Pvt sector appeals for pro-business environment

KATHMANDU, JUL 10  

The upcoming budget should be able to create a conducive business environment for the country’s private sector apart from focusing on reconstruction.

Private sector leaders are of the view that the government should take the devastation caused by the April 25 earthquake as an opportunity and embark on a new development journey.

They say that the role of the government and the upcoming budget will be crucial in making a better investment climate.

“We have not asked for many concessions and facilities from the government this time. Our main point is the creation of a proper business environment,” said Pashupati Murarka, the president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

According to Murarka, spending in the market has gone down significantly after the earthquake, and keeping the cash flowing is one of the most crucial tasks for the government.

“Low spending might lead to an economic recession,” said Murarka, adding that the budget should focus on attracting investment to push spending.

“The more you attract investment, the more spending there will be.” According Murarka, boosting spending and investment is a crucial factor the government needs to consider to increase the Gross Domestic Product (GDP).

The FNCCI is of the view that the government should increase the value added tax (VAT) threshold in the upcoming budget from the current Rs2 million to Rs10 million to create a more level playing field for traders who conduct business by paying VAT.

Likewise, the FNCCI has urged the government to come up with an export promotion package, increase cash incentives for exporters, simplify the process to receive export subsidies, promote collective trademarks in the international market and formulate and implement a master plan to promote 10 specific goods in 10 new export destinations.

Meanwhile, Hari Bhakta Sharma, senior vice-president of the Confederation of Nepalese Industries (CNI), said the budget should ensure a stimulus package for industrial development.

“We urge the government to allocate at least Rs20 billion for an industrial stimulus package,” Sharma said, adding that apart from writing the constitution, the government and political parties should work to ensure economic development and stability.

Stating that the industrial sector had sustained huge losses during the recent earthquake, Sharma stressed the need to slash corporate tax by 5 percent for five years and VAT by 2-3 percent for three years.

“This will help increase cash flow in the market. During the present critical time, the government needs to play an active role to create demand for goods. And this can be done by waiving VAT to some extent,” Sharma said.  

The CNI has officially urged the Ministry of Finance to provide grants amounting to 25 percent of the fixed capital to new industrial enterprises that are set up during the next five years by fixing a particular amount to determine the eligibility of new companies to receive the funds. Likewise, it has sought a 25 percent one-time grant for industrial enterprises that are established in new industrial estates during the next 10 years. The private sector body has also demanded endorsement of around three dozen acts to ensure a better business doing environment.

According to Shahil Agrawal, managing director of the Shankar Group, the upcoming budget should be a development budget. “The focus should be on the infrastructure sector,” Agrawal said, adding that infrastructure development would help create jobs besides boosting the country’s economy. Agrawal said that the government should continue according priority to energy and infrastructure as an immediate priority and tourism and agriculture as long-term priorities for shaping the country’s economy.  

Moreover, Agrawal feels that the government should continue the initiative of reforming the economic sector. However, the policies and programmes unveiled by the government this week have not dwelled much on economic reforms. Last year, Finance Minister Ram Sharan Mahat had stressed the need for a second generation of economic reforms.

“Without economic reforms, we cannot expect development,” Agrawal said. He added that Nepal would require expertise, funds and foreign direct investment (FDI) to a large extent to maintain economic growth in the post-earthquake period. For this to happen, several plans and policies need to be reformed, he said.

The private sector is also looking forward to playing a role in the process of national rebuilding in the days to come. The apex bodies of Nepal’s business community, the FNCCI and CNI, have urged the government to come up with specific plans for including the private sector in the reconstruction drive. “We have a strong network in all the 75 districts of the country. The government can increase the effectiveness of the reconstruction drive by partnering with the private sector ,” Murarka said.

Likewise, the CNI has urged the government to include a private sector stakeholder in the National Reconstruction Authority which is being headed by Prime Minister Sushil Koirala. “Nepal’s private sector has come a long way and is capable of driving large-scale projects if there is adequate support from the government in terms of funds management,” Agrawal said.

Pashupati Murarka

President, FNCCI

The budget should focus on creating conducive business environment. Considering the post-earthquake situation, we have not asked for many concessions and facilities in the budget. We are really concerned about the implementation of the budget rather than what kind of budget is coming. Post-earthquake, we are seeing the people are not willing to spend much in whatever that is vulnerable from the quake point of view. This might lead to an economic recession. Hence, there is a need for increasing spending, for which there is a need for increasing attracting investment. Increment in spending and investment is a crucial factor for boosting the Gross Domestic Product (GDP). The budget should also be able to address the issues of entrepreneurs of the 14 highly-affected districts, whose businesses have been completely wiped out due to the earthquake. The government has committed giving Rs200,000 to those whose houses has been collapsed. The government should also think about how to facilitate entrepreneurs. Particiption of the private sector in the reconstruction initiative is a must. The government should prioritise locally-manufactured products in the reconstruction drive. We should take earthquake as an opportunity and work on increasing investment. This will have a long-term impact.

Hari Bhakta Sharma

Senior Vice-president, CNI

The industry’s contribution to the economy is shrinking. Post-earthquake, the situation is likely to be more dangerous. At a time when we should embark on a journey of industrialisation, we might end up going through the phase of de-industrialisation. The Post-Disaster Needs Assessment (PDNA) has stated the manufacturing sector has sustained Rs115.6 billion loss. Around 90 percent of small and micro enterprises in 14 highly-affected districts have been completely devastated. Some 500,000 people have lost employment. The budget should ensure stimulus package for industrial development. The budget should allocate at least Rs20 billion as an industrial stimulus package. We have urged the government to reduce corporate tax by 5 percent for five years and reduce Value Added Tax (VAT) by 2-3 percent for at least three years. This will help increase cash flow in the market. The budget should focus on creating a coherent vision document which recognises and mobilises all stakeholders.

Anjan Shrestha

Vice-president, Nepal Automobile Dealers’ Association

As Nepal’s auto industry has not been able to grow as expected, the government should prioritise mainly two things -- basic infrastructure and reduction in customs duty. The industry is one of the largest contributors to the government’s revenue, which has taken a beating after the earthquake. The government categorises automobiles as luxury goods and imposes high customs duty. So we are demanding a reduction in the customs duty so that the market would grow. Finance Minister Ram Sharan Mahat has been saying we should promote assembling of vehicles within the country, but the government has not announced support. Although he proposed some kind of support for two wheelers, which is commendable, but there should be more support for four-wheelers. The market of four wheelers very small. There should be economic development and tax cuts to expand the market. So we wish the government bring a 10-year policy for the development of the sector. We don’t have auto component producers, which are must for automobile assembling. So there is a need for developing auto auxiliary industries and for redemption in tax while importing auto parts from overseas. The government has been imposing high tax on spare parts too. Due to this, smuggling is rampant.

Khadga Bisht

President, Ippan

Energy is one of the sectors hit hard by the devastating April 25 earthquake and subsequent aftershocks. While physical infrastructure of hydropower projects have been affected severely, projects have also sustained revenue loss due to stoppage in power generation. We are looking forward to some concessional loans, may be at rates ranging from 5 percent to 5.5 percent, for the rehabilitation of affected plants. The government had announced giving subsidy worth Rs5 million per MW to projects connecting to the national grid within fiscal year 2020-21 in the last year’s budget, which was later agreed to be given as grant. We are expecting this issue to be addressed through the budget. Our other demand is implementation of the plan of unbundling the Nepal Electricity Authority (NEA) into -- generation, transmission and distribution -- entities. We have also been demanding the government allow the private sector to construct transmission lines and later hand it over to the NEA.

Private sector demands

Federation of Nepalese Chambers of Commerce and Industry

- Prioritisation of reconstruction and resettlement

- Focus on employment generation by prioritising infrastructure and energy sector development

- Hike in the VAT threshold to Rs10 million from the current Rs2 million

- Increase in cash incentives for exporters, simplification of the process to receive export subsidies, promotion of collective trademarks in the international market, and formulation and implementation of a master plan to promote 10 specific goods in 10 new export destinations, respectively

- Redefining sick industries and providing them easy exit

- Hike in the income tax ceiling

- Tax exemption for once for traders having problem of VAT mismatch

- Revision of the Excise Duty Act and scrapping of Liquor Act Confederation of Nepalese Industries

- Reduction of VAT by 2-3 percent for three years to increase consumption

- Reduction of corporate tax by five percent for five years

- Development of coherent vision document including the private sector

- Allocation of Rs20 billion for industrial stimulus package

- Establishment of a Business Recovery Centre to provide technical and financial support to Small and Micro Enterprises, and allotment of at least Rs500 million for this

- Providing grants amounting to 25 percent of the fixed capital to new industrial enterprises that are set up in the next five years by setting up a standard in terms of investment

- Providing 25 percent one-time grant for industrial enterprises that are established in new industrial estates in the next 10 years

- Implementation of multi-VAT rate

 
Source: The Kathmandu Post