As a blogger I
take pleasure in writing for my own cerebral fulfilment, not for work. And, I
feel happy if people read my blogs, not only in Bhutan but around the world in
17 countries so far (the most popular being one -- blog no. 4 -- posted on 8
April 2012). There are pageviews of the first blog everyday even more than
three months after I posted it. I guess people like reading them. But I
am not sure if people take anything, deduce any message and/or are indifferent
to the issues. No one has posted any comments, not even as anonymous, despite
the fact that the readers included cross-section of national (from leaders;
peoples’ representatives; people in civil service, private sector,
and civil society; to non-resident Bhutanese) and
international elites. You don't need to!
I write with a
purpose, not of self-centred direct intent seeking name,
fame, recognition and/or wealth now or later. I write to
emphasize four directional hairpin turns including:
(i)
rethinking our development model and making slow
longer-term economic shift in harmony with other three that follows here;
(ii)
strengthening government institutions balancing
power, authority, responsibility and accountability;
(iii)
moving forward development process with positive
public-private partnership concept for creation of "coalition of the
positive"; and
(iv)
undertaking austerity measures, regulating
economic activities and introducing financial discipline to ease rupee
crunch.
So, let me
recapitulate and see if it will stir your
thought process and stimulate some substantive discussions.
First, I place
emphasis on taking tougher hard-work route with a slow and step-by-step shift towards export-led growth model
from current relaxed import-driven internal consumption-based pattern characterized by high
credit growth and internal and external imbalances. If not now, we will not
even be able to take the future path tagging along catching a little finger. The initial
steps to this: instilling into the system financial accountability;
undertaking institutional reform; and streamlining policies, regulations and
procedures to improve medium- to longer-term socioeconomic performance. If the
need for improving the core structural strength including institutional and
individual capability to perform, with
creativity (thinking new things) and innovation (doing new things), is
not recognized no one will see national enthusiasm inundated with
optimism forthcoming in near future. Earlier we recognize and move in
this direction, the better it is. My main points in “The Indian Rupee
Crunch in Macro Perspective” posted on 17 March 2012!
In second and
third issues, I have reviewed RMA’s austerity measures introduced to ease INR
crunch with somewhat irrational
excitement with little/no consideration to day-to-day problems of the people including small
business people, retailers, travellers, students, patients, and poor residents
in border areas; and financial
environment created by its measures and no realization to how important a role
INR plays in people’s daily life. Also included in the review are bank
deposits and credit growth scenarios. We need to learn to respect the
peoples’ value and their problems with no carry-forward financial burden to
future generation. A responsible nation does not disregard the aspirations,
both present and future, of its people of all levels!
Fourth, every
country has potential to do well but the potential is lost if its citizens’
days are spread thin. The people in public as well as private sector have to take national pride in associating
themselves as committed partners in the development process: a shift from the
present culture of business
fronting, tax evasion, illegal authentication, and taking advantage of other
loopholes at all levels of economy. First step towards this: block every
possible route to cronyism. Then foster public-private partnership clearly
underpinning what is done best by public sector vis-a-vis to be best left
to private undertaking, with no debt liability to future generation. The debt can make a country effectively bankrupt. Therefore
careful assessment of debt sustainability and judicious utilization of credit
will go in line with economic shift to support production base for export of goods and services. In
near-term regulating economic activities in both public and private
sectors at manageable/affordable level with key fiscal and monetary measures is
crucial to realizing institutional capacity of the economy and easing rupee
crunch.
Fifth, casual oversimplification
of issues dilutes innovative drive as well as development accountability.
There is a need to create conducive environment for true professionals, both in
public and private sectors, to deal every issues in depth and make positive
contribution with innovation and creativity. It takes massive effort and time to build
institutions/organizations with professional values. But ignorant destruction
of values takes flick of a second. Adequate space is required for qualified and
educated professionals, be the growth model export-led or import substitution.
The import substitution is good provided it is supported with economic and strategic rationale, with
or without rupee crunch, but has limitations. The best strategy is to realize
what you are good at and focus fully on it with an intention to carve out your
own regional space. For this we have to have vision!
And last one
before this blog, I have reviewed Task Force recommendations. The Task Force has essentially focused on immediate measures
in financial sectors, but included no substantive recommendations on
longer-term scale that reflect future development perspective and foresight
including in dealing with country’s
debt situation.
While I
emphasize the importance of paradigm shift in both public and private sectors
and formation of "coalition of the positive",
synchronized austerity measures to ease rupee crunch in parallel cannot be
overstressed more. The
rupee crunch is not the cause, it is the symptom of a weak long-term
developmental foresight. You may treat the symptom but cannot get over the
problem unless you take care of the root cause. As simple as that! The problem
must be fully addressed along the policy paths. If someone argues that the
heavy dependence on public sector, including hydropower, is a consequence of --
and a foundation towards -- a future free market regime, it sounds unreasonable
to me.
Bhutan has
hydropower potential. In 2010,
the total exports of electricity to India was Nu.10.4 billion (17.6% of nominal
GDP). While we look into tapping 10,000 MW, there are critical issues:
hydropower is dependent on summer rainfall and winter snowfall, and its
competitive advantage in the long run considering also that the energy focus of
the world is shifting from traditional sources (crude oil, natural gas,
thermal, nuclear, hydro…) to more environment friendly and renewable sources
(wave, tidal, solar, wind, fuel cell etc). For example, United
States uses about 4,000 terawatt hours (TWh) of electricity per year. The
recent report found that the nation’s waves and tides could potentially produce
up to 1,420 TWh (35%) annually.
The hydropower is water
dependent, and so are other assets, land and forests. So water is by far most
important of our natural resources. Bhutan’s total annual internal renewable
surface water resources are estimated at 78 km3 (78,000 million
m³) without accounting groundwater resources. Mostly groundwater gets drained
by the surface water network because of hilly terrain. In 2008, total water
withdrawal was estimated at 338 million m3, representing a mere
0.43% of the annual renewable water resources while the world is withdrawing water from aquifers at a rate faster than
the aquifers can recharge. Also,
water is not a renewable resource
in many parts of the world. The internal renewable water resources (IRWR)
per capita of Bhutan at about 43,000 m3 compared with Asian
IRWR per capita average of 3,300 m3 deserves attention and priority. I was wondering
why we do not have department/ministry to deal with internal
renewable water resources while all our neighbours have ministries
dedicated to water resources.
We do need a
shift in our strategy!
continuation.....................The Indian Rupee Crunch..........(8) - Tax Increase
