Estimating the cost of the blockade

With funding support from the Alliance for Social Dialogue (ASD), Nepal Economic Forum (NEF) released a report, Post Disaster Assessment: Blockade 2015/16, documenting the cost of 135 days long blockade on Nepali economy. Mr. Sujeev Shakya, Chairperson of NEF, also a prominent economic writer, has refrained from doing political economy analysis of the blockade; instead concentrated on presenting meticulous technical details of computing and imputing the costs of the blockade. In the absence of the political economy analysis of the blockade, that is, understanding why and how the blockade itself took place in the first place and the strategy pursued by the regime in Kathmandu to mitigate or resolve the crisis, the technical details have little meaning other than drawing the sympathy of some friendly countries and donor agencies. Most probably the five months long research, covering 23 districts, including hot-spots of the blockade, must have been made possible by some donor funding support via ASD.

Unlike past blockades made in 1969 and 1989, India had not officially accepted this third blockade in 2015/16. It even refrained from calling it a blockade. The Government of India has preferred to refer the blockade as a “hindrance” or a “bottleneck” in flow of goods created primarily as a result of security situation inside Nepal. However, the perception of Nepali side is unofficial blockade or “asahaj pristhiti” (inconvenient situation). In fact the blockade got introduced very much unofficially and it was also lifted unofficially. Whatever the terminology and nuances be, the 135 days long political economic drag only made common Nepali people to suffer. The jingoistic establishment of Nepal, instead of resolving the problem, fanned ultra-nationalism to escalate the conflict and let people suffer so that India can be cornered; they were least interested in resolving the issue.

During 15 months long blockade in 1989, the only state television, Nepal Television (NTV), telecasted every news bulletin with a count on blockade number of days. The stupidity of the then regime was clearly visible when housewives from some elite family members were telecasted live commenting fire-wood cooked meals to be tastier than the one cooked in kerosene. We did not hear such comments this time but, definitely, some political masters sought to trigger Nepali jingoism by advising them to try riding bicycles. They played heavily “China Cards” until they ran out of cards. This is why I said political economy analysis of the blockade is far more important than calculating the costs of blockade. Let me come back to political economy analysis after reviewing the contents of the research study.

The research covers eight major areas for imputing the cost of blockade. These included: macro-economy, commerce and industry and social sectors. There is a section on social impacts referred in the report as “Social Review”, but the report failed to give proper treatment to the subject matter.

Obviously, the macro economic impact of the blockade included rise in inflation (12%); dipping trade (36.8%), public spending and government revenue collection. The figures were compared to corresponding figures in 2014/15. The agriculture sector suffered due to unavailability of the fertilizers and the access to market. The energy sector suffered as the crunch in fuel supply lead to over consumption of electricity. This added insult to the injury as Nepal was already facing the problems of electricity outages. The tourism sector suffered with substantial drop in tourists – both Chinese and Indian. The report speaks of drop in tourist occupancy rates as “to 15%” in one section and “below 30%” in other. There are other inconsistencies in the report. The direct loss from commerce and industry sector is imputed as $2-2.7 billion as a result of demurrage charges; 400,000 workers were estimated to have remained unemployed. In the education sector, about 3.47 students could not attain schools and colleges. Similarly, in the health sector, as Nepal depended on 60% medical supplies imported from India, the sector was badly affected. The report concludes with possible long term impact on Nepal’s Sustainable Development Goals (SDGs). Given the fact that this man-made crisis followed immediately after big earthquake in Nepal, the human sufferings and cost from the blockade is enormous beyond the one that could be easily captured by statistics.

The most exciting section of the research should have been on social impacts but this is where researchers have failed despairingly. Divided into four sections, but mistakenly mentioned in the report as five, the social impacts included (1) further polarization of Nepali society into Pahadi vs. Madhesi; (2) widespread black marketing of fuel, currency, other scarce goods and gold to convert Nepali currency into Indian currency; (3) extravagant spending as a result of black marketing and moonlighting; and (4) deterioration in public morality as rules were relaxed or regulators looked to the other side during crisis situation. The researchers failed to report on lives lost due to fire hazard as people stock piled fuels. At least, in two places (Kathmandu and Pokhara) family members were killed by accidental fire from fuel storage. The researchers also failed to report that the brunt of the blockade was felt by the poorest of the poor. The political masters and their civil servants benefitted or were not affected at all. Have these hard facts been introduced in the report the report would have gained some currency and credibility. Reading the report gives an impression of “analysis-paralysis syndrome”. Instead of doing sector by sector impact analysis, had the report presented cascading effects of the blockade, in terms of first order, second order and third order effects – starting first with the crunch in the supply of fuel, followed by bottlenecks in transportation leading to scarcity of essential goods and services – the analysis would have been more coherent, meaningful and interesting material to read. The report may please some sections in Nepali society adept in bashing India, playing China Cards and stoking the fire of Nepali nationalism but it failed to touch sufferings of common Nepali people. As the report has mentioned Nepal seems to be experiencing blockade almost at an interval of 20 years. This means there will be many more blockades to be faced in future. But the preparations and solutions mentioned in the report do not provide counter measures for the possible blockade, say, in the year 2036.