-Rajesh Kumar Agrawal
The `primary duty’ of the Federation of Nepal Chamber of Commerce and Industries (FNCCI) is to serve the interests of businesses and businessmen. This is where my emphasis lies. Right now the business community is being harassed in every way.
We have well witnessed that in recent days the voice of the private sector remained unheard by the State. My main aim is to create a favorable environment where the State carefully listens and acts on the crucial issues raised by the private sector.
I am working round the clock to root out the trend of the state and the policymakers to turn a deaf hear to the crucial issues raised by the business community. If my efforts fail, I will come back to you (the business community) to ask for support.
There are various regulatory bodies in Nepal that regulate businesses and industries, banks, and financial institutions. The central bank, Nepal Rastra Bank. is responsible for the monetary policy. But the issue is that all the regulatory bodies keep making experiments in the home ground adopting the principles and practices of developed nations like the USA, UK, or Japan.
Following the practices implemented by International Monetary Fund, and World Bank in developed countries, similar laws are implemented in Nepal. However, we do not belong to a country with an economic status like USA, UK or Japan.
The reality is Nepal is a country with a 1,500 km open border with India, where no visa or passport is required for the citizens of both countries to cross the border. There is no other country in the world that has such a tradition.
Under the undue influence of donor agencies like the International Monetary Fund or World Bank, the central bank imposes new rules and regulations without any consultation with the private sector. Later, not only the business community suffers but also the whole nation. That is why my effort is to compel the state’s authorities to introduce new rules and regulations only after consultation with the business community.
The regulatory body has repeatedly claimed that the rules and regulations have been brought in consultation with the private sector. The FNCCI is also responsible for that. The selection of the leadership of the FNCCI might have gone wrong in terms of assigning experts to provide guidance and feedback to the state’s wing.
The level of knowledge of the person who represents the entire private sector has a great meaning. The leadership should also assign well-experienced businessmen who can contribute valuable inputs for policy-making and convince the state of the agenda of the private sector.
Issues in the Financial Sector
Nepal Rastra Bank, the central bank has been pointing to the International Monetary Fund or World Bank behind the changes in monetary policy.
Banks and the private sector together made a massive investment in the industry, business, and real sector as well to minimize the adverse impact of the Covid19 pandemic. The investment poured into the secondary stock market which surged the stock exchange index from 1,800 points to 3200.
At the current market, the bank’s interest rate hiked to double digits while the market demand is quite low amid the poor affordability of the common people. In many industries, the demand already fell by 50 to 60 percent at once. On the one hand, the interest cost increased by 70 percent point. The nation is almost in an economic recession.
The state’s financial advisor and BFI’s regulatory body, Nepal Rastra Bank remained silent when it should have paid attention. Suddenly, the central bank started using various monetary tools including withdrawing liquidity from the market, increasing interest rates to control inflation, and discouraging imports. It compelled some of the businessmen to commit suicide.
Real estate is the most important aspect to ‘boost’ or sink the economy. Real estate does not mean only land, it actually includes construction works such as housing, business malls, roads, bridges, etc. It fuels the economy from 360 degrees. It creates a cycle of income and investment in the national economy, Now, the cycle has been destroyed since Government has not made enough capital expenditure in recent years.
Businessmen cannot overcome the problem until the government spends enough for infrastructure development. Banks do not get enough investable funds if government spending does not increase. Reciprocally, industrial production too will not take the increase. Construction workers too are pushed toward unemployment.
We are in big trouble. Non-performing loans of banks are increasing. To get out of this, the demand side of the market should be increased. I will continue to ‘lobby’ with the Government for that.
Whatever problems the businessmen are facing, all this is happening because of the Central Bank and Ministry of Finance. Due to the lack of coordination between them, businessmen have to bear the pain. My top priority is to coordinate with the Government and state agencies to initiate smooth policies.
Liquidity must be released in the market, the Government has many tools for that, and I am more focused on that. Our economy is also ‘under-leveraged’.
Most of the small and medium-scale businesses are in trouble now. Further, businessmen have been dispersed due to a lack of cement, timber, construction materials, and real estate business. From hotels, restaurants, and garments, all kinds of businessmen are in the market. There is no demand in the market, there has been a big drop in demand due to the state’s wrong policy. It will be my responsibility to lobby the state’s organ to make a policy to increase the demand and I will do it.
Now in Japan, the government pays 20 to 30 percent of the cost of dining in a restaurant. The Japanese Government has taken the such initiative to create demand. If the government is not in a position to bear the expenses, at least it can somehow play a positive role to increase the market demand, I will take the initiative for that.
Now businessmen are in trouble amid high-interest costs. In recent times, interest increased from eight percent to 16 percent. Our problem will not be addressed even by reducing the interest rate by three percent. There is no demand in the market and another exorbitant cost. These two problems are complementary to each other. Goods become cheaper as costs decrease.
Now people don’t even want to do business. Is that what the government wants? Now you are getting a 12 percent interest rate as a ‘return’ for term deposits in the bank. The question arises, why should someone invest in the business?
Initiative to enliven the entrepreneurship
Entrepreneurship is slowly dying in the country. Risk-taking ability is also decreasing. Today, there is no more than a 7 to 7.5 percent deposit interest rate in neighboring countries. Whereas, in Nepal, interest on term deposits is above 11 percent. It means our interest cost is quite high in comparison to the neighboring market.
For example, if the cost to set up an industry in India costs Rs.100 million, it will be Rs.180 million to set up the same industry in Nepal. On the one hand, the cost of setting up an industry is high, and on the other hand, the interest rate is too. Contrary to that the market demand is in a downfall trend amid high inflation and poor saving capacity of the general consumer. So, it’s tough for the industry and business to sustain. I promise to put this issue with the Government and convince it in creating a favorable environment.
Strong ‘lobbying’ for industrial and commercial infrastructure development
There is no ‘industrial park’ in Nepal yet. Basic infrastructure like electricity, and communication transmission are very poor and the highway too is not wide enough. It is cheaper to import and trade than purchase or sell goods produced in one part of the country to another part. ‘Cost of doing business’ is also high in Nepal.
There is a huge shortage of economic infrastructure in Nepal. Industry and business have been running on the strength of the businessmen themselves. Businessmen do not even get the facilities that the Government has promised. The government announces various facilities through the budget, but when providing facilities, many of them are reluctant. I will initiative to benefit the private sector with the Government’s announced benefits.
Our team in the FNCCI will surely lobby to deliver all the incentives that the Government has already announced and our team will work diligently to maximize the incentives for industries.
Government and businessmen are not like oppositions
The recent economic recession and high-interest rates caused by the poor monetary policy have provoked a confrontation between the state and the business community. The consequences of proceeding without prior consultation with the private sector are now seen in the national economy.
The whole nation has to suffer if the state or the regulatory authority unilaterally imposes any new rules or regulations. Unless we move forward as a team, nobody benefits.
The state and the private sector have one common goal,’ economic prosperity. In my opinion, the state should remain in the role of ‘caretaker’ and let the rest of the things in the hands of the private sector.
Just as a farmer works with crops, an industrialist/businessman works with capital. The capacity of the bank will increase. The capital gains we make will remain in the country.
Now it seems that the private sector and the government are two teams. Our goals are not separate. When we work together, we both will surely benefit.