The budget speech for the current fiscal year (2007-08) has announced that institutional reform will be introduced and the Privatisation Act amended to “manage government investment” in the public corporations (PEs) in the light of “serious financial mismanagement” there. The figures supplied in defence of this assessment include: by the end of the fiscal year 2005-06, the government had invested Rs.68 billion in the PEs’ shares alone; of that, only less than Rs.40 billion remains, the rest of the share investment has eroded in value; and the accumulated losses of the PEs total more than Rs. 47 billion at present. For years, the value of the government’s share investment in the PEs has been deteriorating and their losses have been piling up. This trend has been unmistakable since the beginning. The only sad part was that successive governments, including most of those parties now represented in the interim government, knew the hugeness of the problem but did not do much to improve things.
The problem is not one of identification of what needs to be done, but of inaction. In the post-1990 era, the present PM and the Finance Minister have held those posts respectively longer than any other person. But not much was done to improve the unenviable state of the PEs, except the selling-off of several PEs to businessmen — moves which became highly controversial and gave privatisation a bad name. Even at this stage, suggestions are being floated for setting up yet another committee or commission to make recommendations as to how to deal with the poor performance of the PEs. The current budget promised reform, but its blueprint is unknown. There are several ways of approaching the crisis. In this interim period, no single political party can dictate its solutions. And things cannot wait till the post-CA elected government takes office, either.
That means the eight parties will have to arrive at a consensus on a minimum programme of action to be implemented during the transitional phase. Many PEs’ liabilities exceed their assets. But even the crisis of a single PE is so huge as to cause serious problems for the government, as the loss-making Nepal Oil Corporation and the Nepal Airlines
Corporation testify. Groups of PEs vary from one another in nature — some are manufacturing, some are trading, and some are service-oriented. They represent various sectors of the economy. For instance, the state-owned media present problems of a different sort from other PEs for the government to decide. Therefore, decision-making involves
financial and other considerations. The favourite way with government leaders of reducing or eliminating state ownership of the PEs has been to sell them off to private businessmen rather than to float their shares in public, perhaps, as suspected by many, for reasons of manipulation. Clarity of vision, transparency of process and transactions, and promptness of action are urgently called for.