‘We will gradually reduce cost of production to lure investors in industrial sector’

The Ministry of Industry recently unveiled the ‘Industry Sector Reform Action Plan’, which aims to enhance industrial environment addressing all the constraints of industrialisation in the country. After assuming office, Industry Minister Nabindra Raj Joshi has taken the initiative to gradually address all the bottlenecks through reforms in the legal and administrative front. Simultaneously, development of the required infrastructure has also been prioritised. The government has announced protection for cottage, small and medium scale industries and also said it would create a conducive environment to operate big-scale industries in the country. Contrary to a liberal economic policy, the government is also preparing to revive some of the sick public enterprises through its own resources. Pushpa Raj Acharya of The Himalayan Times caught up with Minister Joshi to know about the government’s plans to revive sick public enterprises and on the implementation process of the reform plan introduced recently. Excerpts:

Why is the Ministry of Industry (MoI) planning to revive sick public enterprises, which have already failed? Moreover, many state-owned enterprises (SOEs) have already been privatised or liquidated while some are in the process of liquidation.

We are not saying that the government will mobilise all resources that are required to revive the SoEs. We have introduced some other models apart from mobilising the government’s own resources like public private partnership model, awarding management contract to private sector and cooperative model. The government has planned to revive at least three enterprises within this fiscal and for this we can adopt different modalities like I mentioned earlier. Definitely, there will be questions raised on why the government is trying to revive sick enterprises that are on the verge of collapse due to their poor performance and it is understood that the government is not good in running enterprises. The MoI has planned to revive Nepal Drugs Ltd (NDL). The government will run this company as an example to convey a positive message to domestic and foreign investors who have been hesitating to invest in industrial sector. This is a beginning and I hope the private sector will collaborate with the government to revive other enterprises after the government begins operation of NDL.

Do you think the Ministry of Finance will inject financial resources that are required to revive NDL?

I have had a meeting with Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara and he is positive towards reviving NDL as a model industry and the MoI has forwarded the proposal for the Cabinet’s endorsement. To run NDL as a model industry we have to revamp its administrative structure. There will not be any political appointee as the management head. We will recruit competent staff and sign performance contract with the management head. We have developed all the plans on how we are planning to revive NDL and I think the finance ministry will not oppose this idea. NDL is on the verge of collapse because it was not able to upgrade its production process as per the World Health Organisation’s Good Manufacturing Practice (GMP) standard due to lack of resources to procure modern equipment and other facilities.

How can you assure that NDL can compete with private sector firms and imported drugs?

The government has been procuring 70 types of drugs that it distributes to the public at free of cost through various health centres. I believe that NDL will have good business if it can produce the required quantity of medicines that government distributes to the public under the basic health care facility. It will help save billions of rupees that at present is being spent to procure drugs. On the other hand, NDL must be able to compete with other privately run pharmaceutical plants. I am conscious of the fact that reviving these enterprises is not the only issue and sustaining them will be the biggest challenge. Though the government will inject resources to upgrade its production facility, in the long run we can sign management contract with private parties as well.

You have said that MoI will invite private parties to run sick enterprises under various models. Why doesn’t the government privatise the enterprises that are declared sick?

We have bitter experiences of privatisation in the past. The business houses to which the government handed over some enterprises in the past were only concerned about taking advantage of the physical property of the enterprises instead of operating them. We do not want to repeat the same mistake again. We have declared some modalities, which are guided with the pious objective to run industries in the country. The country has enough potential of industrialisation. If we are able to do so, it will subsequently bring confidence in private sector. The government has been eyeing investment from the private sector, non-resident Nepalis and foreign investors in the industrial sector, which is fundamental to boost our production capacity, create employment and uplift the country’s slow economic growth. We know there are groups lobbying for privatisation of sick enterprises but we cannot do that. For example, we are planning to revive Gorakhkali Rubber Industry through PPP model. If we adopt sole privatisation model then there is a danger again that the private party will have interest in the physical property like land, building and machinery. Gorakhkali Rubber owns 640 ropanis of land. Similarly, the government has been spending millions of rupees to pay salary of the staffs of SoEs without any output from them. In this situation, the government came up with the plan to revive the enterprises.

As a minister you sound confident that the country can do a lot in the industrial sector. But the reality is the sector is facing a raft of hassles like power outage, strikes, donation drive and labour unrest, among others, which is increasing the cost of production. What has the ministry planned to resolve these challenges?

The government has been taking steps towards that direction. Premature deindustrialisation in the country has many consequences in the economy. The trade deficit is alarming. If we thoroughly analyse the cause of the huge trade deficit it is the rising import of goods in which the country itself has potential. To a large extent our move is directed towards being self-reliant on products that have enough potential in the country. Self-reliance on some products that we have been importing will not only save the money that is going out of the country but also generate jobs here so that Nepali youths can easily get employment opportunities in the country. In this regard, we have been preparing to develop a one-window service from MoI, so that business people involved in any type of industry like tourism, information technology, health, media and education, among others, can obtain service through a single window. The single-window facility that is going to be set up at MoI will provide one-stop service through coordination with the sectoral ministries. Further, we have announced reforms in the line agencies under MoI with an action matrix. Our focus is to minimise hassles and provide effective and efficient services through government agencies. These steps have been taken under the administrative reform. Similarly, under the legal reform, we will expedite the industrial sector related bills like Industrial Enterprise Bill, Foreign Investment and Technology Transfer Bill and other required legislation. To address other infrastructure related hassles, the government agencies need to collaborate to address the specific hassles. I am confident that we will be able to reduce the cost of production gradually to lure investors in industrial sector.

MoI has also announced to support every Nepali to set up enterprises. What sort of support is the government going to provide?

The government has realised that the country cannot move towards higher growth trajectory unless we enhance our production base. To enhance production base we do not have any other option besides setting up industries. MoI has announced of providing support to enterprises under our policy to protect the cottage, small and medium enterprises. The government can facilitate large scale industries through policy intervention like the provisions of the Special Economic Zone Act. The Act has restricted labour strikes and ensured all facilities including single-window service to set up industries, among others. However, for the small, medium and cottage industries the government needs to do more including bringing a favourable policy. The MoI through local bodies will take applications from interested parties and select the ideas at the local level. Based on the ideas to set up enterprises, the government will provide mentorship, skill development training, venture capital and ensure integrating those enterprises in the value chain with big industries based on the need of the enterprise. These facilities which government has been planning to extend to cottage, small and medium enterprises will be regulated by the regulations that the ministry will frame very soon.