A decade on, sick-industries revival program still not taking off
KATHMANDU, May 17:
The government formed a committee to study the situation of sick industries in 1994 for the first time, with the aim of reviving them and increasing the manufacturing sector´s contribution to the country´s gross domestic product (GDP) and ultimately making the economy more vibrant.
Two things have happened since. One, the government has kept on forming different committees and study teams each year with instructions to find a way to revive these sick industries but not a single firm has had a new lease of life in the last 10 years.
Second, the contribution of the manufacturing sector to the GDP has constantly fallen to reach 6.2 percent in Fiscal Year 2011/12 -- the lowest in the last decade.
An enterprise can get a ‘sick-industries’ tag when it has either stopped operating or is operating at less then 20 percent of their production capacity for five years in a row due to external factors such as policy changes and natural calamities. Once that is done, it is qualified to get support and facilities from the government that will help its rehabilitation.
Looking at how the government has been forming committees and study teams gives an impression that it is trying hard to fix things and revive the country´s industrial sector. But, that is just an illusion, according to experts. The real problem lies somewhere else, they say.
"Vested interests of politicians and bureaucrats, in some cases, play a major role in creating friction between the mechanism to revive the sick industries," an official involved in the technical committee a -- formed to study the actual status of the sick industries and recommend ways of reviving them -- at the Ministry of Industry (MoI), said.
The government, in last 10 years, formed around a dozen of different committees in order to study and uplift the situation of sick-industries in the country. All of them recommended what should be done but none of them precisely categorized the criteria for sick-industries.
"The situation of sick industries is the same now as it was in 1994 -- when the first committee was formed to restore the situation of sick industries," Bishnu Dhakal, under-secretary at the MoI, said.
The Dr Babu Ram Bhattarai-led government formed an 8-member Sick-Industries Rehabilitation High-Level Task Force (SIR HLTF) under the leadership of Dipendra Bahadur Kshetry, vice-chairman of the National Planning Commission (NPC), back in 2011. The 20 pages-long report that was prepared by the SIR HLTF cleared the way for identifying the criteria to declare sick-industries in the country.
Based on the criteria set by the report, the MoI asked for application from the industries who would like to be declared as sick. 37 firms applied to the ministry to get the status of sick-industries. The MoI, which was entrusted to facilitate the development of the industrial growth in the country, formed a technical committee to study the actual situation of the firms that registered applications. It even hired a team of chartered accountants to do due diligence auditing of the firms in order to know the financial situation of the firms.
As the things have been moving forward, the ministry also forwarded a proposal to the council of ministers to declare four firms -- Birat Leather, Birat Shoes, Nepal Boarders Pvt Ltd and Basulingi Pvt Ltd -- as sick-industries.
The technical committee also made recommendations to the government about the financial and non-financial support that the firms should receive.
"The government is yet to declare those firms as sick," an official at the ministry said. "It´s still unclear whether the government would okay the recommendations that the committee made about the financial and non-financial support to the firms."
The program to revive sick-industries has gained slight momentum but there are other barriers that are hindering the smooth implementation of the program.
"There should be a clear understanding among the different government entities to take this program forward," Dhakal said.
Meanwhile, the constant changes of the officials involved in the process is another major hurdle in materializing the program. "The top level official was changed three times in the Industrial Promotion Division (IPD) of the ministry after the technical committee was formed," an official at the ministry said. "The transfer of the leader of the technical committee has also affected the timely implementation of the program."
The government´s move to revive the sick industries has been on limbo for years in one hand. On the other hand, problems such as acute power shortages, labor unrest and political instability have deviated investors from making fresh investment in the productive sector of the country.
"It would have made a difference in the country´s moribund industrial sector had the government implemented the sick-industries revival program effectively," Pashupati Murarka, vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said.
That is not all it is. Industrialists who have political influence also lobby for declaring their own industries sick even though they may not fall under the criteria.
"Politicians, mainly the minister at the MoI, put a lot of pressure to declare the firms sick whose owners are close to him in many cases," the official said. "That stops the officials from working properly and providing relief to the genuinely sick firms."
The constantly deteriorating manufacturing sector was expecting some exogenous intervention to become more productive after the country entered the peace process and the holding of Constituent Assembly (CA) elections in 2008 -- which ended in May 2012 without promulgating the constitution in the country. "But that hope was shattered as the industrial sector became more volatile since then," Murarka said.
Source: Republica
