Industrial policies should guide labour policies‚ not the other way around

Nepal has had its fair share of problems in attracting investment in the last one-and-a-half decades.

But with the installation of a fairly liberal government, investors are awaiting introduction of favourable programmes and policies that can boost their sentiment. Rupak D Sharma of The Himalayan Times spoke to Prime Minister Sushil Koirala’s Economic Advisor Dr Chiranjibi Nepal on measures that should be taken to lure investment, reduce procedural delays and remove other bottlenecks that are deteriorating the investment climate. Excerpts:

Nepali Congress has come back to power and domestic and foreign investors are keenly waiting for the launch of more liberal and investor-friendly policies. Can the new government live up to the expectation?

The period in the early 1990s, when the Nepali Congress government introduced various economic reform measures, is still considered a golden era in the country’s economic sector. That was the time when the economy was liberalised and the country was able to achieve higher growth rates. That created a new breed of wealthy people in sectors ranging from banking and education to medical, among others. But things started moving at a slower pace after that. For instance, we still have not been able to refine the Industrial Enterprises Act which was enforced in 1992. Against the backdrop where the world has transformed into a global village, such delays and feet dragging have left the country far behind other developing and developed countries. This government is committed to introducing new policies that can ensure economic growth complemented by social justice.

So what moves should be taken by the new government to achieve this goal?

The first priority should be given to building the confidence of the private sector. Unless the private sector is confident, we cannot lure private investment. In this regard, we should protect property rights of individuals, create policies to safeguard private investment, uphold free market economy and bring leading political parties together to frame common minimum economic agendas. Along with these, we should ensure policy consistency and political stability. Also, macroeconomic policies should be framed accordingly to contain inflation so that the value of money does not erode.

What about procedural delays that annoy most investors?

Removing bureaucratic hurdles faced by the private sector is a challenging job for developing and least developed countries. But the government should quickly address these issues as a large chunk of investment comes from the private sector. If we can keep the domestic private sector happy, they will definitely encourage foreign investors to come and invest here. So, bureaucratic hurdles need to be removed to boost investor confidence.

What other measures should be taken to boost investor confidence?

More hydropower projects must be built. This is because energy is one of the key enabling factors for higher economic growth. This means we should now start using our water resources effectively. This water resource, which is flowing from Nepal, is being used by India to generate electricity and build

irrigation facilities. So why can’t we do that? Once we answer this problem and address the problem of energy deficiency, more manufacturing companies will crop up, which will not only create employment opportunities but also reduce our dependence on imports and diversify the range of exportable items. Additionally, this will pave the way for the government to raise its revenue, which, in turn, can be used to extend subsidy in certain sectors and address poverty-related issues. This way, we can ensure prosperity.

Talking about revenue, one of the government’s main income sources is taxes slapped on imports. Is such a revenue generating model sustainable?

This is not good for the country’s long-term development. Because of this, the money coming into the country in the form of remittance is leaving the country again to finance imports. This has also weakened our export base. One of the major reasons for growing import dependency is lack of policy consistency, which has not only crippled the industrial sector but triggered capital flight. Another problem is the rise in the number of labour disputes because of stringent labour policies. In fact, labour policies here are so stringent, they are guiding industrial policies. This has instilled a sense of insecurity in investors because laws are more favourable towards workers than investors. We must make sure that industrial policies guide labour policies and not the other way around.

But along with formulation of better policies, shouldn’t lawmakers also be more responsible? Take for instance, the case of parliament adjournment two days ago due to lack of quorum, which stalled the process of passing the Extradition Ordinance and Organised Crime Prevention Ordinance.

Lawmakers should be serious in their work. Their inability to draft the constitution during the previous tenure of the Constituent Assembly has sent a wrong message to the public. This should not happen again.

Source: THT