Friday, May 26, 2017

Hydro Revenue Can’t Assure Self-reliance

The Kuensel’s headline “Hydro Revenue Can’t Assure Self-reliance” of 24th May, 2017 has got to be the understatement of the century, but a STATEMENT nonetheless. For once, truthful, even if not the whole truth, about the perils of Bhutan’s hydro-power misadventures are now beginning to appear in print, and expert views that matter are beginning to be heard.

Saying that hydro revenue cannot assure self-reliance is euphemism at its extreme. What we are headed for is total economic bondage.

Every Bhutanese who care for the country and the Tsa Wa Sum must read and re-read the Kuensel article quoted above. It does not unravel whole lot of muck that surrounds the hydro-power projects in Bhutan. But the article certainly provides an unvignetted view into the looming disaster that awaits us.

The recent public talk given by Mr. Martin Rama, World Bank’s Chief Economist of South Asia Region, as reported by the Kuensel, is carefully worded and goes to great lengths to ensure that they do not cause any tremors. But the truth, in whatever garb it is presented, remains a truth. And the good economist has delivered some home truths that we need to take note of.

The World Bank's economist Mr. Martin Rama (Phd) has apparently said:  “…… because when more than a quarter of revenue generated from hydro-power is spent on debt servicing, the country may not meet its expenditure.”

What he is saying is this: that the hydro-power projects may be self-liquidating - but they do not contribute to self-reliance and, therefore, we will be even more broke in the future!

He also said: “…… the decline in tax revenue in relation to GDP is not due to a change in tax instruments or in tax rates, but because of policy decisions of tax holidays and exemptions. Sales Tax exemptions result in 50 percent of foregone revenue. Further around 63 percent of all imported commodities are exempted from Custom Duties.”

“Instead of losing the tax revenue to exemptions that are not rational, he said efficient management of taxation could also play a vital role in attaining fiscal self-sufficiency.”

I am immensely tickled at his reference to Exemptions that are not rational. How beautifully he phrases it! But artistry of language aside, spoken in plain language, what he means is that the “QUOTA” system must go. I am in no doubt that he is referring to the irrationality of the “quota” system - a system that allows duty-free import of luxury vehicles, booze, chocolates and perfumes, by a select group of privileged people. It certainly is irrational when the rich, the powerful and the well placed and those who are economically able, are exempted from paying taxes and duties ---- and those who cannot afford them are denied the relief they deserve.

The World Bank economist's underlying message is this: that the hydro-power is good only for liquidating its loans. Even that may not be true.

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