Are we heading towards state failure?

With political instability and economic downturn, everyone is fearing about Nepal heading towards a state collapse, something akin to what unfolded in Sri Lanka in a harsher from or in Pakistan in a milder way.

In 2015 we had a natural disaster – April earthquake. However, one positive outcome of that disaster is that it compelled politicians to draft the constitution, hitherto delayed after Constituent Assembly elections in 2008. This was in response to donors dangling more than four billion dollar aid money for earthquake reconstruction and rehabilitation. The drafting of the New Constitution triggered another round of discontent in Terai-Madhesh politics and this, in turn, led to blockade by India thereby putting the economy in a state of limbo.

The elections in 2017 instilled some hope in terms of ending political transition and achieving a degree of stability. However, intra-party fighting in the communist camp betrayed people’s hope. The arrival of Covid-19 was an insult to the injury. With the phase-wise, extended lockdowns, the economy came to a standstill position. The politicians kept busy fighting each other over to occupy the master bedroom when the whole house was on fire.

The second elections in 2022 was expected to bring some respite; however, the hung parliament situation brought the repetition of the same, if not the worse, situation than of 2017-2022.

The deeper impacts of Covid-19 is being felt by all sectors of the economy. This is reflected by ongoing financial and social crisis. Now, everyone is talking of trade deficits, shrink in the economy, problems of meter byaji (loan sharks), rising inflation and liquidity crunch. The moot question being asked: Are we heading towards a failed state?

Now, everyone is talking of trade deficits, shrink in the economy, problems of meter byaji (loan sharks), rising inflation and liquidity crunch. The moot question being asked: Are we heading towards a failed state?

State Fragility Index and Fragile State Index

There are two indicators that are used to measure state fragility. The names sounds similar; however, their scoring and construction are totally different. We will use these two indicators as a way to check one on the other. The first one is called State Fragility Index (SFI). This is published by the Centre for Systemic Peace. The SFI data are available from 1995-2018, covering a total of 167 countries.

The Centre for Systemic Peace has defined SFI as “state capacity to manage conflict, make and implement public policy, and deliver essential services, and its systemic resilience in maintaining system coherence, cohesion, and quality of life, responding effectively to challenges and crises, and sustaining progressive development.” FSI is composed of four dimensions of state fragility, namely, security, political, economic and social. Each dimension is further divided into “effectiveness” and “legitimacy” components, giving a total of eight (4x2) variables. Except for economic variable which is scaled from 0 to 5, all other components are scale from 0-4. The total scores ranges from “0” (no fragility) to “25” (extreme fragility). Therefore, higher SFI score implies worsening of fragility situation and vice versa.

The second measure, having a similar sounding, is called Fragile State Index (FSI). This is annually published by an NGO called the Fund for Peace. FSI is composed of four dimensions of state fragility: cohesion, economy, political and social dimensions. Each of these components is further divided into three variables giving a total of 12 (4x3) (Refer to Table for component breakdowns). With a scoring of 10 for each variable, FSI scores range from 0-120. As with SFI, a higher FSI implies worsening fragility situation and vice versa.

Table 1: Dimensions of Failed State Index with Sub-Components

FSI data are available from 2006-2022 and cover a total of 178 countries. Originally, the indicator was called Failed State Index. The Fund for Peace has defined fragility as a risk of state failure arising out of “extensive corruption and criminal behaviour, inability to collect taxes or otherwise draw on citizen support, large-scale involuntary dislocation of the population, sharp economic decline, group-based inequality, institutionalized persecution or discrimination, severe demographic pressures, brain drain, and environmental decay”. It further stresses that states can fail at varying rates through explosion, implosion, erosion, or invasion over different time periods.

Fragility data for Nepal

Armed with these two sets of data, let us see the results for Nepal. Chart 1 depicts trends in SFI data for Nepal from 1995-2018 and Chart 2 depicts FSI data from 2006-2022.

Source: www.systemicpeace.org

Source: www.fundforpeace.org

As mentioned above, both indicators are constructed using different methodology, therefore, the results and interpretations may differ. However, both graphs reveal a declining trend in state fragility or an improvement in state stability for Nepal, albeit at a slower pace than what can be achieved.

As per SFI data, the Centre for Systemic Peace has labelled us as “low fragile” country in 2018. In 1995, we were in the category of “moderately fragile” country. In both charts, one can observe worsening of fragility situation during the period of royal regression (2001-2006).

In terms of Fragile State Index (FSI), the Fund for Peace has rated us as “highly fragile” country in 2006. We were ranked at 20th position among the list of 179 countries. By 2022, our ranking has declined to 49th position. This is again a two point drop from 51st position in 2021. Both data sources indicate that we need not worry about state collapse though there are lots of rooms for improvement.

Sources of fragility

If the Charts 1 and 2 give us some respite on our fragility situation then decomposing SFI and FSI indicators will help us identify possible sources of our fragility or, alternatively, the sources of our resilience and stability.

In SFI data, the four components (security, political, economic and social) are decomposed into “effectiveness” and “legitimacy” factors. A bit of explanation is required here. Effectiveness is related to achieving results or outcomes – how effective we are in achieving particular results or goals? Legitimacy, on the other, is related to doing rightful things – how legitimate are our goals and aspirations?

Chart 3 indicates that we are good at conceiving legitimate goals and/or objectives (the rapidly declining legitimacy trend line) compared to effectiveness component. Among the four dimensions of SFI, we are worse at achieving economic goals and objectives. Therefore, reading SFI data, our fragility rests on non-achievement of economic goals. This is to say our problems are not with politics but with economics.   

Source: www.systemicpeace.org

What about FSI data? FSI data also look into four components: cohesion, economy, politics and social. The Chart 4 presents trends in these four components over a period of 16 years (2006-2022). It will be clumsy to have all twelve sub-components in a single graph. Therefore, I will only highlight the significant issues. Readers interested in these data may get access from the website.

Source: www.fundforpeace.org

In contrast to SFI data, it is not economic factor that is contributing to our fragility; it is the cohesion factor. These include primarily group grievances and factionalized elites. These two factors are the primary sources of our fragility.

From 2010 onwards, economic factors are at the bottom and they are on rapid decline. Therefore, as per FSI data, our fragility is not with economic issues. The next contributing factor within social component is demographic pressure. Recent publication of census results indicate we are into some kind of population stabilization. But the data here refer to demographic pressure on land and climate change. Within political component, it is the human flight and brain drain (related to our foreign employment and remittance economy) that is contributing to our fragility. The delivery of public service is the next component within politics where we need to improve if are expecting resilience and stability.

To sum up

It is too difficult to predict our state fragility. However, reading two sets global data on state fragility we can refute state failure hypothesis for Nepal. The trend line clearly exhibits Nepal improving its fragility situation. It is too difficult to change or reverse the momentum gained. Externally induced situations like earthquake in 2015 and Covid situation in 2020-21 have minimally disturbed our fragility situation. The recent media hype on state failure has little do with hard evidences. However, we do have lots of room to improve on our resilience and stability.    

Published on 28 March 2023