‘Budget’s priority should be job creation’

As per the new constitution, the government must present the annual budget in Parliament on May 28. Based on this constitutional provision, the Ministry of Finance has started framing the fiscal policy for the next fiscal year, as per the budget ceiling of Rs 908 billion extended by the National Planning Commission. Rupak D Sharma of The Himalayan Times met Shekhar Golchha, Vice President of the Federation of Nepalese Chambers of Commerce and Industry, the largest private sector umbrella body, to know more about expectations of the private sector from the upcoming fiscal policy.

The government is soon launching the budget for the next fiscal year. Which areas, do you think, should it focus on?

The overarching goal of the upcoming budget should be to create as many jobs as possible in the country. Years of political instability have badly hit the industrial sector. The situation is the same in the agriculture sector. Underperformance of these sectors has squeezed the job market. So, youths have no choice but to seek employment opportunities abroad. Today, as many as 2,000 youths are leaving the country for overseas labour destinations every day. Had the country been able to create adequate job opportunities, they probably would not have to toil in foreign lands. Of course, the money these workers are sending is keeping the economy afloat. But mass overseas migration is likely to create social and other problems, including shortage of workers. So, our growing dependence on overseas labour markets and remittance income is impeding the development process. That’s why the budget should focus on domestic job creation.

Job creation is directly related to investment. But to attract investment, the country must create a business-friendly climate, which is not the case in Nepal.

Around 90 per cent of the jobs in the country are created by the private sector. We have created jobs in agriculture, industrial and services sectors. We can do more if an appropriate environment is created. First, let’s talk about what needs to be done in the agriculture sector. It is apparent this sector is in a pathetic state and we have started importing almost all food products, including rice. To give a facelift to this sector, the government must encourage formation of agricultural cooperatives in the Tarai so that farmers can pool resources and land, and achieve economies of scale. These cooperatives should also focus on promoting the concept of mechanised farming. Also, the government should

subsidise agricultural input costs or remove duties levied on inputs like diesel, electricity, fertilisers, seeds and other farming equipment. This will enable Nepalis working in the agriculture sector to compete with farmers in India, where most of the input costs are subsidised. Similarly, in the hilly areas, where land holdings are smaller, production of high-value crops should be promoted. At the same time, other bottlenecks that are preventing investment from flowing into the sector should be identified and removed. If we could implement these concepts, our dependence on foreign food products will gradually go down. This will also help us to create job opportunities in the agriculture sector.

Many of these issues have been covered by the government’s Agriculture Development Strategy, a 20-year blueprint for the development of the agriculture sector. Yet, the sector seems to be lagging behind, isn’t it?

Yes, the strategy is there. But necessary laws have not been framed. And investors will not show willingness to invest in the sector unless proper legal frameworks are introduced. The government should understand that we need investments to the tune of billions of rupees to modernise the agriculture sector, so focus should be on framing appropriate laws to attract investors.

And what do you think should be done to give a lift to the manufacturing sector whose contribution in the gross domestic product (GDP) has been falling?

At one time, manufacturing sector used to make a contribution of around 14 per cent to the GDP. Today, that share has fallen to around six per cent. One of the major reasons for the slump is protests launched by political parties that prevent manufacturing units from operating in full capacity. The FNCCI strongly believes it is time to end these protests and focus on launching an economic revolution. If not, poor people will never get prosperous. Political parties should understand that once the economy starts expanding rapidly, it will not only lift the poor out of the traps of poverty but end disparity that is taking place in the name of caste and identity. This is because people will have little time to think about petty issues once their income starts going up. But to attain higher economic growth, the government must focus on building energy projects to end loadshedding, develop physical infrastructure, such as roads, and introduce appropriate industrial and labour laws. This will definitely give a boost to the manufacturing sector.

But entrepreneurs here seem to be more interested in making quick profit by selling imported goods rather than taking risk to set up manufacturing plants to replace the imported goods. Isn’t that a big problem here?

To produce goods here, you need to make big and long-term investment. And to make that investment you need to take risk. And to take the risk, you need a business-friendly environment. Nepal, unfortunately, does not have that environment. Take for instance how every incoming government changes policies. When there is no policy predictability, how can investors think of making investments? Also, many foreign governments extend benefits, like subsidy, to support growth of industries. But we don’t get those facilities here. At the same time, many countries have flexible labour markets. But our attempt to make the labour market flexible has hit a roadblock as the Parliament has not approved the new Labour Act.

The new Labour Bill was drafted a few years ago. What is taking time to introduce it?

The Bill has been forwarded to Parliament and it is sitting idle there. I heard some lawmakers want amendments to the Bill. I don’t know why they want to change the provisions, although the Bill was framed after holding tripartite discussions between the government, trade unions and the private sector.

Talking about the labour issue, it is often said productivity of workers here does not go up despite hike in wages. Why is there a disconnection?

Nepalis are most sought after workers abroad. This means Nepalis are hardworking and diligent. But the same workers do not work with the same zeal here. This is probably because of instability in almost every sector, which is discouraging workers to put in all their efforts. However, employers should also be blamed for this, because they are the ones who should keep tabs on performance of employees. But I think a lot will change once the Parliament approves the new Labour Bill because it allows employers to fire unproductive workers, upon conducting assessment of their performance. So, if there is flexibility in labour market, like ‘no work, no pay’ and ‘hire and fire’, productivity will definitely go up.

It is often said that the private sector only makes complaints, but never comes up with concrete proposals for development of different sectors. Do you consider this as a weakness of Nepal’s private sector?

In a country where there is no political stability, entrepreneurs cannot frame long-term visions. This is because there is no guarantee on tenure of incumbent governments and policies that will be introduced by successive governments. This means there is no guarantee that policies introduced by the current government will be adopted by the upcoming government. When there is no such guarantee, what is the need of framing a concrete long-term strategy? Also, our governments seem to have very little risk appetite. Take the case of the new Labour Bill. If the process of signing the Bill into law is initiated, some will raise voices against the law and some will raise voices in favour of the law. In short, there will be some controversy. But the government does not want to get dragged into this controversy, so it prefers to let the Bill to gather dust in Parliament. Shouldn’t the government show some courage and face the problems head-on? All these things are setting a bad precedence in the country.

 But the private sector also has not been able to win the confidence of the government, isn’t it? Take for instance the project on Kathmandu-Kulekhani-Hetauda Tunnel Highway, which was extended to a private company, but has failed to take off. What is your take on this issue?

The project did face problems because of lack of support from the government and other external issues. But you can’t take this single case and come up with a general statement saying the entire private sector does not have the capacity to build infrastructure projects. As I said earlier, the private sector has generated 90 per cent of the jobs here and we work efficiently. So, there is no alternative to private sector participation in the country’s development. But we have some preconditions.

What are those preconditions?

First is introduction of appropriate legal frameworks. As you know, 16 new Acts related to the economic sector are sitting idle in Parliament, while around 14 Acts need to be amended immediately. Second is uninterrupted supply of electricity. And the third is development of necessary infrastructure, such as roads. Also, policy stability has to be ensured and there should be no political intervention in sectors such as hydro. The hydro sector can change the fate of Nepalis yet we have not been able to harness the potential of the sector because of political meddling and misplaced sense of nationality. If these problems could be addressed, the hydro sector can turn into a key driver for economic growth. But for this, we need a consensus at the national level.