead of reducing it, you have increased it substantially?
Dr Bhattarai: We are in a transitional phase. Firstly, this is not a government totally controlled by our party. We are not free to implement all our policies. I had to make a lot of compromises. Secondly, foreign dependence is a historical process. It takes time to do away with that. Foreign dependence does not mean you don't borrow from outside or accept grants. The issue is what do you use that for. You use that for improving your capacity, building infrastructure, building industry and developing self-reliant economy. Or you accept it to increase dependence. My approach has been that I accepted loans and grants but I have tried to utilise that for economic development and to build capacity. In the coming years the dependence will be reduced. Thirdly, I have changed favourably the ratio of internal revenue to the external resources. In the coming days, it will lead to less dependence.

What do you think of the donors' conditions? Aren't you going to fall into the debt trap?
Dr Bhattarai: Of course, the conditions are there. Foreign aid does not come as charity. But we are focusing on developing self-reliant economy and learn to utilise our own resources -- natural as well as human. In the long-term we will develop self-reliant economy. We have to go through this transitional phase first.

How can you develop a self-reliant economy without more investment? We have not seen any domestic or foreign investment lately. Without more investment how can you generate employment?
Dr Bhattarai: We have been trying our best to create conducive investment climate. We have been regularly talking to the private sector as well as foreigners to invest. Some of them have shown interest also. We are sure they will invest.

But how can you be so sure when there are rising labour disputes? When domestic industries are closing down, how do you expect foreigners to come and invest?
Dr Bhattarai: Labour disputes are just 10 per cent of the total problems that our industries are facing. Around 40 per cent of their production is hampered due to load-shedding and there are other more serious issues. If the industries operate smoothly, the meagre amount of wage hike will not be any issue.

Are you sure that concept of public-private partnership will work in Nepal and there won't be socialisation of debt and privatisation of profits?
Dr Bhattarai: We have not brought public-private partnership (PPP) model only to appease private sector but it is also our conviction. Only with the cooperation of the private sector our economy can develop and the economic policy and programmes put forward by the government can be executed. We are ready to sit down with the private sector and work out the correct modality of the PPP. In the days to come, I'm quite confident that we can make it work.

Don't you think that the loan-waiver programme that you spelt in your budget will have negative impact on the total banking sector?
Dr Bhattarai: No, it won't have any adverse impact on the banking sector. We have brought this scheme to give relief to the poor peasants. This is the duty of this government to help small peasants and also small entrepreneurs whose business was destroyed during the conflict. This government will provide relief to them. Anyway they were not able to pay their loans and the banks were losing. But we have guaranteed to return the money to these banks within a time-frame.

Won't it put burden on next finance ministers?
Dr Bhattarai: We are not passing the burden to anyone because Maoists will lead the state for many years to come. There is no need to worry on this score. We'll execute this programme. We have to take the responsibility and we are fully prepared for that. People believe that it's only the Maoists who can lead this country. People want change and only the Maoist party can bring change.

The budget you presented is a deficit budget. How are you going to manage it?
Dr Bhattarai: We'll increase revenue collection. The revenue collection till October 31 was Rs 26.24 billion, a 24.3 per cent growth in comparison to the same period last year. We'll meet our revenue target and also fill the gap by collecting more revenue.

But your own cadres are being blamed for revenue leakage. How will you be able to increase revenue, if your cadres oppose the revenue officials from collecting taxes?
Dr Bhattarai: That is not true. To meet revenue target, our government is very serious. Those who have not paid taxes will have to pay. Our trade union is not involved in any revenue leakage activities and we have given strict directions that they should not side with the defaulters. As long as I am finance minister and a leader of this party nothing of this sort will happen. I'll be strict with defaulters.

Do you agree that in a cash-strapped country like Nepal capital market can be a better tool to collect dispersed small amounts of money and use the same for industrial development?
Dr Bhattarai: I don't see any dearth of capital in our country. It's only the question of management, proper utilisation, proper investment. There are some institutional bottlenecks in this regard. What I like to emphasise on is that we're changing from agriculture-based economy to industrial-based economy. During such period, we have to utilise small capital and make a correct investment in industrial and other sectors. So that capital formation goes in a correct direction. In case of Nepal, there is a lot of capital in the rural sector from remittances. But there is no proper modality to channelise and utilise it. This money should come through the banking channel. People are investing on unproductive sectors like buying land and houses. It should be invested in productive sectors like infrastructure development and industries.

Some economists have alleged that Maoists are promoting crony capitalism. What do you have to say?
Dr Bhattarai: It's a baseless claim. Those who have thrived on corruption and illegal deeds in the past are finding it difficult to come out of that frame of mind and making baseless allegation on our party. The Maoist party is a large party. People, who have supported us, voted for us do you think they do not have any economic right to invest? If they are involved in legal economic activities, it's their right.

The dispute on education tax shows that you did not do enough groundwork before coming out with it?
Dr Bhattarai: That is not true. There are two types of education systems in the country. It will take some time to change this old educational system. In the transitional period, we'll tax the private schools so that the public schools in the remote areas could benefit. We have formed a committee to resolve the dispute on modalities. Its completely new concept, people will take some time to understand.