“Introduction of new FITTA, IP Act, digital signature and online payment gateway will re-energize the industrial sector”

  12 min 19 sec to read
“Introduction of new FITTA, IP Act, digital signature and online payment gateway will re-energize the industrial sector”

After assuming office in August 27, 2016, Industry Minister Nabindra Raj Joshi has been focusing his efforts to improve the climate for the industrial sector which has been a victim of the prolonged political instability. The noticeable progress on establishing Special Economic Zones across the country, the ministry’s proactive approach towards amending obsolete industrial laws and introduction of the Intellectual Property Act along with the digital signature and online payment gateway and attempts to revive ailing industries such as carpet and garment have raised hope among domestic and foreign investors. Similarly, prioritising FDI in the industrial sector, the ministry is preparing to organise an international convention in the capital on March 2 and 3. However, the ministry’s initiation to restart the state-owned industries that are no longer in operation for long has been viewed with suspicion that perhaps the government is moving away from the liberal economic policies adopted after 1990. In an interview with Sanjeev Sharma of New Business Age, minister Joshi talked about the ministry’s efforts in policy changes, its priority areas, reviving the government-owned companies and plans for coming days, among others. Excerpts:

What are major things you have done after assuming the ministerial post?
The ministry has been trying to create a favourable environment for the industrial sector. I believe that the situation has started to improve for the investors. At present, not only the Nepalis but foreign investors too are showing their interests. But we have a long way to go. 

The economic development of this country can be boosted very quickly if we can take a single good or strong step. This can significantly increase employment opportunities. Along with that, we are also focusing our efforts to find ways to increase foreign direct investment (FDI). 

Similarly, we have also formed mobile teams to provide support to cottage and small scale industries. We are promoting various products produced by cottage and small scale industries including the Himalayan nettle.  We have installed 22 machines, costing around Rs one million per unit, in various districts for the processing of Himalayan nettle as a trial. 

Our initiations will gradually pay off. The initiatives have added excitement to the common people and have made them believe that Ministry of Industry can successfully operate. We are in a process to resume the operations of state-owned industries that have been closed for long. We have resumed the nominal operation of Nepal Drugs Limited, for instance. Similarly, it might take further six months for the Hetauda Textile Factory to restart its manufacturing activities. We have published notices to lease Butwal Spinning Mill and Birgunj Sugar Factory as well. We are discussing to revive the Gorakhkali Rubber Industry, Nepal Orind Magnesite and Nepal Metal Company. Another important thing that we are doing is introducing proper rules, regulations and preparing work tasks required for an industry to operate smoothly. We will complete this before March. This is my commitment. 

Isn’t it contradictory for the government to approach towards operating industries since the country’s economy post-1990 has taken the liberal path? Can’t the government give the responsibility to the private sector? 
We have always welcomed the private sector. We aim to move ahead in public- private partnership model (PPP) modality. Right now, we are just trying to ease the hurdles. We are planning to operate Butwal Spinning Mill and Birgunj Sugar factory in the PPP model. However, some industries need to be operated by the government before engaging the private sector. The situation is different from the past. A number of industries are not running but have loans of billions of rupees. To conclude, we are moving towards making things easy for the private sector.  

Has there been any research to assess the business viability of these state factories?
We have proper research and action plans. Despite our wish to run the industries that have ceased their operations in the past, we are not in the situation to run all of them.  We are working to make things easy for the private sector. We have planned to operate only the industries that are sustainable. For example, we have evaluated that the Hetauda Textile Factory might go in loss for three years after it resumes its operations. But the industry will achieve a break-even point on the fourth year and will be able to earn profit from the fifth year.

It is said that MoI is having a tough time to run projects due to insufficiency of budget. Is it true?
Additional budget is obviously required for the new projects that the ministry has planned. For that we have already approached the Ministry of Finance. The process might be taking some time, but the budget will come. Talking about the available budget, we are trying to utilise the budget of our ministry to achieve optimal results. 

MoI also had a target to create 11,000 new jobs. What is the basis for it?
First of all, we are giving a lot of importance to provide employment trainings. Currently, we are providing training to 3,000 earthquake victims and are making preparations for additional 500 in the first stage. After that, we will start trainings related to the commercial utilisation of the nettle plant. Alongside that, the environment we have been creating is attracting domestic and foreign investors which will eventually create employment opportunities in the country. 

You mentioned that foreign investors are making queries for investing. Investors of which sectors and countries are showing their interest in particular?
Foreign investors are interested in hydroelectricity, tourism, information technology and mining industry, among others. Two big foreign companies have shown their interests in the mining industry. The interested companies are from India and China.

How will the ministry fulfill its FDI target of USD one billion? 
The initial draft of new Foreign Investments and Technology Transfer Act (FITTA) has already been prepared to achieve the FDI target. It will come after necessary amendments. We have received suggestions from stakeholders for the purpose. Similarly, the processes to introduce Intellectual Property (IP) Act, digital signature and online payment gateway have already begun. There are no problems in introducing the digital signature. We are in talk with the Nepal Rastra Bank (NRB) to solve the issues regarding the introduction of the online payment gateway. It will move ahead after related technical issues are cleared. All these will create an environment conducive to attract FDI in the country. 

What is new in the FITTA Bill?
With liberal provisions, the amended FITTA will play an important role in attracting foreign investments. Similarly, the implementation of SEZ Act and the Industrial Enterprises Act that have already been endorsed by the parliament will make Nepal an attractive FDI destination. Many prospective foreign investors are making their queries about investment in Nepal which is due to our initiation on FITTA. The legal and administrative reforms will create a friendly atmosphere for FDI while arrangements of supply of power, favourable labor relations help in making the production activities efficient and competitive. 

The FITTA Bill will be harmonised with the provisions of the Industrial Enterprises Act to provide equal treatment to Nepali and foreign investors. This will end the contradictory provisions of the FITTA, 2049.  The exit of investors and repatriation of investment have been made flexible in the amended Act which has been a major area of complaint of foreign investors 
in the past. 

Meanwhile, the Intellectual Property (IP) Act and digital signature and online payment gateway that will come together will also help in attracting FDI. 

The ministry has also announced to receive letter of intent from the citizens in order to open community-based industries. Where has the initiation reached?
I feel this initiative needs to be taken to rural areas because industrialisation hasn’t yet ‘clicked’ in our country. We need to take people to that phase. Everyone including the political parties, civil society and business sector should take the initiation. It is important to bring industrial awareness among the general public. 

It is our responsibility to bring positive and necessary changes to the lives of people despite differences in opinion and thoughts. We are trying to secure the future of common people. MoI has discussed the agenda with political parties.  We are searching for a common commitment from all so that the works that have been initiated can be completed and the nation can move towards higher economic growth.

The contribution of the industrial sector in the country’s GDP has fallen from 9 percent in 2001 to 5 percent in 2016. As per a Central Bureau of Statistics data, the average industrial sector growth rate over the last one decade is just 2.1 percent. What can be done to improve this paltry figure?
We must establish export-based industries to have higher growth of the industrial sector. The establishment of Special Economic Zones (SEZs) will be pivotal to move things forward. After that, we will set up a garment industry at Simara. This will have a positive impact on the country’s ailing garment sector. We have talked about this with the Ambassador of Bangladesh. We have discussed on how we can move ahead by working together. Another important thing is our Himalayan nettle project that aims to expand the horizon of commercial utilisation of the plant. The locally produced nettle fiber will become a game changer for the ailing carpet industry. It will help us to regain the same export levels of carpet that we used to have many years ago. 

Although nettle is something new for us, this plant poses a high potential in international market due to the quality products and derivatives we can have from it. We need to cash in all the opportunities for the industrial development without delay.  

While we talk about attracting FDI in the industrial sector, don't you think economic and industrial diplomacy is needed?
Yes, they are important aspects. We have already started economic and industrial diplomacy. We have discussed this with almost all our ambassadors. We have also sent letters abroad requesting the ambassadors to maintain good relations with the governments, industrialists and the businessmen of the respective countries Embassies are our primary contact sources in foreign lands. The international conference we are planning to conduct is also a part of our industrial and economic diplomacy. 

SEZ has been in the priority list of most governments for the promotion of exports. However, the SEZ facility at Bhairahawa which is said to be completed has not come into operation till date. Is it that the government considering some policy changes in SEZ?
The government is serious about the operation of SEZ facilities and is working actively in this regard. The work of the garment industry in Simara has progressed. Meanwhile, the works related to the Bhairahawa SEZ have moved ahead with significant progress. We have already selected the industries for the facility. Some works related to the technical part are left which will be completed very soon. There will be no policy changes for SEZ. We are only trying to simplify the processes for the entrepreneurs who are looking to establish industries at such zones. It will enable them to obtain all services from one place. Entrepreneurs who register their industries at SEZ won’t be required to keep visiting the Department of Industries (DoI) for registration. They can register online as well or else can directly go to SEZ offices for registration.  

Quality standards certification has been a major problem for industries like  Nepali cement companies to export their products. The ministry last year started a process introduce a new quality standard certification system. Where is it now?
I completely agree with you. We don't have strong mechanism and resources. However, we have started to strengthen our quality standard mechanisms. I am trying to set up a lab within the DoI in order to test the quality of cement produced by Nepali producers. I have called on the private sector for cooperation. Both the government and private sector need to join hands to establish an effective mechanism.  One problem is that entrepreneurs often say that their products failed to secure the quality certifications as they did not bribe anyone. Let's keep technicians from both the government and the private sector. If there is any contradictory report of any product, we will review and re-examine the tests. I will immediately take action against our technicians if they are found involved in wrongdoings. I have even asked the entrepreneurs to install the test machines by themselves. Nonetheless, such machines need to be technically correct to give accurate test results.  MoI is preparing to amend the Standard Measurement and Weight Act, 2025 to ease the problems in standard testing and quality of products. 

Nepal IMEX

One big fairy tale!!!! What investment events brought Nepal in the past? Big plans always in Nepal but mostly later in limbo. How to attract investors for the SEZ when the infrastructure in Nepal is a mess, the corruption and cases of crime are high, militant labor unions who damage businesses often in the past are everywhere, and the protection by law is low? Small investors cannot come to Nepal because the threshold of Rs 5.000.000 is much to high because of the unpredictability of Nepal and her economy and by that the heavy risk investment gives for them. Heavy corruption (also in the Departments an investor is depend on) is a daily practice. No small investor can start any business before paying heavy bribes to the officers of the government departments. And that is not all, like I say investors have to deal with the militant labor unions which heavily damaged businesses (many times in the past and as result factories closed), with the criminals who are protected by government (law and order) officers who take also a part of the bribe cake, with inhabitants who demand receiving shares (in case of hydro-power plant in the past) and heavily damaged the construction and the machines. No Nepal have to change a lot before investors are interested to come. Mr. Joshi talk more times in this interview about the nettle business, do he surely think that is the solution of all the problems around doing business in Nepal? And carpet industry is past, the world bought all ready to many carpets from Nepal. And at last, insane that a lot of rules and regulations are not ready yet. If you know to talk about then you have to make everything smooth and ready, months before a event like coming 2 and 3 March. Wish you success and enjoy your stay in Soalty hotel.