Investment for Change
Envisioning Nepal's Economic Prospetrity
--BY SANJEEV SHARMA
‘Change’ has become an overhyped buzzword in Nepal with the country going through various political and social changes over the past few decades. And these changes have so far failed to translate into economic prosperity and development as the prolonged political instability has been dragging the economy down.
With the economy facing one of the most challenging times in its history at present, the third edition of NewBiz Business Conclave & Awards organised by New Business Age Pvt Ltd on 19th August at Hotel Soaltee Crown Plaza energetically highlighted the need for blanket investment across various sectors to transform the country. The event’s theme ‘Investment for Change’ focused on multiple aspects with the major focus on hydropower, infrastructure development, tourism and agriculture.
Speakers of the Conclave and participants of the Interaction session talked in length about why and how investment has been obstructed but also suggested solutions and fixes. Chief guest of the event Former Finance Minister and Ambassador of Nepal to India Dr Bekh Bahadur Thapa prioritised the economic agenda. Presenting some global examples, Dr Thapa, who now leads the Nepali side of the recently formed Eminent Persons Group (EPG), urged policy makers to focus less on political agendas and more on the economy. “Be it G8, G20 or APEC, all are focusing on job creation and economic development and less on security,” he said adding, “It is this development that we must keep in mind as we look into the future.”
Political stability is the key
Political instability is repeatedly blamed for the economic malaise in Nepal. With the changes in government and bureaucracy, it has become quite difficult for domestic and foreign investors to go ahead with their investment plans in the country. All speakers including the participants of the Interaction, the first session of the Conclave, agreed on the need for political stability to create an improved investment climate. “Nepal has been politically unstable with many governments changing hands over short intervals,” noted Shekhar Golchha, Vice-president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Executive Director of Golchha Organisation. However, he also expressed his hope for a better tomorrow. According to him, the Nepali economy is growing by three to four percent annually, averaging the international level despite the hurdles. “This is largely due to the strong effect our entrepreneurs have had on the country.” Saurabh Jyoti, Director of Jyoti Group of Companies also agreed. “Political stability and sustainability are essential for the quantitative economic development of the country. The problems have come due to the lack of stable policies.”
Delivering his speech, Dr Thapa called for stability in politics in order to make the business climate better. “The simple answer to the questions regarding the problems in attracting investments is political stability,” he opined.
Hydropower imperative and utilisation of resources
The lack of investment has resulted in the underdevelopment of the hydropower sector despite the country having over 40,000MW of commercially feasible electricity. A consensus among the speakers and participants at the panel discussion was reached in that hydropower development can be a spur to the overall development of the country. “Nepal is a resource rich country. The combination of its endowment and the high quality of its human capital can help in a rising Nepal that can contribute to the development of South Asia at a significant pace,” mentioned keynote speaker Jayant Prasad, former Ambassador of India to Nepal highlighting on the optimum use of Nepal’s rich resources. He suggested that this can be done first and foremost by harnessing Nepal’s enormous hydropower potential which can supply energy for a power hungry South Asia. Meanwhile, guest speaker TN Thakur, former Chairman of PTC India suggested that Nepal should develop an energy market which can be a pillar for hydropower development here. “Two decades ago, India faced the same challenges which Nepal is facing today of not getting enough investment due to concerns over who to sell the electricity to,” he said.
Thakur recalled that PTC India, which is now a major electricity entity in India, was first established to buy surplus electricity on a yearly and sometimes on a daily basis to transfer the power to the deficit locations. “Our argument was- it will create a domestic power market which would boost the confidence of investors enabling the government to become a guarantor for the projects,” he shared. Addressing the Conclave, he urged Nepal to set a target of producing 10,000MW by 2024.
Concluding the Conclave, former Finance Minister Shanker Prasad Koirala said that it is important for Nepal to focus on areas where it can perform better. “We are aware that a self-reliant economy is not possible and functional in the 21st century due to the interdependence among the nations. Therefore, there are some sectors like hydropower, tourism, mineral based industries, semi-precious stones, agro products and handicrafts where Nepal can enjoy competitive and comparative advantages,” he suggested.
Energy Security = National Security
As the Conclave continued, Sujit Acharya, Chairman of Energy Development Council and Founder of IDS Energy Pvt Ltd further highlighted the importance of hydropower for Nepal. “Energy security has been translated into national security in our context,” he said. Mentioning the India imposed economic blockade of last year in the wake of the political wrangle over the promulgation of the new constitution which in turn led to a big energy crisis in the country, Acharya stressed on the need for a total dependency on hydropower to maintain the country’s sovereignty. “It is essential to develop and introduce modern technologies to tap the hydropower potential,” he stressed.
Also, Vishnu Kumar Agrawal, Vice-Chairman of Confederation of Nepalese Industries (CNI) and Managing Director of MAW Enterprises emphasised on an aggressive infrastructure development drive to happen in the next five years. “The government has allocated 20 percent of the total budget for the construction of infrastructures for the current fiscal year. It indicates that the government has prioritised infrastructure building,” he said. According to him, this sector will see further growth as the government has stressed on the public-private-partnership (PPP) model. The expansion of the market is directly tied to the development of hydropower. Likewise, infrastructures are important for the development of sectors such as tourism, hydropower and industries.
Focusing on the Insurance sector
The Conclave also focused on making the insurance sector in Nepal more workable as well as more attractive and accessible to the general public. “We have certain indicators for the insurance industry here such as the insurance penetration and density,” informed KB Vijay Srinivas, General Manager of National Insurance Company Limited. According to him, Nepal can be a lucrative market for insurance companies as the retention rate of the businesses that have retained and not reinsured in Nepal is also very low. He suggested insurers to come up with simple products and to simplify claim procedures in order to attract more people.
Is making profit bad?
The primary target of any business is to earn profit. Let alone the private businesses, state-owned commercial entities have the sole intention of earning a profit. Nevertheless, a general perception still persists in our country that to earn profit is a bad thing to do! The interaction part of the Conclave focused on how this backward-way-of-thinking has hampered the potential of the private sector. “There is a serious lack of realisation in the amount of work the private sector is and has been doing for the country’s prosperity,” expressed Sudhir Mittal, Managing Director of Shree Airlines. “For smoother economic transition to happen, a change in the general perception about the private sector, investment and profit making is required,” he added.
CNI Vice-president Vishnu Agrawal shared similar views. “We have a problem in our attitude in that we think earning a profit is a bad thing. It is this kind of thinking which is hindering the growth of entrepreneurship in our country,” he said. Nevertheless, Agrawal is hopeful for a change in the mentality in the future. “The recently introduced PPP policy has accepted profit as the prime factor to attract private sector in infrastructure development. Therefore, it can be understood that the government has finally adopted profit as an element of entrepreneurship development and healthy competition,” he noted. According to him, if the subject matters covered by the policy are implemented effectively, there will be no reason to equate profit making with profiteering in the future.
Celebrating the Business Excellence
NewBiz Business Conclave & Awards is also a platform to celebrate the business excellence of companies across various sectors. Continuing this tradition, awards were handed over to best managed companies in seven different categories, a special recognition to a foreign insurance company and Lifetime Achievement Award to an individual who has excelled in business leadership over the years. However, two categories namely, the Best Managed Development Bank and Best Managed Finance Company were not included as difficulties persisted due to the ongoing capital increment drive as per the central bank’s last year’s directive.