Govt urged to address ‘systemic inefficiency’

Kathmandu, May 7

Private sector players have urged the government to address the systemic inefficiency caused by high logistics cost of trade, lack of infrastructure and high interest rate of banks and financial institutions (BFIs), to make industrial production competitive.

Speaking during a pre-budget interaction organised by the Nepal Rastra Bank (NRB) here today, Shekhar Golchha, senior vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), underscored the importance of industrialisation for job creation and to ensure sustainable economic growth.

Stating that after accession to the World Trade Organisation (WTO), Nepal opened up its market to other countries, but completely failed to protect domestic industries, he said, “We became a champion nation in terms of WTO compliance, but could not minimise the cost of production through policy incentives.”

Nepali industries have been hit hard due to frequent strikes, high logistics cost of trade, labour unrest, crippling power shortages and unpredictably high interest rates of the banks. “Productive sector has been facing threat due to the inefficiency of bank and financial institutions. Hence, the government, through the fiscal budget, and central bank, through monetary policy, must address the problems faced by the industrial sector,” Golchha asserted.

The share of manufacturing in gross domestic product (GDP) stood at 9.2 per cent in 2000-01, but it has been gradually coming down in the recent years to stand at just 5.4 per cent in the current fiscal.

Golchha urged the government to focus on the development of small and medium enterprises (SMEs) through congenial policies and to improve the investment climate.

In the programme, Shyam Prasad Giri, president of the Federation of Nepali Cottage and Small Industries (FNCSI), sought easy access to finance for expansion of small and cottage industries.

“BFIs provide loans against vehicles as collateral, but refuse to consider mills and machinery worth millions of rupees as collateral, which is a pity,” said Giri, adding FNCSI was willing to provide guarantee of repayment of loans given by keeping mills as collateral.

He also asked the central bank to prioritise small and cottage industries in deprived sector lending along with agriculture sector.

Exporters sought an increase in cash incentives and simplification of the process for obtaining cash incentives in exports. Currently, the government has been providing two per cent (of export bill) as export incentive to the exporters. However, exporters have urged the ratio be raised to at least 10 per cent to encourage exports.

Durga Bikram Thapa, president of Nepal Pashmina Industries Association (NPIA), said the products that have competitive edge should be given priority in terms of protecting the industries through facilitations like establishing backward and forward linkages.

Rewat Bahadur Karki, chairman of Securities Board of Nepal (SEBON), opined that the capital market should be developed to address the mounting need of resources that needs to be invested in the economy.

Chiranjibi Chapagain, chairman of Insurance Board, said that the insurance of crops based on the weather forecast index needed to be carried out to protect the farmers and encourage agriculture production.

Budget size to be around Rs 1,500bn

KATHMANDU: Nepal Rastra Bank Governor Chiranjibi Nepal has said that the size of the integrated budget (including provinces and local governments) will hover around Rs 1,500 billion for the next fiscal. Out of total Rs 1,500 billion,

Rs 300 billion will go towards the lower layers of administration, according to him. As per Governor Nepal, it is a challenge to seek the resources to that extent to finance the budget. The central bank is assuming the budget deficit would stand at around Rs 300 billion after mobilising the revenue, internal debt and foreign assistance. There is room for expanding the size of debt for deficit financing, according to the governor. In the programme organised by the central bank here on Monday to collect the feedback for fiscal budget 2018-19, Nara Bahadur Thapa, executive director of NRB, said that the central bank has said the budget would have to keep the momentum of high growth; mobilise resources at large scale; address the unsustainably growing trade deficit; address the bottlenecks that are hindering expansion of tourism sector; create employment opportunities within the country; create environment for small and medium enterprises to grow and raise agriculture productivity. — HNS