Kathmandu, May 27
On May 28, 2008, the newly elected Constituent Assembly
declared Nepal a Federal Democratic Republic, abolishing the 240-year-old
monarchy. Business and investment in the country has always been critical
due to political and policy instability, conflict, energy crisis and disasters.
Although the country had adopted liberal economic policies about 18 years back
in early 1990s, the shift had moderate impacts on the business and industry.
The Rising Nepal talked to four business leaders about the impacts that the new
system had on it.
Bhawani Rana, Former
President of Federation, Federation of Nepalese Chambers of Commerce and
Industry (FNCCI)
Since the business community
also participated in the struggles and movements that brought about the changes
including the republic. There has been a slight change in the political
leaderships as they have started to talk about the economic agenda, but that is
not getting priority in the practice. For an instance, many manufacturing
industries have long been on the verge of collapse while the others are running
under-capacity but governments have shown no concerns.
There has been a change we
could see, but general as well as business people have not felt it. It’s not that
we don't have good policies; there are better ones as well. But their
implementation is very poor.
The liberal policies that the
country adopted in 1990s paved the way for the flourishment of banking,
aviation, and other industries. We could see positive impacts on
hydroelectricity and industries like cements in the republic era. But this
positive progress has now been halted due to policy instability.
There is no alternative of
the republic, we need to make it successful together but there is a need of
reforms in the political parties and governments’ performance. Nepal should
learn from Bangladesh to advance the economic and business agenda forward and
make people feel the positive impact of the new system through growth and
development.
Kamlesh Kumar Agrawal,
Senior Vice President, Nepal Chamber of Commerce (NCC)
After the establishment of
the Federal Democratic Republic, Nepal has taken a leap in the path of economic
development.
In seven/eight years after
the establishment of the Federal Democratic Republic, the economic activity in
the country expanded, and the creation of an investment climate encouraged
domestic and foreign investors to increase investment. The size of economy
reached about Rs. 5.4 trillion.
However, after the
devastating earthquake of 2015, the pace of economic development in the country
has slowed down.
After the 2015 earthquake,
Nepal have had to face different challenges. The economic activity of Nepal has
been affected due to the unofficial Indian blockade after the promulgation of
the constitution, the COVID-19 pandemic and Russia-Ukraine war.
After the establishment of
the Federal Democratic Republic, due to the positive business environment, investment
has increased in various sectors including hydropower and cement industries. As
a result, today Nepal has started selling electricity to India and has also
started exporting cement by becoming self-reliant on it.
Currently, Nepal is under the
problems of economic recession due to internal and external reasons. The
production of the industrial sector has reduced due to fall in consumption.
High interest rates have affected the businessmen and investment.
Hari Bhakta Sharma, Former
president of Confederation of Nepalese Industries (CNI)
Nepal has made significant
achievements in the development of hydropower and cement industry over a decade
period.
Due to the promotional
programme of the government in the hydropower and cement industry, Nepal is in
the position to export electricity during the rainy season, along with cement.
This is an achievement for the country’s economy.
However, industrial sector is
still facing power tripping frequently. Nepal is still importing power from
India to meet the demand during the summer season.
There was no progress in the
investment in the productive sectors after the promulgation of constitution in
2072 BS as the government introduced laws and policies to ease import instead
of promoting manufacturing industries inside the country.
After the promulgation of the
constitution, the government introduced many acts and laws. But the government
could not bring a policy to promote the manufacturing industry in accordance
with the expectations of the private sector to increase domestic production. This
is a failure in promoting domestic and foreign investors and accelerating
economic activities.
The government should not
delay in amending the policies and acts to create a business-friendly
environment and encourage the private sector to increase their investment in
productive sectors.
Satish Kumar Bohra, Managing
Director, Bohra Group
Policy stability is the first element for the growth of
business and industries but the private sector in Nepal has been deprived of
the fruits of republic system due to political and policy instability. A policy
that was announced by a government might be scrapped or changed by its
successor whereby there could be a policy while initiating a business and
another one while launching business operations.
The private sector needs policy stability for 10-15
years. However, the government and political leadership in Nepal lack long-term
vision for the promotion and development of business sector. Meanwhile, the
government should also estimate the number of industries or size of production
that the country needs since the herding in a sector has caused problems in
various sectors including cement and steel industries.
Solution is simple yet difficult to achieve: political
parties should come together and form a single voice on economic agenda and
business promotion. Budget could be a starting point to have national consensus
so that even if the government is changed in the same fiscal year, the new one
treats it as its own document. Even if a single industry is closed, it’s a
national loss as it directly affects employment and revenue.
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