"We need to avoid the shadow of political uncertainty over the already shattered economy.”

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"We need to avoid the shadow of  political uncertainty over the already shattered economy.”

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has elected a new leadership seemingly ending months of uncertainty and wrangling surrounding its 54th AGM with the election of its Senior Vice President and the executive committee. But just as the dust has started to settle on the largest private sector body of Nepal, the country has been plunged into a political crisis with the abrupt dissolution of the lower house and a split within the ruling party. Ravi Bhakta Shrestha, former President of FNCCI, who is closely watching the developments in the national political arena stresses for stronger unity among the business community to face the unprecedented challenges posed by Covid-19 and the current political uncertainty. In a interview with NewBiz Editor-in-Chief Madan Lamsal, Shrestha, who is also the President of NE Group, talked about the responsibility of the new FNCCI leadership, problems surrounding the economic recovery and investment diversification of NE Group, among other topics. Excerpts:       

Will the FNCCI elections be the beginning of the long sought after change in the apex body of the Nepali private sector?
The provision of Senior Vice President automatically assuming the post of President in FNCCI was introduced to put an end to the wrong practices that have been seen over the years during the election of the executive committee. The use of money and power has fostered unethical activities to influence voters tarnishing the image of FNCCI as the apex body of the country’s private sector. Similarly, the election biases also remain for a long time and the rivalry between the contestants who fought for the post of president continue. All these have resulted in the weakening of FNCCI and the unity of the overall Nepali private sector. To address these problems, we came to the conclusion to end the election for the post of president. We observed similar practices also in other countries. For instance, private sector bodies in India and Bangladesh do not hold direct elections of their president. However, after observing the last two elections, I feel that the objectives of the amendment have not been met as the election of the senior vice president has become similar to electing the president.

We will again work to amend the statute of FNCCI; the provision of direct election of the president will be re-introduced and there will be arrangements to avoid the wrong practices to influence the election process. Similarly, the tenure of the executive committee will be reduced to two years which is currently three years.  

The interference of former FNCCI presidents in the affairs of FNCCI can be blamed for obstructing its leadership from working actively. Is this right?
I don’t know if this is directed towards those few individuals who meddle into FNCCI’s everyday affairs to fulfill their own interests. But it will be wrong to say that all former presidents interfere. Former presidents just play the role of advisors and suggest office bearers if they seek advice. We do not interfere but play our role proactively if the problems in FNCCI are not resolved and the reputation of the organisation is at stake. Upholding the dignity of FNCCI is also in our interest.

The seeds of division in FNCCI were sown in 2052 BS when Binod Chaudhary and Padma Jyoti contested for the post of president. There was a similar situation in 2056 BS when I and Pradeep Kumar Shrestha announced our candidacy for the post. There was immense pressure from the business community not to contest against each other; the then FNCCI President Ananda Raj Mulmial persuaded us to forge a consensus and I later withdrew my candidacy for the sake of the unity of the private sector and things gradually started getting better at FNCCI. But in the latter years, groupism became stronger and caused fragmentation within the organisation.

It is an irony that we couldn’t narrow the divisions and foster a sense of unity among FNCCI members. In all these years, we have seen that elections have become very divisive and the post-election activities have weakened FNCCI further eroding the capability of its leadership to lobby the interests of the business community and boldly discuss pertinent economic issues with the government and the lawmakers.

What should be the roadmap of the newly elected leadership in terms of strengthening FNCCI becoming the representative of the Nepali private sector in a true sense?
Now the responsibility to heal the wounds and unify FNCCI has fallen on the shoulders of Shekhar ji. After assuming office, he invited over former presidents a few weeks ago and asked for suggestions to unite FNCCI. We told him to become the leader of not one group but to represent all those who are under the umbrella of the largest organisation of the country’s private sector. I believe Shekhar ji will pay heed to our suggestions and will work to resolve the issues within FNCCI.

The new executive committee should prioritise teamwork and avoid groupism and politics within the organisation. It needs to be understood that having a united voice is essential in order to put pressure on the government to resolve the issues surrounding the private sector. Only then can the government step up to address the demands of the business community. Shekhar ji has said that he has prepared a 10-year plan to strengthen the business community. I am yet to see the plan, but I think the implementation of such plans is what matters the most.

What major challenges do you think the new leadership in FNCCI needs to overcome to make the tenure meaningful?
Be it manufacturing, tourism or aviation, the Covid-19 pandemic has badly affected every sector of the Nepali economy. A large number of industries were forced to shut down for months and even after the easing of restrictions production has remained subdued; it will take a long time for manufacturing activities to return to levels prior to the lockdown. Similarly, the wrangle within the ruling party has also hampered the recovery efforts. The spread of coronavirus has not stopped. Thousands of migrant workers and other Nepalis are still unable to return to Nepal due to the Covid-19 restrictions in many countries. Not only for businesspersons, the pandemic has had a massive hit on the income of daily wage earners. It is an irony that at a time when concerted efforts are needed to take the economy out of the deep slump, the country is facing a political crisis.

All these have added to the challenges for the private sector and business leaders have to play an important role for the economic wellbeing of the country. The new leadership of FNCCI needs to send a strong message to the political leaders not to cast a shadow of uncertainty over the already shattered economy.

Economic recovery will only speed up only when the most affected sectors will get meaningful support from the government. It is high time for the FNCCI leadership to pressure the government to come up with a stimulus package while also cooperating with the government to realise the agenda of economic development. The FNCCI leadership should do the adequate homework to identify the problems businesses are facing due to the pandemic. Similarly, they should also work on to ease the hassles created by the existing legal arrangements discouraging domestic and foreign investments.

The Prime Minister has said that support to the business sector has been provided according to the capacity of the government. But the relief measures are far too inadequate, and as a result the economic recovery has remained sluggish. Here, FNCCI leadership can ask the government to check its unnecessary expenses.

The new Minister for Finance has said that the government will support the struggling businesses proactively. How hopeful are you about this?
The government’s response to the crisis can be called tepid at best. The former finance minister was not ready to even listen to our concerns. While it has become normal for our politicians to show indifference towards their own commitments, the new Minister for Finance Bishnu Paudel is seen putting efforts in terms of delivery. After assuming office in mid-October, the minister signaled that he will work hand in hand with the private sector for the country’s economic development. In the last one and a half months, things have slowly changed for the better for the private sector and the minister has been seen working to translate his commitments into actions. He has asked private sector bodies to provide suggestions to the government. I think he understands the problems surrounding the business community at the moment.  

What do you think the government specifically needs to do to help the struggling businesses survive?
There is a need to add momentum in the industrial, agriculture and tourism/travel sectors to end the current economic sluggishness. To achieve this, the government should come up with all measures at its disposal which includes providing grants and loans and relaxing taxes to support the struggling businesses. The taxes can be increased later when the businesses recover their losses, industries generate new employment and the situation returns to normalcy.

The central bank has already provided relief to the crisis-stricken business sector through the Monetary Policy for FY2020/21. Aren’t the measures helping businesses to come out of the slump?
While the arrangements in the monetary policy are positive, the measures are definitely not enough. Despite the arrangements related to moratorium on debt payments in the monetary policy, banks are putting unnecessary pressure on businesses to repay the loans. The time period to repay loans should be extended. Similarly, the size of the refinancing fund needs to be increased. The Rs 50 billion refinancing fund allocated in the federal budget is far too inadequate to provide a lifeline to the tourism businesses that are in their death bed due to the pandemic. Likewise, bank interest rates should be lowered further.

There were expectations that the promulgation of the new constitution would bring an era of investment and business growth. How do you evaluate the last five years in terms of Nepal’s economic development? What have been the hits and misses?
We all held high hopes that the promulgation of the new constitution and the 2017 elections would herald a new era of stability and growth in the country. But things have not been as per our expectations. It is mainly because of the petty interests of politicians and high corruption. The political parties also lack clarity in their economic development agenda and the bureaucracy is still not much friendlier to doing business in the country. Also, frequent changes in the bureaucracy have hindered us to work efficiently.

However, it is not that the situation has not improved. We have seen good progress in infrastructure development; sectors such as hydropower have shown promising signs and the short supply of electricity has also ended. Similarly, we are also in a position to boost our exports and sectors such as tourism and hospitality have witnessed a pouring in of investments in the recent years. Likewise, investments have also grown in the agriculture and manufacturing sectors.

The last couple of years have seen you diversifying investments to hospitality and financial services sectors from manufacturing and trading. How has this diversification been like for you as an investor?
The country’s economic situation was different during the time of my late father Indra Bhakta Shrestha. In the past, our focus was mainly on manufacturing ventures. We operated textiles and rolling mills industries for many years before shutting them down after Nepal adopted the open-market policy post-1990. We divested from the industries not because our production capacity was low, but due to the increasing competition caused by the flood of cheaper goods into the market.

From problems related to labour relations, power shortage and political instability, we went through a number of hurdles with our manufacturing ventures leading us to reach to our conclusion of investment diversification. We found that investments in sectors like tourism and hydropower can ensure good returns for a long time. Buying the entire stake of The Oberoi Group in Soaltee Hotel Limited when they were exiting Soaltee was our first step towards the diversification of our business. Later on, observing the potentials in domestic tourism, Soaltee Hotel Limited and NE Group formed a joint venture Soaltee-SIBKRIM Hotels and Resorts Pvt Ltd to open new hotel and resort properties and take management of existing ones in different parts of the country. Under this, the Soaltee Westend Premier was formally inaugurated in April 2019 which is the first LEED certified five-star hotel in Nepal. The company has plans to open a hotel in Pokhara which was delayed by the Covid-19 pandemic; it will move ahead with hotel projects in other parts of the country by analysing the situation.

Our joint venture investment in Hotel Summit has also helped us to garner more experience in the hospitality sector. We have now planned to change Summit into an ultramodern premium accommodation centre exclusive to the people from the elite class. It will be centrally located sprawling across 18 ropanis of land owned by Summit Hotel and will be developed by the Singapore-based international company Meinhardt. There will be service and residential apartments and the existing hotel will also be replaced with a new property.

Earlier, another project in Jahamsikhel, Lalitpur which was developed as an apartment project but was later converted into a hotel as Vivanta Kathmandu, as a joint venture between Chaudhary Group and NE Group, also provided us a new experience. Besides, we are also planning to construct a complex in Kantipath where currently 1905 Suites and Restaurants is situated. It will house a commercial complex and residential apartments which will be a first of its kind in Nepal; the project is currently in the design phase and a world-class architect from Mumbai is working on it.

Similarly, Unilever Nepal which earlier used to import several products to supply to the domestic market is working to produce the items locally. The Covid-19 pandemic has affected this plan, but the expansion will move ahead. Likewise, the SRL Diagnostics Nepal, a joint venture between the India-based SRL Diagnostics and NE Group, is also planning for expansion. Meanwhile, National Ice Cream, a joint venture between NE Group and Nanglo Group, is also doing good business.

Over these years, I have sought to earn goodwill rather than money. I think, people like to get into business partnerships with me because of the higher trust level. This gives me happiness to work.

How is NE Group moving ahead with recovering from the impacts of the Covid-19 pandemic?
NE will not be making new investments for the next 4-5 years and will be focusing on revival and expansion of its existing businesses.

Unilever Nepal has posted losses in the last few quarters. How is the company planning to recover the losses?
Unilever Nepal’s dividend distribution capacity has been affected by the pandemic; the company’s profit declined by 65 percent because of the decrease in sales. Also, the company has not distributed all of its earnings as dividends; a part of the earnings has been added to the company’s capital expenditure. As I said earlier, the money will be invested to expand manufacturing units to substitute the import of various products. Similarly, Unilever Nepal is also looking to export after a few years.

While Unilever Nepal has been working to contribute to the manufacturing sector and generate employment within the country, the government should also address the problems the company faces. The sales of unauthorised and counterfeit products, for instance, still remains as an issue to the company.     

You are representing multinational companies (MNCs) in the Industry Commerce Promotion Dialogue Council formed by the government two years ago. How has the council worked?
The council has been mandated to engage in dialogue with MNCs in Nepal, hear their problems and grievances, and suggest to the government the ways in which to address the issues. The council seeks to assist the government in creating an environment conducive to foreign investments. During a meeting with the Prime Minister, we told him that things have not moved forward in spite of the formation of the council due to the non-action on past recommendations. Many problems have been discussed for a decade now. While the Prime Minister is keen to address the issues for MNCs, the support from the bureaucracy is important in the implementation side.

How do MNCs view the legal and other economic reform processes undertaken by the government over the last few years? Has the environment become conducive to them to invest in Nepal?
The steps taken by the government so far in terms of legal and administrative reforms are insufficient. Apart from the difficulties faced by MNCs operating in Nepal, the sluggish and ineffective reform does not give a positive message internationally about Nepal as an investment destination. We need to be aware that the experiences shared by MNCs that are in operation in a country like Nepal become a deciding factor for any MNC looking to invest here; foreign companies trust such experiences over anything else.

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