'We had expected an unconventional budget to address the needs of these exceptional circumstances'

Last week, the government unveiled the budget for fiscal year 2015-16 with focus on reconstruction, infrastructure development and boosting productivity. The amount allocated for capital expenditure, which is for physical infrastructure development, has been increased by 79 per cent to Rs 208.88 billion this fiscal compared to the previous year. Also, the government has earmarked Rs 91 billion for the reconstruction drive. To know more about the private sector’s perspective on the budget, Pushpa Raj Acharya of The Himalayan Times had a tête-à-tête with Hari Bhakta Sharma, who along with being a prominent pharmaceutical industrialist is also Senior Vice President of the Confederation of Nepalese Industries — the apex organisation of the country’s manufacturing and service enterprises.

The government recently unveiled the fiscal budget 2015-16 prioritising reconstruction in a bid to address the rebuilding needs of the country in the post-earthquake scenario. What is your take on the budget?

This budget is not as ambitious as we had anticipated. It has completely failed to link the reconstruction drive with economic stimulus, which is necessary to spur economic growth. So, we can’t expect much from this budget in terms of helping revive the economy. The total allocation of Rs 91 billion for reconstruction is insufficient to address the immediate needs of the post-quake situation. At the same time, there is doubt on whether the government will be able to spend the earmarked funds properly. The devastating earthquake and subsequent powerful aftershocks are likely to push around 700,000 people into poverty, and yet, the government has no plans to uplift their status and build the resilience of the vulnerable communities. We had expected an unconventional budget to address the needs of these exceptional circumstances — meaning, higher allocation for infrastructure development and rebuilding. However, it failed to do so. Akin to normal times, a large chunk of budget has been allocated under recurrent heading and less has been allotted for infrastructure development and rebuilding.

The government has presented a budget of Rs 819.47 billion and allocation for capital expenditure has been increased by 79 per cent compared to last fiscal. Will the government be able to spend the amount allocated for capital expenditure?

The government should enhance its spending capacity. As I said earlier, since the country is passing through a turbulent time, the government should also refrain from sticking to normal modus operandi. We expected a more expansionary budget, with more funds allocated for rebuilding, reconstruction and other mega-projects. In this regard, I’d say that the government has curbed its ambitions. Even though the finance minister has tried to address some crucial issues, the measures are less than complete. If we fail to timely diagnose and tackle the deep-rooted problems of our economy they will become chronic in the long run. Unemployment, under-employment, high trade imbalance, low productivity and high inflation are the major challenges facing the economy and need to be dealt with at the earliest. We expected the budget to envision means of coping with these challenges, but the budget document sorely lacked on this front.

Government plans to train 50,000 individuals for reconstruction activities, which as per budget announcement will boost productivity and the country aims to achieve economic growth of six per cent this fiscal. Do you think the set target is achievable?

Every budget talks about boosting productivity and generating employment, but what really matters is its implementation. How can we expect a boost in productivity without the revival of small and medium enterprises (SMEs) that have been shattered by the devastating earthquake? These SMEs, largely considered as the spine of the economy, are linked up in the value chain process with large scale industries. For example, if a vegetable farmer is affected due to the quake, he or she can’t supply vegetables to his or her clients, who may be the hotels or restaurants. Thus, there is a chain effect in the whole value chain process. Therefore, we had sought a Business Recovery Centre to be set up to help SMEs get back on their feet. CNI has not been lobbying for its own interest, rather for the wider interest to help return the economy to normalcy. But, it is clear that the government’s priority lies elsewhere. Though it is incorporated in the budget speech, government’s plan and budget allocation to revive SMEs are vague. Not only this, let’s come to the big thing — Reconstruction Authority. The government has yet to appoint the CEO in the authority. I don’t understand the reason for the delay, which is giving the impression that the government is actually not too serious about reconstruction. The major challenge I see in this budget is its implementation. It seems the issues plaguing the economy since one-and-a-half decades will trouble us this year as well. And it will continue to haunt us until we enhance the institutional capacity of implementing agencies.

The government has extended a raft of schemes for the private sector like dividend tax waiver in reinvestment, incentives for export, and threshold expansion of value added tax (VAT), among others. These facilities have been extended with the hope that the private sector would generate employment opportunities and boost production. What is your opinion regarding this?

The government has tried to make this budget investment-friendly to a large extent. Even as these facilities will provide relief to the private businesses, the government has not seriously taken the suggestions of the private sector. We had asked the government to slightly reduce corporate income tax and VAT for the next few years. We had requested the government to reduce VAT citing slackness in economy. To revert from this slowdown, there is no other option than reducing consumption tax, which would be instrumental in the growth of service sector, like, tourism and telecommunication, among others.

The government has also announced some mega projects like Kathmandu-Tarai fast track, Nijgadh International Airport, and East-West Railway, among others. How confident is the private sector about implementation of these projects?

We aren’t too optimistic that these projects will be implemented. Firstly, the entire budget earmarked for these projects is grossly insufficient. Secondly, the delays in decision-making and negligence of the implementing agencies will hinder timely delivery of the projects. None of the development projects — from drinking water projects, highways, road projects, large scale irrigation projects to hydropower projects, among others — are ever completed on time. We can’t expect much from the existing mechanism. We need strong laws to make implementing agencies liable to deliver development projects on time.

Lastly, the Constituent Assembly recently tabled the draft of the new constitution for public feedback. What does the private sector think of the draft?

We are preparing a structured document to submit to the chairman of the CA. The draft needs to be amended for betterment of economy and to prioritise private sector-led growth. First, draft constitution has conceptualised a three-pillar economy. Fundamentally, that is wrong because the co-operative sector is also a private sector. So, we want to request the lawmakers not to demarcate private sector. Giving special treatment to co-operatives will ultimately destroy the level-playing field. Second, property rights and wealth creation need to be guaranteed as fundamental rights. And third is governance, which is also crucial to attain prosperity. Issue of governance is linked with socio-economic growth. In this regard, citizens should have the right to elect executives of country and states directly. Without strong and visionary leadership in federalism, states also will not be able to generate resources themselves. Moreover, I firmly believe that qualification requirement of people’s representatives also needs to be written in the constitution.