• Finance minister says government not deviated from principle of free market economy

Kathmandu, May 12

The umbrella body of the private sector has questioned the government’s stance on liberal economic policies citing the unjustified actions taken by officials against some private sector firms in recent days.

Presenting its suggestions for the Budget 2016-17, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has said that action taken against some established businesspeople has hinted towards government’s experiment to adopt controlled economy in the future. Reportedly, some established companies are mulling over shutting shop in the wake of the crackdown.

In the upcoming budget, the FNCCI has sought raft of reforms in legal and administrative fronts, including abundant supply of power to boost productivity in the country. “The fiscal budget must take some critical steps to raise government’s capital expenditure and improve the environment to run business,” said Pashupati Murarka, president of FNCCI.

“As Nepal’s economy has long been suffering due to low productivity, high unemployment and spike in inflation — ranking the country as the second poorest in Asia after Afghanistan — the government should adopt some critical steps that could be panacea for country’s economy.”

FNCCI has said that reforms in legal and administrative fronts are crucial to kickstart higher pace of economic growth. Though some of the laws are liberal towards the private sector, the sector has not been able to utilise the facilities offered by the government due to contradictions with provisions in some other laws, according to Murarka.

Citing an example of Black-marketing and Some Other Social Offenses and Punishment Act, 1957 that bars traders from making profit of over 20 per cent, Murarka asked, “How is it possible for the private sector to invest in research and development to foster growth and flourish if the government caps its earnings to no more than 20 per cent?”

As per FNCCI, many firms have closed down due to high penalties levied by the government for minor cases like delay in tax submission, missing the renewal deadline, among others. In this regard, the largest umbrella body of the private sector has sought amnesty from all penalties (with the exception of serious social offences) for all firms for one time to pave the way for the closed industries to reenter the market.

Presenting its suggestions to the Ministry of Finance, FNCCI president laid emphasis on the provision of anticipatory bail for businesspeople through financial bill in the upcoming budget.

FNCCI has sought early approval of financial and industrial bill, which was announced long time back by the parliament. According to Murarka, industrialists have been facing numerous challenges in establishing industries in the country. Apart from the widely shared problems like power crisis, labour unrest and high logistics costs to establish business here, industrialists have also been facing numerous hassles in land acquisition, firm registration, and environmental impact assessment, among others. These issues can be addressed through efficient administration and harmonisation among various laws of similar spirit, as per FNCCI.

FNCCI has coined slogans ‘vision to venture’ and ‘paper to practice’ to make budget implementable. It has urged the government not to impose more taxes on the private firms while implementing the federal tax system. Reportedly, the increase in tax rate could make businesses unviable. FNCCI has also strongly stressed on the need to end unethical practices prevailing in businesses like syndicates and cartel system and road tax imposed by locals.

For rapid development of hydroelectricity, in which the country has comparative advantage, the private sector umbrella body has asked the government to introduce similar treatment in interest rates for solar energy and hydroelectric projects. Similarly, it has asked for reduction in customs tariff of hybrid vehicles by fifty per cent and that such tax in all types of vehicles be slashed by 20 per cent.

To address the ballooning trade gap, FNCCI has suggested the government to raise export incentives to 10 per cent from existing two per cent. It has also urged establishment of internationally accredited labs to address, particularly the quarantine-related, hassles while exporting agriculture and livestock products.

In his response to the private sector, Finance Minister Bishnu Prasad Paudel said that the government has not deviated from the principle of free market economy and is making best effort to boost confidence of the private sector, which is considered as an engine of economic growth.

He further informed that the government will bring budget for next fiscal year under the guiding principles of productive capacity enhancement, employment generation, reducing poverty and export promotion. He assured that he will do the needful to address the concerns raised by the private sector in the upcoming budget.