Old tune

In recent years, terms like restructuring, reforms, privatisation and liberalisation have been fashionable in Nepal in connection with the economy and public enterprises. This has been in line with the guidelines provided by such multilateral lending agencies as the World Bank and the International Monetary Fund. The focus on how to manage the economy has changed in the country depending on the change in the policies of those organisations. At present, the foreign-induced financial sector reforms are being implemented, covering, among other things, laws and regulations and ways to revive sick units, such as the Nepal Bank Limited and the Rastriya Banijya Bank. Now the Nepal Rastra Bank thinks that another public sector lending agency, the Nepal Industrial Development Corporation (NIDC), needs a restructuring of its management.

The NIDC, which survives on taxpayers’ money, is virtually bankrupt now. It has run up huge bad debts because of the inefficiency, incompetence and collusion with big businessmen of its successive managements, with the blessings of their political masters. The NIDC provides big loans for setting up new industries or for the operation or expansion of existing industries. It does not provide small loans for poor people or people of moderate means to help them start income-generating activities. So the beneficiaries of such loans are rich businessmen who can tap other sources of finance. And it is these people who have not repaid their loans. Those in authority have been unable to recover them. As for restructuring or improving the management of government undertakings like the NIDC, much has been stressed during all these years. But nothing has come of it. The same old tune is being replayed now.

Already, commercial banks, development banks as well as finance companies thrive in the market. What useful function, then, does the NIDC serve by spending billions each year out of taxpayers’ money at a time when the people are being deprived of even basic services because of the shortage of funds? Financing fat business people, most of whom do not intend to repay, is certainly a gross misuse of public funds. For the past few years, financial institutions have been suffering from excess liquidity, and in these circumstances, any viable industrial project should have no problems getting loans. The extent of excess liquidity is reflected in a sharp fall in the interest rates these institutions charge borrowers. Therefore, the idea of restructuring the NIDC management must be dropped not only because entrepreneurs can get loans elsewhere but also because it will only give the NIDC an unnecessarily extended period of life at the expense of the public treasury.