The government reiterated the proposal to establish a High Level Public Enterprises Management Board in the fiscal year 2011/12 in the budget presented by Bharat Mohan Adhikari. The promise made in the budget 2010/11 to form the committee has however remained unfulfilled. The board is expected to manage and run the corporations effectively and efficiently. Suresh Kumar Regmi, Under Secretary of Corporation Coordination and Privatisation Division at the Ministry of Finance, said the proposal to constitute the board has been sent to the cabinet for approval.
The role of the government to act as a referee for the development of economy seems to be neglected by the new budget. Rather, it has proposed the concept of an economy led by cooperatives. Obviously, private sector is thoroughly dissatisfied with the government move. Dr Ram Sharan Mahat, former Finance Minister and Nepali Congress Leader, said, “The proposal of the government-owned cooperatives is not an alternative. Rather, they are against the self-help spirit of the cooperatives.â€
In the new budget, the government has tried to democratise the selection of Chief Executive Officers and General Managers of public enterprises. Merit-based selection is expected to welcome capable and qualified leadership. Often, it is alleged that poor leadership in the corporations led to their deterioration.
Similarly, this year’s budget says, “A policy of disinvesting the share of the public enterprises to the public will be implemented.†The share of the government was Rs 82.76 billion in 2009/10 while its total loan investment in 36 public enterprises remained at Rs 84.92 billion. In the previous fiscal year, the figures stood at Rs 86.13 billion and Rs 74.60 billion respectively. According to the economic survey of 2010/11, share investment of the government decreased by 3.9 per cent while loan investment rose by 13.8 per cent.
In the name of reforms, the government is funnelling billions of rupees from the state coffers as subsidy to public enterprises which are constantly failing to show their competency in comparison with the private sector. This year, an estimated Rs 2.77 billion is being provided as subsidy. Similarly, the subsidy was Rs 1.97 billion in 2010/11 and Rs 1.54 billion in 2009/10. Regmi said, “The corporations will not progress if they remain dependent on the government. Rather, they must manage their operations on their own.†“When the private companies in the same sector can do well, why can’t the government-owned companies make profit,†he asked.
In the last fiscal year, out of the 36 public enterprises, 22 were in profit while 14 were bearing losses. None of the corporations engaged in production are in profit. The economic survey shows that the net profit of Rs 10.55 billion in fiscal year 2009/10 grew by Rs 8.3 million in the fiscal year 2010/11. The share of net operating income of the public enterprises has been 11.2 per cent of the GDP. Regmi said though the number of profit-making companies has increased in recent years, the combined profit of the corporations has not increased.
Although Nepal Tourism Year 2011 is going on, national carrier Nepal Airlines Corporation (NAC) is in the worst possible condition. Similarly, Hetauda Cement and the first cigarette factory of the nation, Janakpur Cigarette Factory, are also in dire straits. Despite a monopoly in the market, it is unfortunate to see Nepal Oil Corporation (NOC) and Nepal Electricity Authority (NEA) in heavy losses. Stories of other 14 corporations are no different. Poor management, inefficiency, corruption, weak leadership, skewed policies are to be blamed for their failure.
Likewise, the net fixed asset of the 36 public enterprises was Rs 133.740 billion in the fiscal year 2008/09 which increased to Rs 139.365 billion by the end of the fiscal year 2009/10, up 4.2 per cent.
With the liberalisation policy on economy introduced after the restoration of democracy in Nepal, the government initiated the process of privatisation, liquidation and termination of state-owned enterprises in 1993. Ever since, 30 companies have been divested of which 18 corporations have been privatised while 11 have been liquidated and one, Nepal Transport Corporation, was dissolved. The disinvestment has been carried out through the sale of businesses assets, partial disinvestment of shares, sale of current assets, leasing of buildings and land, management contract, liquidation, and termination.
The private sector and some economists are complaining that the government has taken a regressive step by reverting to state-controlled economy from the currently liberal economic regime. Mahat said the proposal of the government brought through the budget 2011/12 is suspicious and non-transparent. “The government has failed to bring any concrete policy for the state-owned enterprises. It lacks an action plan for the corporations,†he said.
Experts opine that the government should play the role of a referee. It should work for the development of the real sector and the economy but it should not involve in doing business. They say competitive market entities should be handed over to the private sector. Dr Prakash Chandra Lohani, former Finance Minister and Co-president of Rastriya Janasakti Party, says the government and the private sector must complement each other. He opines without ensuring law and order and a strong policy framework, the private sector cannot prosper. “For that, competitive regulation is necessary and the government should try to minimise the risk of the private sector. However, this year’s budget does not talk about vision and roadmap for the private sector,†he said.
Although much criticised, the public enterprises have been the source of employment to 33,603 people at executive level appointed by the management in 2008/09. However, the figure dropped to 33,526 in the succeeding fiscal years. Regmi also accepts that public enterprises are overstaffed. Experts opine that the number of staff in sick corporations can be lowered, which may lower their cost of operation and.
According to Regmi, the government does not have a list of public enterprises that they want to privatise or a policy framework to privatise them in the near future. He suggests that the policy should be made in coordination with line ministries to give such companies the right direction. “Trying to save them by the finance ministry alone will not work,†said Regmi. “A political decision can choose either to close down or keep operating the public enterprises. However, as thousands of people are getting employment even in sick public enterprises, they cannot be abruptly closed.â€
