Private sector hopes for action from new government
KATHMANDU, Feb 14:
With the formation of a new government, industrialists and people in the private sector are more hopeful of a better economy as well as a more investment-friendly environment.
The government, led by the Nepali Congress (NC) with the participation of CPN-UML, is expected to adopt a more liberal policy by providing investors incentives, facilitating trade and ending a log-jam in making and amending outdated laws. The industrial sector hopes the government will solve the electricity problem that the country has been going through for some time now.
The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) President Suraj Vaidya expressed optimism that the government would revive the economy and encourage the private sector as both the parties have an experience in government and can mobilize the bureaucracy.“If the parties live up to their election manifestos, especially what they said about harnessing hydropower to end load-shedding within three and a half years and providing employment to 300,000 people annually, a revived private sector will definitely contribute to achieve double digit growth,” Vaidya said.
However, commenting on the current squabbling between NC and CPN-UML over the home ministerial portfolio, Vaidya said that their main priority should have been industry, commerce and agriculture instead.
Following the fresh Constituent Assembly (CA) election in November, the newly elected government’s main task is to bring all parties together and help the CA draft the constitution within a year.
But, the economy cannot wait forever, Dinesh Shrestha, the chairman of the Industry Committee at FNCCI, said. “The constitution may be the main priority for this government, it has to also start paying attention to the economy and the private sector as time is money and delaying will cost the economy more.”
He said he also expected the new government to start tackling about two dozen laws related to the economy that need to be updated or enacted. Laws and policies would facilitate and provide incentives to the industries on a product-basis for making them competitive, he said.
Economist Bishwambher Pyakuryal said the government needed to make the investment environment better and encourage industrialists as well as create an environment that could draw in foreign investment.
The new government should work to help Nepali products penetrate neighboring markets, particularly to India and China. “For the purpose, the government should initiate bringing all the bilateral agreements related to trade into effect and extend the economic diplomacy effectively for trade facilitation of Nepali products,” added Pyakuryal.
Occurrences of delayed customs clearance and denial of origin of certificate for Nepali products are common at different customs points while trading with India. Pyakuryal said most of trading happens through only six customs points currently even when there are an additional 22 customs points and a dry port in Birgunj which is not being used effectively for smooth import and export. At a time Nepali products are losing the competitive battle with imported goods, there is urgency in revising laws and policies to facilitate gaining competitiveness in their production.
ABOUT TWO DOZEN LAWS NEEDED FOR ECONOMIC SECTOR
Most of the laws related to economy and business were endorsed and revised in the 1990s after the country embraced liberal economy. However they have not been amended thereafter and the sector has suffered without updated laws.
Yam Kumari Khatiwada, the spokesperson for the Ministry of Industry, said amendments are very important to bring them in line with the World Trade Organization and address emerging new issues.
Things have changed over the last two decades. Global trade and foreign direct investment has emerged ass a new dimension in the economic sector but the country is yet to update the laws and devise new laws.
Khatiwada said industrialists are demanding policy stability in the industrial sector but the annual budget programs of the government have often changed tax rates.
“We have tried to address their concerns in the amendment proposals on the Industrial Enterprise Act 1992 and also provide proper facilitation for large-scale industries and protection for the cottage and small scale industries.
An NC-led government had initiated the drafting of those laws in the 1990s, however several of those laws related to the economy, investment and industries could not make it through even the first Constituent Assembly.
There are total 23 laws related to the economic sector alone, including those drafted recently and previously registered at the parliament secretariat that are yet to be approved by the parliament.
Shrestha also urged the government to prioritize the sector and initiate the amendment process saying that in absence of those legal amendments Nepali economy has suffered.
An industrial policy was endorsed in 2010, with provisions for providing incentives for production-based industries, particularly export-based ones, however in absence of an amendment to the Industrial Enterprise Act 1992, industries have lost their competitiveness against imported goods as there is no preferential taxation policy for domestic products.
“It’s cheaper to import finished products as higher taxes are levied on products of local industries,” added Shrestha. “The amendment draft of the Industrial Enterprise Act has incorporated policies favoring industries as per the industrial policy,” added Shrestha.
Moreover, there are 11 contradictory laws related to the hydropower sector alone, according to a study by the Investment Board Nepal (IBN), the government entity responsible for promoting economic development and investment-friendly environment. “The laws, including the Electricity Act, Forest Act, Land Acquisition Act, and Bonus Act, contradict each other. It is urgent to amend and harmonize them to harness the potential of hydropower,” Mukunda Paudel, joint-secretary at IBN, told Republica.
Industrialists say that they have to reduce operating hours of industries by 50 percent as they cannot run expensive diesel generators and have reduced their production. This is another cause behind the losing of competitiveness with higher production cost per unit.
Shrestha said industries can also double employment generation if they can run industries in three shifts of eight hours each.
Laws related to economic and business sector
1. Electricity Act *
2. Company Act *
3. Labor Act *
4. Special Economic Zone Act
5. Bank and Financial Institution Act *
6. Industrial Enterprises Act *
7. Foreign Investment and Technology Transfer Act *
8. Anti-dumping Act
9. Prevention of Organized Crime (Related to money laundering)
10. Extradition (Related to money laundering)
11. Mutual Legal Support Act (Related to money laundering)
12. Board of Investment Act *
13. Revenue Board Act
14. Foreign Trade Regulation Act (Replacement of Import and Export Control Act 2013 BS)
15. Integrated Intellectual Property Rights Act
16. Assets Management Company Act
17. Competition Act *
18. Foreign Exchange Regulation Act (Replacement of Foreign Exchange Regulation Act 2019 BS)
19. Mediation Act
20. Public Procurement Act *
21. House and Land Transaction Act
22. Public Warehousing Act
23. Insolvency Act
*amendments
Source: THT
