Roles of Public, Private, and Cooperative Sectors in Economic Development

Economic Development

Economic development refers to a state of positive and qualitative transformation across all dimensions of human life, coupled with structural changes in the economy. It is a multidimensional concept that expects positive changes in all aspects of human life within a human-centered development framework. Economic development is understood as a condition where poverty, unemployment, and inequality are eradicated within the context of a growing economy.

For sustainable economic development, capital formation through savings mobilization, broad-based economic growth, scientific and practical education systems, accessible and quality healthcare, abundant productive employment, nutritious food, a clean environment, poverty reduction, and distributive justice are essential. Economic development is measured through multiple indicators such as average life expectancy, health, education, employment, poverty, and child and maternal mortality rates.

Public Sector

The public sector encompasses all activities and their expansion operated by the government, focusing on public welfare. It is a government-owned and controlled sector that serves public interests and acts as the primary driver of development. The public sector is synonymous with the government sector, and its core function is to fulfill all responsibilities assigned to the government. It steps in to perform tasks that the private and cooperative sectors cannot undertake or where they fail, addressing citizens’ basic and essential needs. Service delivery takes precedence over profit in the public sector, and it remains active under all circumstances. The objectives, policies, and programs of the public sector are formulated by the government and include public entities, public enterprises, development committees, and projects.

Role of the Public Sector in Economic Development

The public sector is a key pillar of economic development, acting as the leader of the economy due to its broad scope and nature. It serves as the guardian and legal mechanism of the state, exercising coercive power and punitive authority when necessary. The roles of the public sector in economic development include:

Achieving rapid, sustainable, and employment-oriented economic growth to build a socialism-oriented economy.
Encouraging investment and participation from private, cooperative, community, and non-governmental sectors.
Formulating policies, plans, strategies, and standards for a socialism-oriented economy.
Creating an environment for high, sustainable, and inclusive economic growth, infrastructure development, and increased production and productivity.
Maintaining macroeconomic financial stability.
Promoting social justice, regional balance, and a civilized, equitable society.
Ensuring equitable distribution, redistribution, and empowerment of economic achievements.
Maintaining good governance, peace, order, social security, human rights protection, productive employment, and improving federal governance systems.
Providing citizens with a refined and dignified life experience.
Leading, facilitating, and coordinating economic development.
Developing strategic infrastructure to create a foundation for high and sustainable development.
Implementing policy, procedural, legal, and regulatory reforms to foster domestic and foreign investment.
Advancing government, private, non-governmental, and community sectors in the development process.
Formulating and implementing plans and policies.
Managing foreign aid and promoting economic diplomacy.
Ensuring peace, security, procedural simplification, and an investment-friendly environment.
Coordinating, monitoring, evaluating, and guiding national development programs.

Problems in the Public Sector

Ambiguity and frequent changes in policies and programs.
Lack of good political culture.
Procedural complexities and policy ambiguity.
Process-oriented public entities.
Weak spending capacity of government bodies.
Public enterprises operating at a loss.
Ineffective monitoring and evaluation processes.

Solutions to Public Sector Problems

Ensuring clarity in policies and programs.
Developing a good political culture.
Enhancing the spending capacity of government bodies.
Simplifying the operational processes of public entities.
Identifying the causes of losses in public enterprises and finding solutions.
Strengthening monitoring and evaluation processes.

Private Sector

The private sector comprises businesses or commercial entities established and operated with the aim of earning profits. It operates under government policies but is driven by its own organizational rules, contributing to national economic development outside direct government control. The private sector is the foundation of economic growth, creating 90% of formal and informal employment globally. In Nepal, it is the second strategic economic partner of the government, operating under indirect government regulation. With the advent of economic liberalization and globalization, the private sector has expanded significantly.

Role of the Private Sector in Economic Development

The private sector is characterized by entrepreneurship, creativity, modern technology, and risk-taking capacity, with a focus on profit. It includes industrial, commercial, and service-oriented businesses. Its roles in economic development include:

Expanding economic activities through investment, production, distribution, and job creation.
Collaborating, partnering, and coordinating with the public sector in the development process.
Fostering harmonious relationships between investors and workers.
Enhancing the quality of goods and services and making them accessible to the public.
Operating businesses based on professional values and standards.
Increasing investment with innovative ideas and technology.
Boosting productivity through competition.
Strengthening linkages between agriculture and industry to support economic transformation.
Assisting the government in formulating policies and regulations related to the private sector.
Promoting investment in physical and social sectors.
Prioritizing consumer interests.
Contributing to economic growth, revenue mobilization, and entrepreneurship development.
Promoting international investment in industry, trade, and infrastructure development.
Reducing economic dependency and trade deficits through production and diversification of goods and services with comparative advantages.

Problems in the Private Sector in Nepal

Lack of good political culture.
Insufficient infrastructure development.
Weak competitive capacity.
Political transitions and instability.
Lack of an investment-friendly environment.
Industrial insecurity.
Energy crises.
Strikes and shutdowns.
Dominance of carteling and syndicates.
Extortion, kidnapping, and ransom demands.
Lack of proactiveness within the private sector.
Poor labor relations.
Focus on trading imported goods and services rather than productive sectors.
Shortage of skilled and semi-skilled labor.
Lack of quality and competitiveness in goods and services.
Weak consumer protection and social responsibility.
Lack of a strong, capable, and accountable private sector.
Unstable government policies.
Inadequate facilitative and incentivizing role of the government.

Solutions to Private Sector Problems and Strengthening Its Role

Promoting private sector participation in economic development in line with constitutional policies.
Mobilizing financial and monetary policies to increase investment sources and sectors.
Ensuring industrial security and flexible labor relations.
Strengthening the government’s regulatory role over the private sector.
Developing accountability and transparency standards for the private sector.
Creating a favorable environment for industrial development investments.
Promoting and developing entrepreneurship.
Ensuring timely legal and policy arrangements.
Guaranteeing comprehensive industrial security.
Maintaining political commitment, consensus, and social stability.
Emphasizing physical infrastructure development.
Prioritizing macroeconomic stability by the government and political parties.
Ensuring financial system stability through appropriate government policies.
Collaborating between the government and private sector to develop a competitive market mechanism.
Strictly enforcing existing legal provisions by both government and private sectors.
Ensuring policy clarity and continuity in government policies for private sector development.
Creating an investment-friendly environment to boost private sector investment.
Ensuring an environment for industrial security.
Jointly emphasizing education and training development by the government and private sector.
Implementing effective supervision and regulation of private sector activities by the government as needed.
Encouraging private sector institutions to fulfill their social responsibilities.

Cooperative Sector

The cooperative sector consists of autonomous organizations where individuals voluntarily unite to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled businesses. It is based on values such as collective unity, effort, consensus, goodwill, humanity, and fraternity, operating on the principle of "Each for All and All for Each." Robert Owen of the UK is considered the founder of the cooperative system. In Nepal, the Cooperative and Poverty-Related Management Information System (COPOMIS) is implemented to regulate and promote the cooperative sector effectively.

Seven Principles of Cooperatives

Voluntary and open membership.
Democratic member control.
Member economic participation.
Autonomy and independence.
Education, training, and information.
Cooperation among cooperatives.
Concern for the community.

Core Values of Cooperatives

Self-reliance, self-responsibility, democracy, equality, equity, and solidarity.

Ethical Values of Cooperatives

Honesty, openness, social responsibility, and care for others.

Norms of Cooperatives

Not participating in profits.
Not relying on charity.
Not conducting business with non-members.
Providing non-commercial services to non-members as well.
Engaging in positive activities.

Role of the Cooperative Sector in Economic Development

Consolidating scattered labor, skills, technology, and capital to increase production, productivity, and employment.
Promoting savings habits among local communities.
Advancing collective economic interests, leadership development, and promotion of household and small enterprises.
Generating income, employment, and meeting social needs.
Contributing to poverty alleviation, social security, and community development through cooperative campaigns.
Ensuring simple supply and distribution of consumer goods at affordable prices to promote consumer interests.
Increasing domestic production to reduce economic dependency.
Building economic foundations, fostering social transformation, and developing coordination.

Problems in the Cooperative Sector in Nepal

Inadequate cooperative education and awareness.
Greater focus on savings and loan activities rather than production and employment.
Weak adherence to cooperative principles, values, and norms.
Lack of cooperative governance.
Increasing financial risks in some cooperatives.
Lack of regulation and professionalism.
Weak and non-transparent internal audit systems in cooperatives.
Dominance of family-based management in cooperative operations.
Lack of entrepreneurship.
Insufficient effective government monitoring and regulation.

Solutions to Cooperative Sector Problems

Promoting cooperative education and awareness.
Focusing cooperatives on production and employment.
Ensuring effective adherence to cooperative principles, values, and norms.
Strengthening monitoring and regulation mechanisms.
Enhancing the effectiveness of internal and final audits in cooperatives.
Institutionalizing good governance and the rule of law in cooperatives.

Conclusion

The three-pillar economic policy, comprising the public, private, and cooperative sectors, is a framework for mobilizing capital to ensure economic stability and development. It is also considered a mixed economy that emerged as a form of economic liberalization. The collective and coordinated efforts of these sectors are essential for enhancing economic indicators, utilizing knowledge, skills, and experience for economic development, increasing participation in areas with comparative advantages, creating a conducive development environment, fostering mutual trust, building large-scale infrastructure through partnerships, supporting institutional development across sectors, promoting a professional business culture, and effectively mobilizing scattered resources and capacities. The partnership between the public, private, and cooperative sectors is vital for Nepal’s sustainable and inclusive economic development.

2.3 The role of the public sector, private sector and cooperative sector in economic development