The government’s strategy, implemented since 2003, for turning around loss-making public enterprises (PEs) by entering into management performance contracts has all the makings of failure. True, the government could not provide the degree of functional autonomy as agreed upon, thus making it difficult for the managements to implement their plans. The government appointed political persons as heads of those PEs, and there were frequent changes of heads. The government had entered into performance contracts with the managements of Udayapur Cement Factory, Hetauda Cement Factory, Employees Provident Fund, Agricultural Development Bank and Janak Educational Materials Centre, laying down performance indicators, such as capacity utilisation, return on investment, sales turnover, productivity and net profit.

This shows ad hocism has been the hallmark of any government in Nepal. It is therefore worth pondering why the top managements of those PEs remain in office without lodging any strong protest, or resigning, if the government was not meeting its part of the obligation. The government, too, has been wrong in not applying the policy uniformly — it entered into contracts with some and not with the others. Successive governments have so far done hardly anything concrete to turn around the PEs, and whatever ‘reforms’ they have introduced at various times have often reflected the paradigm shifts of multilateral donors like the World Bank and the IMF. Some two decades ago, the government announced a policy aimed at “improving the PEs’ performance’ through a combination of measures, including reward and punishment. But it turned out to be a non-starter, as the government’s actions, such as its appointments, indicated that the policy was meant merely for public consumption. That was about the time when the structural adjustment programme was in vogue, laying stress on privatisation.

Since then, various methods, including a mix of old and new, have been tried, but none of them has produced any encouraging results. Even the privatisation of a number of PEs after 1990 came under heavy fire for selling them off for a song. Nor could the CPN-UML’s minority government do any better despite its announced policy of appointing corporation heads on the basis of open competition and performance contracts. It is hard to believe a government which has yet to run its own ministries and departments with minimal proficiency can run business enterprises on commercial canons with any degree of efficiency. The best way of privatising the PEs would be to float the majority of their shares among the general public. This the government has hardly ever tried. Such a step would spread economic democracy on the one hand and remove the possibility of graft often involved in their sale to individual businessmen on the other. Moreover, the stakeholders would see that their companies are run on truly business principles. Any other policy mix is more likely to meet the fate of its predecessors.