Import Ban a Knee-jerk Reaction of the Government

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Import Ban a Knee-jerk Reaction of the Government

Gokarna Raj Awasthi is the Director General of the Federation of the Nepalese Chambers of Commerce and Industry (FNCCI) - the apex body of Nepali private sector. He talked to Priyanka Mandal of New Business Age on a wide range of issues related to Nepal’s economic sectors. Excerpts:

What are the main objectives in which FNCCI is focused now?
FNCCI is the apex body of the Nepali private sector. As many as 118 district/municipality level chambers, 106 commodity/sectoral Associations, and almost 2,000 corporate houses having paid-up capital of Rs 25 million or more are associated with us directly. Almost 500,000 businessmen and industrialists are associated with us indirectly. As we are a representative body of the private sector, we have many responsibilities. We are focused on three prime objectives. The first is to work as a think tank, conduct studies and research on economic aspects, and formulate needful strategies for them. Second is lobbying, where we consider the agendas of the private sector and give recommendations for policymaking to the government and other stakeholders. The third is capacity building of the associated private sectors and associations.

What are the challenges that FNCCI is facing at this time of crisis?
First of all, it is a troublesome situation for the country’s economy currently. But, it is not exactly a crisis situation. FNCCI conducts studies and research to determine problems and find solutions as well for businesses and industries to sustain and grow. We are constantly learning about the practices and policies all around the world as well. In the context of our country, we know a lot of areas that are in need of reforms and we know exactly what needs to be done. But we are just advisors and have no direct role in policymaking. The members constantly pressurize FNCCI, accusing it of failing to implement effective policies on one hand, and on the other, the government only pays lip service to our advice. This is probably the critical challenge FNCCI is currently facing. But the government has entertained many of our suggestions. Some are already being implemented. I am hopeful that some of them will be addressed in the upcoming budget.

How does FNCCI coordinate with the government in terms of creating a business-friendly environment in the country?
FNCCI has representations in more than 40 government committees which makes it easier for us to put forth our suggestions. As a representative body of the private sector, we also have easy access to government offices. We meet with officials on a regular basis and discuss pertinent issues of the Nepali economy. Further, we play an active role in the preparation of budget, monetary policy, etc.

How is the business environment in Nepal?
Honestly saying, there is not really a favorable environment to do business in Nepal at present because there are so many trivial issues as well as major hurdles. For example, the Office of the Company Registrar is in Kathmandu only. This means aspiring individuals still need to come all the way to Kathmandu to register a new business. The office does provide online services, but the services are not effective. Even the online services related to taxation have not been able to function fully. There are hurdles right from the time of registration to tax payment, making the environment adverse for starting a business in Nepal. For example, foreign direct companies are making handsome profits here but new companies aren’t willing to come. This shows there are some problems. We have studied the problems and have made some recommendations to the government. Hopefully, the budget will find some way out.  

What are the short and long term plans of FNCCI to facilitate the industrial sector?
We have created a vision, National Economic Transformation, 2030. In the document, we have identified a hundred initiatives in ten priority sectors to further develop the industrial sector. Some of the initiatives include the formulation of new and reform of over a dozen of policies and laws, import substitution and export promotions, formulation of separate strategies and policies for electricity generation, distribution, transmission, and export, etc. SMEs are the priority for promotion and we have already started to work on these initiatives with a sectorwise timeline. Our long-term plan includes increasing the size of our economy from USD 35 billion to USD 100 billion dollars by 2040. We also plan to increase the current GDP, and cut down trade deficit

What is the reaction of FNCCI to the recent government ban on the import of certain goods?
We have termed it a  knee-jerk reaction, the easiest solution available for implementation. The government definitely panicked due to the spread of the word that imports were growing at an alarming rate and immediately imposed bans. However, we still have enough foreign exchange reserves to finance the import of products and services for the next six months. The problem could have been tackled through other measures like increasing duty on certain products, imposing quotas on certain items, and putting a ban on some imports altogether if necessary. We could have suggested pretty effective ways to tackle the problem since we are regularly conducting market studies and research. But the government went head-on to impose a ban. It has lowered the confidence of the private sector.

How can FNCCI help the government overcome the ongoing situation?
The main problem of Nepal currently is the lack of money or shortage of money coming from foreign countries. The main source of foreign money for Nepal is remittances. To encourage the inflow of remittances, we have suggested that banks be encouraged to issue a smart remittance card free of cost to encourage the transfer of remittance via banking channels. We have proposed that family members of the cardholders be made eligible for concessional loans on the basis of such cards. It will motivate migrant workers to remit money through former banking channels. It is our incentive to respect foreign employment and encourage them to remit more money through banking channels. Another way is making the incentives for exports more scientific as well as attracting more FDI. We have established a help desk to help potential investors to access associated authorities without having them go through the trouble.

How is MCC making an impact on the industrial sector? How is it expected to evolve?
MCC has not gone into implementation yet. We received criticism for supporting MCC as well. So we strongly request the government, MCA, and other concerned authorities that it should be implemented as stated without any interference or modifications. Quality work should be completed in time so that it would open doors for new opportunities as well.

What are the major problems that hinder the industrial growth in Nepal?
There are quite a few hindrances to name. One is the high cost of the capital; bank rates are high and bank financing is difficult to get due to a lack of liquidity in the banking system. The second one is the lack of infrastructures, like roads, electricity, etc., for industries. The land is another big hindrance at present. Land prices have hit the roof and it is becoming difficult to acquire land for the industries. The procedural hurdles are quite a nuisance. There are numerous issues related to tax that get in the way of industrial growth in Nepal.

To overcome these problems, there are some effective solutions. The first one is to facilitate the industries with a continuous supply of electricity at a certain rate.  The government must provide electricity at export rates during the wet season. To address the problems in land acquisition, we have suggested that the government allocate 1,000 ropani in hilly areas and 100 bigha in Tarai areas in each municipality for the purpose of building industrial parks. The government should also get rid of procedural hurdles while respecting the industrialists and acknowledging the contribution of the private sector.

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