Chandra Prasad Dhakal
President, Federation of Nepalese
Chambers of Commerce and Industry (FNCCI)
Chairman of the IME Group, Chandra
Prasad Dhakal, is the President of the FNCCI - the largest private sector
organisation in the country. As an entrepreneur with extensive involvement in
various business sectors including remittance, manufacturing, travel and
tourism, hospitality, banking and finance, infrastructure and automobile, he
has a deep understanding of the economy and business environment in Nepal.
Modnath Dhakal of The Rising Nepal and Bishwas Regmi of The Gorkhapatra daily talked
to him about the impacts of the ordinance recently issued by the government to
facilitate business and investment in the country, the status of the private
sector and obstacles to business. Excerpts:
Amidst the sustained slowdown in the
economy, the government recently introduced amendments to provisions related to
the economic sector through an ordinance, which the private sector welcomed.
But is the private sector genuinely satisfied with the move from the
government?
The issues amended through the
ordinance were long-awaited by the private sector. The revision in the Black
Marketing Act is expected not only to encourage Nepal’s private sector but also
to attract foreign investors by ensuring a suitable return on investments. In
terms of revenue leakage, the revised laws have provided an opportunity for
those willing to pay their taxes. The earlier complexity of dissolving a
company that was not operational has been simplified through these amendments
as well, which are highly practical. The amendment to the Arbitration Act has
broadened the scope for resolving economic disputes through mediation.
Additionally, provisions have been added to facilitate IT businesses in seeking
opportunities abroad, which is a significant achievement. This particularly has
been one of the reforms most demanded from the young IT entrepreneurs as well
as other concerned stakeholders. The changes made through the ordinance spurs
private sector growth.
Likewise, the government has also
removed the procedural hurdles by eliminating the compulsion of requiring
Cabinet decisions even for minor tasks, delegating such responsibilities to the
concerned ministries and secretaries. This change will save considerable time
for both the bureaucracy and entrepreneurs. Meanwhile, the Prime Minister has
expressed his commitment to address the hierarchy of protocol to boost the
morale of the private sector. Financial incentives may not always be necessary
to encourage the private sector, but such initiatives are equally motivating as
they help to promote its good image. Just to take a recent example, during
former US President Donald Trump’s oath-taking ceremony, the first row was
occupied by his family, the second by the representatives from the private
sector and the third was assigned to the Cabinet ministers. This indicates that
there are many ways to encourage the private sector.
So, the amendments have addressed
several legal hurdles that were constantly put forth by the private sector
businesses. However, the government must now focus on implementing these
changes promptly through procedures and standards. We are happy that the
demands raised by the private sector, particularly the FNCCI, have been
incorporated into the ordinance, which has encouraged us.
What role did the private sector and
FNCCI play in these reforms?
Twenty months ago, when I assumed
office as the FNCCI President, on behalf of the private sector, I had committed
to initiating five major reforms for the economy. At that time, the economy was
shrinking due to the impacts of COVID-19 and certain policy constraints. To
uplift the economy from that situation and create a conducive investment
environment in Nepal, the FNCCI undertook integrated efforts through the
private sector and worked to unite political parties on economic issues, with
an aim to minimising opposition in terms of economic and development aspects.
Previously, there was a tendency for
the government to accuse the private sector and for the private sector to blame
the government for inaction. Recognising that such an approach would not lead
the economy anywhere, I publicly committed to making the private sector a
collaborative partner with the government. We had urged the government to
prioritise extensive reforms in traditional laws that hinder investment and
ensure policy stability to uplift the private sector's morale. It resulted in
bringing political leaders, including the Prime Minister, former prime
ministers, and leaders of all major parties, together on a single platform to
align their perspectives on economic issues. This led to amendments to several
laws, including those announced on the very day of the investment summit’s
inauguration.
During our informal conversations with
foreign investors from the Middle East, they frequently highlighted the need
for bilateral investment agreements. I took the initiative to convince the
government to address this requirement, and we now have it. To uplift the private sector's confidence,
FNCCI held an executive committee meeting in Dhorpatan, Baglung, where we
decided to establish the Nepal Development Public Limited company with a
paid-up capital of Rs. 10 billion. This company is already operational,
demonstrating ample investment opportunities in Nepal and positively impacting
the morale of the private sector. We also worked to unite various private
sector organisations on economic issues during that period.
Have the legal reforms sought by the
private sector been fully addressed?
To a large extent, many legal issues
have been resolved. But the critical concern now is how these laws will be
implemented. The government must work to formulate corresponding policies,
procedures, and standards to ensure the effective implementation of the reforms
announced. Without it, the business sector wouldn't be benefitted and the
economy wouldn't be benefitted much from the steps announced to implement reform.
Despite past initiatives to amend
laws, hold investment summits, and create a better investment environment, why
has the economy not seen the expected impact? Could it be that structural
problems are at fault? Are structural issues to be blamed?
Regarding the investment summits, they
were organised more as events rather than strategic moves to attract investors
and investments. The private sector was only included at the last minute,
making it challenging to evaluate whether past commitments were fulfilled, or
whether work was conducted down the line. But I would like to take a note that
the government’s spirit of making timely legal amendments is commendable. The
focus now should be on translating that spirit into rules, procedures, and
implementation. This will send a clear message to the private sector and
foreign investors that Nepal is a viable investment destination. The economic
model we envision is one where infrastructure development is also led by the
private sector. Unfortunately, there is still some reluctance to view the
private sector positively. However, looking globally, economies led by the
private sector have seen remarkable development.
I see immense opportunities in Nepal.
For example, one-third of the world’s Buddhist population aspires to visit
Nepal. This alone highlights the transformative potential of tourism for our
economy. Every sector in Nepal is ripe with investment opportunities. The
government simply needs to create the necessary laws, policies, and basic
infrastructure to facilitate these opportunities. With this foundation, the
private sector will increase investments, delivering on time, on budget, and
with quality. Infrastructure development benefits the entire economy, not just
the businesses. Unfortunately, negative narratives on social media often
overshadow the country’s potential and opportunities. In this regard, there is
a need for mindset change as well.
Despite strong economic indicators
like low interest rates and adequate foreign reserves, credit expansion has
slowed. Does this suggest that even favourable indicators cannot drive the
economy?
This slowdown has resulted from poor
decisions made at the wrong time. In the past, fearmongering about a crisis
similar to Sri Lanka in the post-COVID scenario led the government to impose
import restrictions on over a dozen goods. That unnecessary decision was driven
by baseless fears which resulted in extra-cautious moves by the government thus
significantly reduced the demand of goods and services in the market.
Businesses relying on bank loans were forced to operate at minimal capacity.
Subsequently, the whole economy was weakened.
This situation taught us a lesson that
liquidity, low interest rates, and foreign reserves alone are insufficient to
sustain the economy. All economic parameters must be aligned. The government
needs to increase spending, especially the capital budget, and boost the
private sector’s confidence to stimulate demand. Facilitating the private
sector is crucial—not just for their benefit but for the economy as a whole.
Meanwhile, the belief that supporting
the private sector is essential to reviving the economy is gaining traction, of
late. This positive approach and taking the private sector as the partner in
national development will help the economy recover swiftly.
The private sector has also been
voicing against the challenges faced by private sector-led projects. How
critical is coordination among federal, provincial and local governments?
This is an important issue that should
be addressed promptly. Coordination among all levels of government is crucial.
We have examples where projects were stalled for years simply because of delays
in obtaining permission to cut a tree. Minor disputes have left significant
investments stranded. Such instances demand effective collaboration among
governments. Lack of proper collaboration among them creates policy and
execution confusion seriously impacting the private sector projects.
Once a project receives approval from
one government, other governments must facilitate its progress. While
federalism is still in its early stages in Nepal, development and economic
issues require consensus and coordination among all levels of government. Only
under such circumstances can an investment-friendly environment be created
where private sector would feel encouraged to make an investment.
You have completed 20 months as the
president of the FNCCI. What achievements do you think you could make during
your tenure?
During my early days as the president
of the FNCCI, there were efforts to bring the private sector under the
jurisdiction of the Commission for the Investigation of Abuse of Authority
(CIAA), an anti-graft body. However, the private sector operates differently
from the government-adopted modality, and such oversight could have discouraged
accountability, delayed work, and harmed the morale of entrepreneurs. The FNCCI
opposed this move and through persistent efforts, we ensured that the private
sector remained outside such provisions.
Similarly, we resolved a long-standing
dispute regarding dedicated and trunk line payments by proposing a fair
solution as recommended by an independent probe commission. We also ensured
that disconnected lines in industries were reconnected through government
intervention. High government officials including the chief secretary played a
positive role in resolving the long-standing issue.
During this period, the FNCCI organised
international investment summits in China, Qatar, and Dubai, presenting
bilateral investment agreements and laying new foundations for investment. I
took the initiative for investment agreement which has created bilateral
investment opportunities. Meanwhile, statute of the FNCCI was amended,
introducing direct elections, ensuring women’s leadership, and addressing the
tenure of executive committees. We also plan to organise an economic summit in
March, with participation from diplomats, investors, and representatives from
the FNCCI's counterpart organisations from over 90 countries.
The IME Group has significantly
expanded its business in banking, digital service, tourism and infrastructure.
What are the Group’s upcoming plans as a leading business entity in Nepal?
Our operations focus on three
principles: benefiting the public, supporting the government, and substituting
imports. We are currently working on tourism infrastructure in all seven
provinces to realise Nepal’s tourism potential, attract more tourist and extend
their stay. Extending the average tourist stay from 12 days to 20 days could
significantly impact the economy by generating employment and boosting the transport,
hospitality and travel sectors.
We recently began producing A4-sized
paper domestically and will soon start producing cement boards. These
initiatives aim to substitute imports and promote local products. In
hydropower, several projects are underway while we are also exploring opportunities
in Information Technology. Currently, 500–600 IT engineers work under the IME
Group and we aim to transform IT potential into opportunities. IME Group
prioritises turning Nepal’s potential into tangible opportunities, directly
benefiting the local population.
Published in The Rising Nepal daily on 27 January 2025.
