Business community desires policy stability for higher growth in Republic Nepal

By A Staff Reporter,Kathmandu, May 28: On May 28, 2008, the newly elected Constituent Assembly declared Nepal a Federal Democratic Republic, abolishing the 240-year-old monarchy. Business and investment in the country has always been critical due to political and policy instability, conflict, energy crisis and disasters. Although the country had adopted liberal economic policies about 18 years back in early 1990s, the shift had moderate impacts on the business and industry. The Rising Nepal talked to four business leaders about the impacts that the new system had on it. 

Bhawani Rana, Former President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI)

Since the business community also participated in the struggles and movements that brought about the changes including the republic. There has been a slight change in the political leaderships as they have started to talk about the economic agenda, but that is not getting priority in the practice. For an instance, many manufacturing industries have long been on the verge of collapse while the others are running under-capacity but governments have shown no concerns. 

There has been a change we could see, but general as well as business people have not felt it. It’s not that we don’t have good policies; there are better ones as well. But their implementation is very poor. 

The liberal policies that the country adopted in 1990s paved the way for the flourishment of banking, aviation, and other industries. We could see positive impacts on hydroelectricity and industries like cements in the republic era. But this positive progress has now been halted due to policy instability. 

There is no alternative of the republic, we need to make it successful together but there is a need of reforms in the political parties and governments’ performance. Nepal should learn from Bangladesh to advance the economic and business agenda forward and make people feel the positive impact of the new system through growth and development. 

Kamlesh Kumar Agrawal, Senior Vice President, Nepal Chamber of Commerce (NCC) After the establishment of the Federal Democratic Republic, Nepal has taken a leap in the path of economic development.

In seven/eight years after the establishment of the Federal Democratic Republic, the economic activity in the country expanded, and the creation of an investment climate encouraged domestic and foreign investors to increase investment. The size of economy reached about Rs. 5.4 trillion. 

However, after the devastating earthquake of 2015, the pace of economic development in the country has slowed down.

After the 2015 earthquake, Nepal have had to face different challenges. The economic activity of Nepal has been affected due to the unofficial Indian blockade after the promulgation of the constitution, the COVID-19 pandemic and Russia-Ukraine war.

After the establishment of the Federal Democratic Republic, due to the positive business environment, investment has increased in various sectors including hydropower and cement industries. As a result, today Nepal has started selling electricity to India and has also started exporting cement by becoming self-reliant on it.

Currently, Nepal is under the problems of economic recession due to internal and external reasons. The production of the industrial sector has reduced due to fall in consumption. High interest rates have affected the businessmen and investment. 

 Hari Bhakta Sharma, Former president of Confederation of Nepalese Industries (CNI) Nepal has made significant achievements in the development of hydropower and cement industry over a decade period.

Due to the promotional programme of the government in the hydropower and cement industry, Nepal is in the position to export electricity during the rainy season, along with cement. This is an achievement for the country’s economy.

However, industrial sector is still facing power tripping frequently. Nepal is still importing power from India to meet the demand during the summer season.

There was no progress in the investment in the productive sectors after the promulgation of constitution in 2072 BS as the government introduced laws and policies to ease import instead of promoting manufacturing industries inside the country.

After the promulgation of the constitution, the government introduced many acts and laws. But the government could not bring a policy to promote the manufacturing industry in accordance with the expectations of the private sector to increase domestic production. This is a failure in promoting domestic and foreign investors and accelerating economic activities.

The government should not delay in amending the policies and acts to create a business-friendly environment and encourage the private sector to increase their investment in productive sectors.

Satish Kumar Bohra, Managing Director, Bohra Group Policy stability is the first element for the growth of business and industries but the private sector in Nepal has been deprived of the fruits of republic system due to political and policy instability. A policy that was announced by a government might be scrapped or changed by its successor whereby there could be a policy while initiating a business and another one while launching business operations. 

The private sector needs policy stability for 10-15 years. However, the government and political leadership in Nepal lack long-term vision for the promotion and development of business sector. Meanwhile, the government should also estimate the number of industries or size of production that the country needs since the herding in a sector has caused problems in various sectors including cement and steel industries. 

Solution is simple yet difficult to achieve: political parties should come together and form a single voice on economic agenda and business promotion. Budget could be a starting point to have national consensus so that even if the government is changed in the same fiscal year, the new one treats it as its own document. Even if a single industry is closed, it’s a national loss as it directly affects employment and revenue.