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September 2017 Interview

Published on: 2017-09-10 14:27:59     208 times read    0  Comments
“The government needs to start one-on-one discussion with businessmen in order to identify and address their issues”

Moti Lal Dugar Chairman
MV Dugar Group

Moti Lal Dugar, Chairman of MV Dugar Group, is a third generation industrialist of the business family Dugar that carries a 127 year legacy. His elder brother late Tola Ram Dugar is regarded as the entrepreneur who expanded the family business into different areas now operated by the members of the Dugar family.  Moti Lal has a wide array of interests in sectors including FMCG, agro-based and food processing industries,  banking, insurance, hydropower, automobile, life insurance, trading and consultancy services. Chairman of Sunrise Bank since its establishment, Dugar is also the chairman of Gurans Life Insurance Company. He is also Vice-president of Nepal-USA Chamber of Commerce and Industry. In recent years, Dugar has been concentrating in the hydropower sector. The group is currently engaged in constructing the Likhu I, Likhu II and Likhu III hydroelectric projects with total installed capacity of 157MW. Expressing its commitment for the ‘Ujyalo Nepal’ initiative of the government, the group has already announced it will produce 500 megawatts over the next 10 years. In an interview with Madan Lamsal, Editor-in Chief of New Business Age, Dugar talks about the investment environment in Nepal, problems in the implementation of policies, ethical values in business and his religious beliefs. Excerpts: 

 

Why has MV Dugar Group lagged behind other business houses despite having a legacy of 127 years? 
We have followed our traditional businesses for years. My elder brother late Tolaram Dugar who was the chairman of the group used to favour domestically available raw materials over imported ones. He used to point out that utilising domestic raw materials will be sustainable for us in the long run. So, we got engaged in business activities such as operating rice mills and oil mills, that are comparably less profitable and difficult, for many years. We have established rice mills at places such as Dhangadhi where we used to buy paddy from farmers to produce rice.  

As time passed by, different types of industries were established in the country to benefit from exporting products to India. India was a closed economy back then. Such companies used to import raw materials to produce products including vegetable ghee, acrylic yarn and copper items and export finished goods to India. The government also supported and promoted such businesses.  However, we were not engaged in such activities. This is one of the reasons why we lagged behind others.

Similarly, we also avoided the business of cigarettes and liquor due to our religious beliefs. Coming from the Marwari community, we are followers of Janinism and do not engage in business of products that are considered harmful to health. We have been maintaining this policy till date. 

 Many people view that it has become really difficult to do business in Nepal. Do you agree? 
I don’t think doing business in Nepal has become difficult. It was not harder even in the past. We achieved success and came along the way due to the satisfactory business environment. In fact, doing business in India was difficult before 1990. Many Indian businessmen didn’t even know about the Letter of Credit (LC). They used to come here to learn from us about business and trade processes. There are no hurdles from the government side.  The policies are good enough for doing business here. Profit and loss are subject to the strategies and decisions businesses take along with their own fortune. 

How favourable do you think is the environment for investment for foreign investors at present?
The prolonged political transition, instability in government and bureaucracy and inadequacy in rules and regulations are not new in the context of Nepal. We have been facing these challenges for a long time. Foreign investors who are looking to invest here need to be aware of such factors. Foreign investors invest here if they are satisfied with the existing legal arrangements and political situation. Those who are convinced with the ground realities of Nepal have been doing business here for many years. 
 
But why hasn’t the country seen any business with substantial foreign investment in the recent years?
A country has to meet certain conditions in order to attract substantial amounts of FDI. For example, many foreign investors are interested in the Nepali hydropower sector. Nonetheless, inadequate transmission lines stop them from investing here. It takes a considerable amount of time to construct transmission lines for a country like Nepal.  Similarly, problems in land acquisition also create difficulties for many foreign investors to start businesses here. The Nigerian industrial company Dangote, for instance, has not been able to work according to the plans to establish a cement plant due to the unavailability of land. They have sought for 10,000 bighas of land which the government is unable to provide. Meanwhile, the Chinese cement producer Hongshi acquired land by paying 5—10 times more than the current rate to establish a manufacturing plant.   As per the existing legal arrangements, the government cannot acquire privately-owned land for purposes other than governmental works. Private investors do not have any option other than to purchase land from the owners. Other than these, there are not many problems for foreign investors here. 

Over the last few years, there has been a growing trend to invest in hydropower. Industrialists, businessmen and general people all are investing in shares of hydropower companies. The country’s hydropower sector has been witnessing such euphoria for the first time.  The sector could not have seen such excitement had the government not supported the development of the sector. The policies are good enough to do business. However, there are weaknesses in the implementation side. 

But investors say they often face bureaucratic hassles while starting businesses that makes the gestation period longer resulting in the time and cost overruns. They also have to donate large sums of money to satisfy various quarters. Don’t you think these are obstructions to create a better business environment in the country?
I agree with your observation. But the outputs of any business are affected more by the style of work, strategies and plans of investors. Personally, my style of work has been to achieve the best possible results according to the circumstances. I cannot change the whole system and nobody will change it for me. It is easier to do business in Nepal abiding with the existing laws, rules and regulations. As I said earlier, we need to improve the implementation side of the policies. I think that the political leadership has an important role to play in this regard. If the PM can spare two days every fortnight only to hear, discuss and find solutions to the problems of the economic sector by discussing with all stakeholders including the private sector, many issues can be resolved. This type of practice exists in many countries and it could be very much applicable in our context as well. The private sector as well as the media should lobby to start such a practice in our country. 

How is your experience in working in traditional business sectors compared to the newer ones? Has it been easy for you to work in hydropower, banking and insurance sectors? 
Generally, a business has a life cycle of 30-35 years. After that period, the business either goes through a total change or dies out. For example, the business of jute in Nepal declined drastically after witnessing many years of remarkable growth. Similarly, production of stainless steel and textiles also faced the same fate. Many industries that were considered as ‘gold mines’ for investors shut down mostly over the last two and half decades. It is basically due to the technological and other types of changes in the market. For instance, the global photographic film making industry collapsed with the advent of digital photography technology in the 2000s. Those who are able to understand the need of the time and adopt changes accordingly to stay ahead in the market competition will survive and thrive. The lack of investment in terms of technological upgrades is another factor in this regard. 

Recently, you have criticised businessmen from the Marwari community for their non-vegetarian diet and drinking habits and their engagement in the alcohol and tobacco industry. How do you think the ethical and moral conduct of business people has affected the business environment in Nepal?
This is entirely my personal religious belief which I do not impose on others. I do not say that Marwari businessmen should not engage in the production of alcohol and tobacco products or consume such items. Whether or not to engage in such businesses or consume such items depends upon the personal preferences of individuals. It won’t be appropriate to say that businessmen from a particular ethnic group should or shouldn’t engage in a particular business in today’s world. 

Good ethical conduct is certainly rewarding for a business. However, adapting to the changing scenario is more important for the survival of any business.  For example, many Nepali industries couldn’t adapt to the post 1990 changes. Our economy opened up in the 80s, 7-8 years before the economic liberalisation began in India. However, after India embraced the open economic policy, the export-oriented industries in Nepali that used to target the Indian market began to take a hit. The competitiveness of the Indian economy was no match to ours. The availability of sea port facilities to import raw materials and other goods easily and the bulk market to supply finished products provided the southern country with a high level of leverage in terms of economic activities which we did not have. Our cost of doing business increased as we did not have such facilities. 

You also hold a view about rising conspiracies in the Nepali business sector. What types of conspiracies do you think are there at present?
Disturbing and capturing others' business and trying to create a monopoly in the market are increasing in the business sector at present. It shows that the level of ethics in business has decreased to a large extent. 

There are certain principles for Marwari businessmen to follow such as not taking excessive profits, donating 10 percent of the income to social causes, maintaining books properly and collateral-free lending to people within the community who need it, among others. Have these principles become irrelevant today?
The principles used to be customary in the days of our grandfathers and fathers and also used to exist in my time. But the younger generation seems to have completely forgotten the Marwari business ethics. 

A notion prevails that the country’s business sector is dominated by Marwaris as they are in almost all types of businesses. Do you agree?
Saying that businessmen from a particular group have overtaken the business sector is a big misconception. Instead, there should be a discourse on the level of competitiveness, quality of customer service and the overall benefit to the economy businesses can offer. Many of the accusations such as Marwari businessmen are clever in bribing officials and taking benefits from the government are totally baseless. Those who are not capable of competing have the tendency to pull the legs of others. Instead of becoming jealous, such people need to learn the ways of doing business properly. Jews, for instance, are considered as the richest people in the world. Should their wealth be a matter of jealousy to others? Or should their hard work and how they have moved ahead be a factor of inspiration to others?

You are considered as a spiritual person. How have your spiritual beliefs helped in the business?
I follow the Svetembara Terapanthi sect of Jainism. My family is a follower of Acharya Mahashraman who visited Nepal two years ago. Spiritual engagement has a lot of benefits. It keeps you calm, mentally fit and encourages doing good things in life.  For businessmen, spiritual engagement is important for ethical and value-based business practices. Acharya Mahashraman also asks his followers to have a high level of moral value and follow the path of non-violence and social well-being. 

What have you made of the hydropower sector?
The Hydropower Development Policy is good. But there are certain things the government needs to improve on the implementation side. Most of the hydropower developers have been facing different problems. The government needs start one-on-one discussions with the stakeholders in order to identify and address such issues.  Similarly, hydropower is a capital intensive business which requires continuous financing. The mandatory rule that requires banks to have five percent of their total loans in hydropower should be increased to 10-15 percent. New hydropower projects will be very difficult to develop unless such a mandatory provision for financing is in place. Continuous financing in a business sector is only possible when there is the availability of money at cheaper interest rates. Mandatory provision for BFI lending in the priority sectors including hydropower, agriculture and tourism in the monetary policy has been the central bank’s laudable initiative. Such initiatives need to continue in the future. 

Do you have any plans to venture into other new sectors? 
Right now we are focused on strengthening our existing businesses. We do not have plans to enter new sectors for the time being. We have been concentrating our efforts in the hydropower sector. It is an extensive area for business and the work takes a long time to complete. We are looking on how we can move ahead doing new things in this sector. 


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