“Government can operate some economic areas, but the most of it needs to be left open for the private sector”

  13 min 28 sec to read
“Government can operate some economic areas, but the most of it needs to be left open for the private sector”

Jagdish Prasad Agrawal, Chairman, Nimbus Group

Jagdish Prasad Agrawal, chairman of Nimbus Group has spent five decades in the industrial and business sectors. Agrawal who successfully established Nimbus as the country’s major agribusiness has led various institutions as chief executive during a professional career which has spanned over two and a half decades. He is also noted for his contributions to the institutional development of the central associations of the country’s private sector. Agrawal is the former secretary of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and former vice-president of the Confederation of Nepalese Industries (CNI). He is also one of the founders of CNI. Similarly, he has held the position of the vice-president in the Birgunj Chamber of Commerce and Industries (BiCCI), an association representing the entrepreneurs of Bara and Parsa districts. Likewise, he is the founder president of the Nepal Beverage Association and founder vice-president of Management Association of Nepal (MAN). 

73 year old Agrawal, who is known as an entrepreneur with deep insights in political-economic topics, is well versed in the latest studies in economics, business management, human resource and history. In an interview with Om Prakash Khanal of New Business Age, Agrawal shares his views on the problems and prospects in Nepal’s contemporary political-economy, private sector’s participation in economic development and solutions to the existing problems. Excerpts:

The country is on the verge of implementing a federal system of government. How can it be translated into economic development? 
Federalism for us is more a need than a choice. The need for a decentralised approach for development has made federalism necessary in our context. New challenges can surface after the formation of the various layers of government. So far we have blamed political instability for our underdevelopment. But now we can’t blame political instability anymore. A chaotic situation can come forth while taking steps towards decentralised development. We are yet to define and take ahead an appropriate modality of development.  

All levels of governments in a federal structure have their own agendas.  Problems will arise if they are not integrated and if we fail to supplement each of them. We can expect ideological disputes among the political parties if a coalition government if formed. There are people with liberal leanings and there are supporters of a controlled-economy, while some say that we need to move ahead taking the two ideologically opposing sides. The remittance backed income has raised the expectations of the general people as the middle class has become stronger. Though harmonising the issues can be problematic at the start, we can be hopeful that the situation will take a positive turn given time.  

What should the new model of economic development be for Nepal? 
The world has accepted the liberal and market-oriented model of economic development. Those favouring the controlled economy have also acknowledged liberalism. China is an example in this regard. Though China has a controlled political system, it has been practicing liberal economic policies. The country is competing with other nations to become the world’s number one economy on this basis. 

At present, there is discussion raging on the idea that though liberalism has helped increased income, the distribution of the income is uneven, ultimately contributing to the broadening of the gap of inequality. It will not be right to say that conservative economic policies are required to narrow the gap. Some modifications in the market-oriented policy can resolve this issue. The global eco-political scenario is pointing to the need for a combination of capitalist and socialist policies. The government’s control needs to be clearly defined. The conclusion on this topic should be drawn after the new government is formed in the federal structure. I think, the government can operate some of the economic areas, while the most needs to be left open for the private sector.  

But hasn’t the alliance between the left political parties and its possible outcome strengthened the possibility of a controlled economy in Nepal? 
This is my fear too. There are words in the present constitution that generate uncertainties. The Nepali private sector has not been able to promote and secure its agenda as per the need. 

How can a dependent economy like Nepal achieve the expected level of development from the current type of politico-economics?  
The revenue generated from taxes has not been able to sustain the country’s public expenditure. Development works are running either on grants or loans. The remittance received from foreign employment is also a form of dependence. The business sector has become increasingly dependent and the trade deficit has been ballooning every year. The economic over dependency is a threat to our sovereignty. We need to emphasise on mutual dependency to have the expected eco-political development.  

Is it possible for a country like Nepal which is situated between the world’s two largest economies to build mutual dependency? 
I don’t think it is impossible. Even the countries with vast deserts are not as dependent as we are. We think it is impossible to become self-reliant because dependency is embedded in our mindset. The willpower of our politicos is necessary to remove this mentality. Natural resources will have to be optimally utilised in order to be self-reliant. 

The utilisation of water resources always tops the discussions. However, the development of hydropower starts with dependency. We have been talking about exporting the surplus electricity which is also a form of dependency. What if others refuse to buy the power generated for export? So, the main reason for the underdevelopment of the hydropower sector is this basic flaw in our approach. Instead, increasing the domestic consumption of electricity to reduce imports of petroleum products should be the right path for us in this regard. 

It is an irony that despite being an agrarian economy, agro products occupy a huge portion of Nepal’s imports. We cannot move ahead with traditional agriculture in this age.  Agriculture needs to be commercialised and should not only be limited to the subsistence farming. The government too has been saying this. But it has become a political tool. We have not been able to establish agriculture as a source of the country’s income. There is a need for a radical change to make farming competitive. Politicians have paid attention to labour issues, but not to the problems in agriculture. 

What is stopping Nepal from making exports the base for a strong economy? 
We still have a long way to go to becoming an exporting nation. First we need to identify our area of focus. I think we have been living in the world of fantasy in terms of identifying the exportable products. Earlier, we used to talk about exporting commodities which has now shifted to hydroelectricity. The idea of exporting electricity is wrong in itself given the present situation. There is a lack of clarity about the stated aims of the government to produce electricity. The government’s aim to generate 10,000 MW in 10 years has now reached to 20,000 MW for the same period. The size of investment for the proposed hydropower projects and the area of consumption of the generated electricity are very unclear. The current demand for electricity in the country is 1,500MW, but the total domestic production is less than 500MW at present. 

Likewise, nothing has been done so far to move ahead with the government’s plans to export 25 items of competitive and comparative advantage. While exporting, it is important to ensure that the items are of high quality and are competitively priced. We are yet to solve the issues in the factors affecting the quality and price of goods. In spite of the subsidies being provided in exports, Nepali producers have not been able to export goods at present. This shows subsidies are not promoting exports. There is a lack of synchronisation in the subsidy arrangement. For example, Nepal’s largest chunk of trade deficit is with India, but the subsidies are given for exporting products to other countries. 

The reasons need to be assessed as to why agro products like ginger, cardamom and herbs are not processed in Nepal and why private investors hesitate to invest in the agribusiness. Don’t they see any possibilities in this area of business? Or do they view the goods labeled as exportable as having no potential? And why is the agricultural sector out of the sight of foreign investors? 

Meanwhile, we also need to be clear whether we are looking to export goods or services. No meaningful discussion has taken place to reduce the trade deficit. Political leaders and experts won’t do anything but only listen and talk about export promotion until the money coming from foreign aid, tourism and remittance sustains the imports. 

What kind of diplomacy should Nepal have in this situation? 
Our equidistance policy with India and China is not working. Non-alignment is not a meaningful and relevant foreign policy in today’s world. Foreign policy should be guided by our self-interest. Nepal should not show inclination towards the agenda of its neighbours. Instead, we need to have a descent policy in place and help the two countries to overcome their differences.  Bilateral dependency needs to be replaced with multilateral which will help to reduce the level of dependency. We should go for multilateral institutions like The World Bank and the International Monetary Fund stressing on loans rather than aid for our development. 

You’ve been observing the public as well as the private sector over the years. The private sector is also closely connected to the country’s development. But why is the effectiveness of development plans not visible?  
Lack of necessary resources and capacity of implementing agencies are the major bottlenecks with development plans.  There are many instances where project development plans mentioned in the national budget some 25 years ago are 
still pending. 

The selection of development plans is an important aspect in this regard. Ensuring inclusion of local stakeholders in the plans would make the communities aware about the worthiness of the projects. Similarly, there should be business feasibility in every development plan. The allocation of a sufficient budget for individual projects also should be prioritised. The projects lengthen due to the partial allocation of the budget. The trend here is to increase projects rather than increase the resources. Capacity in the implementation of projects is essential and the private sector’s role here can be effective. But not all works can be done by the private sector. So, government participation cannot be overlooked. The public-private-participation (PPP) can be an appropriate model in order to move forward the development works. 

But it seems that the private sector only ever talks about this but does nothing else…
The government has not paid attention to making the PPP modality private sector friendly. Some laws have been formulated to promote the private sector but they have been cast in the shade. It is because the government has no intention in fostering partnership with the private sector. 

Isn’t it the responsibility of the private sector to make the government understand this? 
The private sector organisations have not been able to transform themselves to deal with the challenges that have surfaced with the changing political-economic scenario. First, the private sector players who talk about economic liberalism need to be clean and competitive. 

Enhancing the capacity of the private sector is also necessary. With the aspects of monopoly and protectionism, the image of the private sector is not that good in society. Clean and transparent practices in business will boost up the image of the private sector. 

Corruption has long been blamed for hindering the pace of development. Though, the private sector has raised its voice against this, it has itself become a part of this. What is your view on this? 
In Nepal, corruption has increased with development. The development programmes are marred with corruption in the political and implementation levels. It is among the reasons why government investments are unproductive as a portion of such investments goes to corrupt individuals. Bribery is rampant in government services. It is not right for businessmen to engage in such activities. The laws to control corrupt acts should be self-driven rather than discretionary. 

The use of the latest technology can help in the effective implementation of the rules and regulations in order to curb corruption. It is easier in our context as the formation of the government and new laws are in the process. This can help reduce corruption in the implementation level. The federal structure can fix the misuse of government investments and underlying problems in the policy making process. The level of alertness can rise if the participation of targeted groups is increased in development activities. Likewise, the role of media is also vital in controlling corruption.

You have been raising issues related to environment-friendly development. Is it possible in this era of industrialisation? 
Environmental degradation is a global problem. Industrialisation and excess mining of minerals are considered to be the main reasons for this in countries like China, United States, India and Brazil. While the environment-friendly development seems to be very difficult to achieve for many countries, the environment has not been much polluted in our country due to the low-level of industrialisation. Therefore, we can adopt a different and environment-friendly model for development. We can brand Nepal as an environmental pollution free country in the world. Just like Mount Everest, a cleaner environment can be our identity and a source of income. I think we should prepare the development model by making the environment into a brand.      

What are your thoughts on youth-centred economic development?
Youths comprise a major portion of Nepal’s population which is our strength. The flight of youths going abroad needs to be stopped for the country to utilise this important human resource. Though remittance has been an easier option of income for the government, the level of disparity has been deepening.  The signs of foreign employment opportunities shrinking have already surfaced. In this situation, there won’t be any meaning left in our development activities if there are no employment opportunities for young people in the country. 

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