Nepal: Development Assistance Policy

Finance Minister Dr Ram Sharan Mahat made public the ‘Development Assistance Policy of 2014’ on Friday, June 27, 2014. It has been more for empowering the Finance Ministry for controlling the development assistance than for the effective use of foreign assistance. The policy would hold back the development assistance. Finance Minister Dr Mahat would have done right thing if he were to finish off the institutionalized corruption for efficient and effective use of development assistance. Lawmakers might go on strike if they were not to receive Rs 50 millions for the development of their respective constituency. Some left political parties inside and outside of the CA have formed an alliance to fight jointly for crafting a pro-people constitution with identity-based federalism.

Development Assistance Policy Of 2014
“Development Assistance Policy of 2014 (2071), International Assistance for Effective Development, Government of Nepal, Ministry of Finance, Kathmandu, Nepal” looked more like a textbook than a strategic document. It teaches how the ministry of finance controls the flow of foreign assistance. It also reinvigorates the Social Welfare Council for controlling the NGOs and INGOs. In other words the Development Assistance Policy of 2014 is taking Nepal back to the Panchayat era. It minimizes the role of the private sector in development.

Following this policy, none of the State agencies could do anything for receiving or even looking for the foreign assistance without the prior approval of the ministry of finance. All the rights to mobilizing, using and monitoring the foreign assistance were reserved for the ministry of finance. Whether the ministry of finance has such ability and capability to run all such ambitious administration of foreign assistance, I don’t know but I do know that such control will enhance the inbuilt corruption system at the ministry.

Finance Minister Dr Ram Sharan Mahat had been the forerunner of the economic liberalization. He sometimes boasted about the current economic development in the country was the result of his economic liberalization policy adopted in 1990s. No doubt about that, it was true. We needed to give him the credit for the economic liberalization.

However, the strange thing was happening that the same man Dr Mahat had made the Development Assistance Policy of 2014 entirely for controlling the flow of development assistance. His aim at maximizing the utilization of the foreign assistance would be met if Dr Mahat were to plug the loopholes the State laws concerning the development had. For example, the “Public Procurement Act” has been the main instrument for the corrupt officials including ministers to accept so-called ‘variation order’ to make any development project cost overrun and time overrun. Accepting the ‘variation order,’ ministers and officials in conjunction with the contractors could make huge money. However, Dr Mahat chose to control the flow of development assistance. It would be disastrous to the country and Dr Mahat, too.

The Social Welfare Council (SWC) would run a parallel government to the ministry of finance for controlling the NGOs and INGOs. The Development Assistance Policy of 2014 made the SWC the agency to control the NGOs and INGOs. During the Panchayat era, the then queen Aishowarya ran the parallel administration through the SWC. This time, Dr Mahat might do the same.

Now, how long Dr Mahat might withstand the pressure of the development partners remains to be seen. Dr Mahat preferred to use development partners to donors. Previously, the ministry of finance accepted the foreign assistance projects to meet the requirement of foreign currency. Now, Dr Mahat has sufficient foreign currencies earned by the Nepalese youths working in foreign countries. He needed not to bow to the dictation of the donors. However, the country would suffer from not being able to implement large and small projects. I would rather anticipate the slow flow of foreign assistance following the Development Assistance Policy of 2014. It would certainly cause the slow implementation of development projects at the national and the grassroots level.

NGOs and INGOs would be at the mercy of SWC. Both the recipients of the development assistance and the donors particularly the NGOs and the INGOs have to rush to the SWC for approval of projects. I don’t know whether the SWC has the human power to cope with the administrative pressure they will have after the NGOs and INGOs go there for different sorts of permits. Only time will tell how the SWC would choose NGOs and INGOs for allowing the implementation of development assistance projects at the grassroots level. The consequences of such control of NGOs and INGOs by the SWC would be the slow implementation of development projects at the grassroots level. The sufferers would be the poor.

The Development Assistance Policy of 2014 would surely create a lose-lose situation. Donor in the words of Dr Mahat development partners would regret that they would not be able to assist the Nepalis in their socio-economic development following the Development Assistance Policy of 2014. Each donor country has its program on how much money to funnel through the government and how much through the INGOs, and the NGOs. So, Dr Mahat might not be able to force the donors to pursue his development assistance policy. Donors might go to elsewhere when they would find that they were not able to help the poor. The poor Nepalis at the grassroots level would suffer from not having the development projects at the grassroots level. Mostly the NGOs and INGOs have been pursuing the local level projects.

The Development Assistance Policy of 2014 was totally to stop the program on creating awareness among the Nepalese people, and the training. Dr Mahat perhaps believed that the money spent on creating awareness and training was wastage. Another view would be creating awareness among the people means challenge to the ruling class. Well-informed people are difficult to govern. This is true and this mindset Dr Mahat must have inherited from the former dictatorial rulers such as Ranas and Shahs.

At one clause of the Development Assistance Policy of 2014, Dr Mahat said that the government would have the zero tolerance for corruption, the government would follow the good governance, the government would improve its working style and so on. These words might please the development partners but they would hardly believe in them. They knew that the controlling system Dr Mahat designed for the foreign assistance would enhance the corruption whether the government had tolerance or not for it. Instead of improving the administration for creating an environment conducive to the development, the Development Assistance Policy of 2014 would retard it. It would bind together the hands of both the donors and Nepalis. Only the ministry of finance would have free hand to run the development programs following the Development Assistance Policy of 2014.

I thought that Dr Mahat was a reform-oriented man but the Development Assistance Policy of 2014 indicated it was not so. The policy would resist the previous reform-induced development. Donors would not accept the most of the conditionality imposed by the policy. Dr. Mahat himself had said so in one of his public statements. The policy would take us back to the period of the Panchayat era when the government promised to do everything for the people.

Dr Mahat had copied the slogan of “Taking Nepal To the Asian Standard” made by former king Birendra in 1980s, and put it in his words such as “graduating Nepal to a developing country from the least developed country by 2022”. Dr Mahat has not specified as the former king; whether the developing country means China or India or South Africa or Russia.

Dr Mahat has the feeling that his government of two-thirds majority could do anything. The Development Assistance Policy of 2014 is the result of this egoistic feeling of Dr Mahat. Leaders of Dr Mahat’s political party have ruined this country with such egoistic feeling. Most of the time, they ran the country when Nepal enjoyed democracy. The irony is that the so-called democratic party of Dr Mahat has been running the country in the most undemocratic way.

Kathmandu, June 27, 2014: For resolving the problems of enforcing the development assistance policy, the ministry would set up a Development Assistance Policy Implementation Committee. The finance minister would preside over the committee. Vice-chairman of National Planning Commission, Cabinet Secretary, and Governor of Central Bank called Nepal Rastra Bank, and secretaries to different ministries would be the members of the committee.

Finance Minister Dr Mahat said that the ministry had to enforce the policy for meeting the needs of the country despite the development partners were not agreeable to some subject matters; foreign assistance should follow the national priority and the national system.

The tendency had been that major portion of foreign assistance had been spent on training, on creating the people’s awareness, and consultancy and so on, the development assistance policy was for reducing such expenditures, and for using the resources for creating jobs through the infrastructure development, and for human resources development, finance minister Dr Mahat said.

Following the policy, the State employees should run the projects. Only when they were not able to do so consultants should be hired that also giving the priority to the national consultants. Projects could hire foreign consultants only when such consultants were not available locally, the finance minister said.

The policy also has made the development partners accountable. The assistance amounts should show up in the State annual budget. Then the development partners should submit the verifiable development information on their projects. (Source: gorkhapatra, June 28, 2014)

Kathmandu, June 27, 2014: Finance Minister Dr. Ram Sharan Mahat has said that the development assistance policy is necessary for enhancing the accountability and transparency and for making development assistance more effective. While making public the Development Assistance Policy of 2014 at the Ministry of Finance on Friday, June 27, 2014, he said that the policy would be instrumental in graduating Nepal to a developing country by 2022.

Stating the need for effectively mobilizing development assistance to build a self-reliant economy for reducing the dependency on assistance, Finance Minister Dr. Mahat stressed the need for developing Nepal with its own means and resources.

All development partnership should be affiliated to a national system for building an internal capacity he has said, assistance is needed in social and infrastructure sector.

Grant and technical assistance with less than 5 million US dollars for a project would be unacceptable except for the rural infrastructure and social development, the minister said. He also has made it public that the policy has a provision for not taking soft loans with less than 10 million US dollars for a single project and less than 20 million US dollars of loans for a project or program. (Source: Gorkhapatraonline.com)

Biratnagar, June 25, 2014: Speaking at the opening ceremony of the 60th annual general meeting of Morang Chamber of Commerce in Biratnagar on Wednesday, June 25, 2014, Finance Minister Dr. Ram Sharan Mahat said that the government would take bold decisions on expediting economic development targeting on a higher rate of economic growth in the upcoming budget.

Stating that the government was moving forward to achieve sustainable economic growth, Finance Minister Dr Mahat said that the new budget would focus on development projects achieving the targeted rate of growth. “It will be impossible to address demands and desires of the people without achieving the high rate of growth,” Dr. Mahat said.

He said that practical policies and programs were required for working in tandem with the global change for the economic development in the country. “We cannot move ahead in the 21st century by only admiring the ideology of the 19th century,” he said. “Not only political parties but also private sector should follow the ideology as per the demand of time.”

He said: “We can achieve higher economic growth by increasing investment in agriculture, tourism, irrigation, road and airport among other infrastructures. The upcoming budget will focus on these sectors.” He also stressed the need for enhancing the administrative capacity of the government to increase public investment for economic growth.

“The country’s economic development will be impossible without development of the private sector. The government will update and reform the policy of economic liberalization adopted two-and-a-half decades ago to increase the private sector’s investment,” he said.

He assured that the government would amend the electricity act, investment act, bank and financial institution act, foreign investment and technology transformation act to make them investment friendly. Dr. Mahat asked the investors to invest in a fearless manner in the priority sectors, as the current two-thirds majority government was ready to take any decision anytime.

Meanwhile, Dr. Mahat opened the 149th branch of Rastriya Banijya Bank at Duhabi of Sunsari on Wednesday, June 25, 2014. Speaking at the opening ceremony of the bank, Dr Mahat said that the government was preparing budget of Rs. 400 billion focusing on developmental projects. Minister Dr Mahat informed that the revenue collection had lately increased because of the open economy policy. He said that the situation of State-owned banks had drastically improved following the political change of 1990. He urged the banks to introduce various credit schemes to create self-employment opportunities in the agricultural sector in the country. (Source: Gorkhapatraonline.com, June 25, 2014)

Mugu, June 27, 2014: The District Irrigation Office, Mugu says it has spent millions of rupees in the name of constructing small irrigation projects at different places of the district. But to everyone's surprise, these projects are not found in the field. The office has spent millions in the name of small irrigation projects since the fiscal year 2000/01 (2057/58). However, these projects are only in paper and not on the ground.

It is stated that every fiscal year, the local users committees ask for sanctioning small irrigation projects of Rs 100,000. The office sanctions these projects but makes the payment without monitoring whether or not the project has been completed. The office has been reporting to the line Ministry that more than 10 small projects are selected and completed every year in the district for the last 12 years. According to the office report so far Rs 15 million has been spent on such projects.

People alleged that the office employees also pocketed a certain percentage of the project amount while sanctioning the amount of the project. A few employees at the office also agreed on this matter.

Although 30 small irrigation projects of Rs 2.5 million have been selected in the current fiscal year, not a single one of these is constructed at the proposed site, the monitoring committee under the District Development Committee (DDC) Mugu stated. (Source: Gorkhapatraonline.com, June 28, 2014)

Institutionalized Irregularities in State Agencies
Kathmandu, June 29, 2014: the ministry of finance has reimbursed the 50% of the VAT (value-added tax) collected from the consumers to the cooking oil producing companies. The amount of VAT return reimbursed was Rs 1.5 billions. The companies are entitled to receive the VAT return only if they used the local materials for producing oil. However, these companies had used imported raw materials such as oil seeds, beans and so on for producing cooking oil in Nepal. (Source: Rajdhani Daily, June 29, 2014)

If the news of the VAT return published in the Rajdhani Daily of June 29, 2014 was true then the high officials including the minister of finance must have the shares in such VAT return. The finance ministry would not reimburse such a large sum of money in the name of the VAT return to the private companies without the high officials having shares in it. The return of the VAT amount was illegal, as the companies did not use the local materials. The companies would be eligible to get the VAT return if they used the local materials, according to the news item. Is it the zero tolerance of Dr Ram Sharan Mahat for the corruption?

Kathmandu, June 29, 2014: Nepal Electricity Authority (NEA) has accepted the ‘variation order’ for increasing the estimated cost of the Chameliya Hydropower Project by Rs 2.4 billion causing the cost overrun and the time overrun. The NEA board meeting presided over by Energy Minister Radha Gyawali made this decision on Friday, June 27, 2014. With the latest revision, the cost of the 30MW project has swelled to Rs 15.06 billion from Rs 12.66 billion.

NEA said that the cost overrun and the time overrun were due to the problems of the tunnel construction. The initial estimated cost of this project was Rs 8 billion. However, the ‘variation order’ was done to make it to Rs 12.66 billion five months ago stating the need for widening the tunnel.

NEA’s decision to accept the ‘variation order’ came a week after the NEA board meeting decided to award Rs 1.9 billion to the China Gezhouba Water and Power (Group) Company in the variation claims. The Chinese company has the contract of the project’s main civil work.

The construction started in mid-January 2008 was originally scheduled for completing the project in mid-June 2011. However, the completion date was set for mid-September 2013 after the delay in construction. Following the new schedule, the project has to be completed by the next nine months. However, NEA officials say it will take another one-and-a-half years to complete the project. (Source: Ekantipur.com, June 29, 2014)

Power Purchase Agreement
Kathmandu, June 24, 2014: speaking at the meeting of Public Accounts Committee (PAC) in Kathmandu on Tuesday, June 24, 2014, Minister for Energy (MoE) Radha Gyawali has said that Nepal Electricity Authority (NEA) has stopped signing power purchase agreement (PPA) in US dollar. She said that NEA made this decision after NEA incurred a huge loss due to such decisions made in the past and also because of the lack of proper study on the impact of such agreements. “We can think about signing PPA in US dollar only after conducting a detailed study on the issue,” said Minister Gyawali. PAC has started discussion on why NEA signed PPA in foreign currency without assessing its impact. NEA has signed PPA in US dollar with six projects including the Bhotekoshi and Khimti hydropower projects.

Secretary to the Ministry of Energy Rajendra Kishor Kshatri has said that there is the lack of a proper study on modality to sign PPA with power developers, especially those having foreign investment. “We need to conduct detailed study on the pros and cons of signing PPA in foreign currency,” he said, adding that the energy ministry has commissioned a study to sort out the problem. “It is natural for developers to propose for PPA in US dollar as Nepali currency is devaluating and also because they have to bring most of the construction materials and equipment from abroad.”

Speaking at the meeting, Mohan Bahadur Basnet of NC asked the government to review PPA with Bhotekoshi and Khimti as the agreements have inflicted huge loss on NEA. “About two-thirds of NEA’s total loss of Rs 29 billion in the last 15 years was because of the PPA signed with those two projects,” he added.

Following the PPA signed with Khimti and Bhotekoshi, NEA has been paying all taxes including VAT for those two projects. According to experts, this provision made in the PPA goes against the norms of universal taxation policy. (Source: myrepublica.com, June 24, 2014)

NEA needed to make a provision in the power purchase agreement (PPA) for the periodic review of the agreement to revise the price of power per unit depending on the market situation. Obviously, private companies would not invest in anything if they were not to have an attractive return on their investment. However, NEA also should not go bankrupt purchasing power at the rate far above the market price from the private power producers and then selling at the prevailing price to the consumers including the private companies and household consumers. Every after five year or so, both the NEA and the private power companies need to sit together, and revise the prices of the power whether to increase or decrease depending on the market value of the power. In this case, both the parties would benefit. Power companies would receive higher prices if the prices they negotiated became below the market prices, and the NEA would reduce the prices of power if they were to become higher than the market prices. Thus, the chances of both the parties benefiting from such a deal are high rather than keeping the purchase or sale prices of power constant for thirty years or so.

Working On Identity-based Federalism
Kathmandu, June 26, 2014: Seven political parties such as UCPN-Maoist, Madhesi People’s Rights Forum-Democratic, Madhesi People’s Rights Forum-Nepal, Tarai Madhes Democratic Party, Federal Socialist Party, Sadbhavana Party Nepal, and Tarai Madhes Sadbhavana Party have agreed to work jointly for federalism with identity and constitution with federalism.

A joint meeting of the seven political parties held at the Lazimpat residence of chairman UCPN-Maoist Prachanda on June 26, 2014 agreed to fight for a pro-people constitution within and outside the Constituent Assembly. They agreed on working in the name of Federal Republican Front nationwide.

"Today's meeting concluded that all the parties should unite and move forward for writing a constitution with identity. Since there is little chance of the present Constituent Assembly writing a pro-people constitution, we have agreed to move ahead jointly and to take along all sides together with us," General Secretary of the Federal Socialist Party Rajendra Shrestha said. He has said that although some parties have been saying that they support federalism with identity and constitution with federalism, they have shown dual character and hence, those parties that are not clear on this matter would not be included in the Front.

The Front also has taken a decision on playing an effective role in the Constituent Assembly and the Legislature-Parliament, and on mobilizing the people for the pro-people agenda. It has stated that the Front's concept paper would be made public on July 2, 2014. (Source: Gorkhapatraonline.com, June 27, 2014)

Biratnagar, June 27, 2014: Talking to journalists at Biratnagar Airport on Friday, June 27, 2014, Chairman of UCPN-Maoist Prachanda has said a working alliance has been formed among five political parties for writing a new constitution following the spirit of the 12-point understanding, Comprehensive Peace Accord and the Interim Constitution. Chairman Prachanda said, "We'll organize a press conference in the capital on Saturday to explain the objectives behind the formation of the alliance."

Chairman Prachanda also Former Prime Minister said the new constitution should be promulgated building a consensus among NC, the CPN-UML, and UCPN-Maoist with the participation of the political parties inside and outside the Constituent Assembly (CA). UCPN-Maoist and other political parties of the Five-Party-Alliance are unanimous on this matter, he added.

He said discussions would be held within the alliance on the Contempt of Court Bill and reiterated that the bill curtailing the people's rights under any pretext would not be acceptable to his party.

Similarly, Former Prime Minister also party senior leader Dr Baburam Bhattarai said that all needed to have a common target of promulgating a new constitution within a year and all political parties needed to move ahead united. There is no alternative to promulgating a new constitution to institutionalize the achievements made through various movements, Dr. Bhattarai added.

Chairman Prachanda, Dr Bhattarai and leader such as Narayan Kaji Shrestha and Krishna Bahadur Mahara arrived at Biratnagar to participate in a daylong regional training of the Kochila State Committee of the party. (Source: gorkhapatraonline.com, June 28, 2014)

Kathmandu, June 28, 2014: Five leftist parties led by the UCPN-Maoist have formally announced a working alliance hinting at the possible unification in near future. The alliance among the five parties such as UCPN-Maoist, CPN-Maoist (Vaidhya), CPN-Unified, CPN-Maoist (Matrika) and Revolutionary Communist Party Nepal (RCPN) is to fight for the Maoist agenda. The leaders of the five parties also said that the current alliance would culminate in the party unity.

“We have forged an alliance with long-term strategic vision. This alliance would finally culminate in party unity after seeking a common political line,” said Chairman of UCPN-Maoist Prachanda. However, Chairman of CPN-Maoist Mohan Vaidhya has set conditions for party unification. “Party unification is possible only if our six-point conditions are fulfilled. We hope that the parties would agree to fulfill these conditions,” said Vaidhya.

General Secretary of CPN-Unified Pari Thapa, coordinator of CPN-Maoist Matrika Yadav, general secretary of RCPN Mani Thapa also said that the alliance would work on settling existing differences for party unification.

The alliance also is for crafting a pro-people constitution. The concept paper of the alliance says the UCPN-Maoist would fight for a pro-people and progressive constitution from inside the CA, while other parties would champion for the same cause from outside the CA. “This alliance is not for bringing UCPN-Maoist outside the CA or bringing other parties inside the CA,” said Chairman Prachanda. “This alliance has been formed to mount pressure from both inside and outside the CA to ensure a pro-people statute.”

Stressing the need for an all-party conference, Chairman Vaidhya also has said that his party does not recognize the current CA. “We would appreciate it if the CA promulgates a pro-people constitution. But is very slim possibility that the CA would produce such a statue,” Vaidhya argued. He also accused parties in the CA of being influenced by the external forces. (Source: myrepublica.com)

Kathmandu, June 26: Speaking at a regular press conference held in Kathmandu on June 26, 2014, Chairman of Constitutional-Political Dialogue And Consensus Committee (CPDCC) Dr Baburam Bhattarai has said that discussions on contentious issues have begun as all 300 disputed points of the then committee of the previous CA are received for building a consensus on them. The committee has prepared a four-step working procedure for building a consensus on the controversial issues. The most debated issues among the political parties are the form of governance, re-structuring of the state and judicial system. These are the main issues the previous CA could not deal with. (Source: Gorkhapatraonline.com, June 27, 2014)

Fifty Million Rupees for Each lawmaker
Nepalese lawmakers have been behaving as if they are sidewalk vendors in Kathmandu. If the municipality does not permit them to hold their business on the sidewalk they will launch a street protest. Everybody knows that sidewalks are for the people to walk not for the vendors to sell their goods. Similarly, Nepalese lawmakers have threatened they will not permit the budget pass from the parliament if they will not receive Rs 50 million for their respective constituency. Both the actions of the lawmakers intend to take are not legitimate. As the lawmakers they need to make laws not to have a large sum of money for whatever development they have in their minds.

If we were to believe in the local news media, the lawmakers were entitled to open an office in their respective constituency, and they could spend ten percent of the one million rupees for running the office. So far, lawmakers have been receiving one million rupees in the name of developing their respective constituency. None of them has opened such an office in their respective constituency but all of them have claimed the amount for running such an office. They don’t need to submit bills and salaries paid to the staffs. Thus, lawmakers have been openly misusing the taxpayers’ money. This is a clear case of misuse of State revenue and the authority of lawmakers, the Commission on Investigation into Abuse of Authority (CIAA) needs to act on it immediately.

Kathmandu, June 25, 2014: lawmakers belonging to political parties such as NC, CPN-UML and UCPN-Maoist called for Rs 50 million for each lawmaker for the constituency development otherwise they would obstruct the budget for the fiscal year 2014/15. Holding a press conference on the premises of Constituent Assembly at Nayabaneswore in Kathmandu on June 25, 2014, the lawmakers stated that their demand was not for the personal benefit rather for the proportional development at the local level.

As many as 347 lawmakers belonging to various political parties had met with Finance Minister Dr Ram Sharan Mahat at the Ministry of Finance and turned him over a memo seeking the allocation of 50 million rupees to their respective constituency in the upcoming budget. (Source: myrepublica.com, June 25, 2014)

Irregularities in Political Parties
Kathmandu, June 28, 2014: chairman of Rastriya Prajatantra Party-Nepal (RPP-Nepal) Kamal Thapa received only Rs 19.5 millions from the former king Gyanendra for the elections to a new constituent assembly held on November 19, 2013. Chairman Thapa had been advocating for reinstating the monarchy and the Hindu State in Nepal. Chairman Thapa had asked Gyanendra for Rs 100 million.

Chairman Thapa was disgusted with not having the amount he had asked for from Gyanendra. So, Thapa left out the advocacy of reinstating the monarchy at the general convention of the RPP-Nepal. However, orthodox supporters of the monarchy forced Chairman Thapa to keep on talking about the reinstatement of the monarchy. He continued the advocacy of Hindu State. He had collected millions of rupees from the orthodox rich Hindus for the advocacy of the Hindu State. (Source: Rajdhani Daily, June 28, 2014)

RPP-Nepal had received the votes of orthodox Hindus for reinstating Nepal as a Hindu state. Currently, RPP-Nepal has 24 seats at the constituent assembly-cum-parliament. These votes were abut 5% of the total votes, and were entirely for the reinstatement of the Hindu State.

Gyanendra did not contribute to the advocacy of reinstating the monarchy as much as chairman Thapa wanted. Gyanendra did not believe that Nepalis would reinstate the monarchy. So, he must have thought why he should waste his money donating to the RPP-Nepal. However, he threw few coins in the hat extended by Chairman of RPP-Nepal Kamal Thapa to keep the RPP-Nepal above the water.

Speaking at the CA, Chairman Kamal Thapa complained about the non-inclusion for discussion of the differing views on the Hindu State. His party put forth the agenda. He also called for declaring the country a Hindu state providing equal opportunity to all the religions. Chairman Thapa showed his concern for the mass conversion-taking place in the country taking the benefit of the secular state. He warned that this might disturb the social, economic, cultural and religious unity.

ENDS

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