× Tourism Watch Educational Management Best Print Advertisement Published on NBA 2073-74 3rd National B-schools Rating-Ranking-Awards 2017 Investing Organisational Management Company Profile Education Dataspeak Business Visitors Nepal Politics Economy and Policy Cover Story Corporate Focus Business Financing Sectoral Tourism Trends Business Education Startup Scene Stock Taking Liquor Indicators Crossword Corporate Movements Living + Personality Interview No Laughing Matter Photospeak

September 2016 Cover Story

Published on: 2016-09-28 11:13:39     1239 times read    0  Comments

“Focus more on economic development, less on politics”

Dr Bhekh Bahadur Thapa, Coordinator of Eminent Persons Group (EPG), Nepal ,Former Ambassador of Nepal to India, Former Finance MinisterDr Bhekh Bahadur Thapa
Coordinator of Eminent
Persons Group (EPG), Nepal
Former Ambassador of
Nepal to India
Former Finance Minister

When I came here and looked at the participants, I found three former finance ministers and it is maybe more than a coincidence that all three of us smuggled ourselves into the ‘cabinet’ without being a part of the political process. I was more than impressed with the interaction between the young Nepali entrepreneurs. All of us must thank them and the country’s business community for keeping the candle burning even in the darkest days of Nepal’s history. Looking at the faces of the entrepreneurs, I thought of their grandparents and parents who I used to interact with as a young government secretary. I am hopeful that the stability and better governance which the young people want will materialize to make Nepal's future brighter. 

Talking about investments, let me share a personal experience about a friend who was my classmate at University in California. He went into business soon after his graduation and I came back to Nepal for the government job. His love for Nepal was with the mountains. He became prosperous not only by investing in America but also in East Asia. He would come here every year or so for trekking and expeditions. In the process he used to spend some of his fortune on welfare in Nepal, supporting the deprived children and mostly in the health sector. I once asked him why he only invested in East Asia and not in Nepal and why he only came to Nepal for pleasure. He replied that Nepal had too many governments but too little governance. 

What attracts business? What makes investment possible? The simple answer to these questions is political stability. This is where our political leadership has failed to deliver the essentials for change. In the last two decades, Nepal has witnessed an immense struggle for power. We did not succeed even after the peace process brokered by our friends with a sense of goodwill. The first Constituent Assembly failed to draft the constitution even after the extended period. Another election came and we looked upon it with a sense of hope. The CA delivered the constitution, nevertheless, with many questions unanswered. Nonetheless, we have a document and hopefully with further refinement it will garner acceptance at home and among our friends abroad. 

Transition is what we are going through not just in terms of politics but also in social structure. However, the rest of the world is not going to wait for us to move ahead.  Shoulder to shoulder, our two neighbours are prospering rapidly. They have become the centres of global attention. Today the world leaders are meeting less for diplomacy, less for politics and more for economic opportunities for their homelands. Be it G8, G20 or APEC, all are focusing on job creation and economic development and less on security. It is this development that we must keep in mind as we look into the future. Fortunately, we are at the doorstep of a new beginning and change at the moment. Can we turn that into opportunity? Or will we continue with instability pulling the economy further down discouraging the younger generation from staying in the country? The grim prospects are haunting and daunting Nepalis at present. For these reasons, we need to focus more on economic development.

It is no secret in today’s world that it is the business community and the entrepreneurs who move the countries ahead. The government must act not as a doer but as facilitator, a promoter and motivator. We need to convey this message not only within the country but also while dealing with our neighbours and other friends so as to attract foreign investments here. We should enlarge our market and share the prosperity rather than maintaining a narrow outlook. 

When he asked me to speak at this programme, NewBiz Editor-in-Chief Madan Lamsal presented me with an outline with a question regarding any improvements in the Nepal-India relationship. The answer is a “Yes”. There have been difficult patches in the relationship between the two countries over the last 70 years or so since India became independent and Nepal got rid of authoritarian rule. The dawning of democracy has not been easy for Nepal. But we did make progress with some periodic hitches. What we find now is Nepal waking up to the realities and the challenges ahead. We are receiving high priority from our neighbours diplomatically. Indian PM Narendra Modi has repeatedly stated the “Neighbours First” policy since he became the chief executive there.

To make it worthwhile, to make diplomatic exercises mutually beneficial depending on trust rather than suspicion, two special envoys of our prime minister have recently visited our two neighbouring countries. Looking at the past hitches between Nepal and India, a lesson has been drawn which I hope will avoid the repetition of turbulence in the bilateral relationship of the two countries in the future. But for that an environment conducive to communication and enhanced dialogue should be in place. Regarding the problems in the relationship between Nepal and India, three former Nepali prime ministers decided to embark on a search to review and see where things may have gone wrong or where things may have to be altered and to chart a new path if necessary for our future conduct. This is where ambassador Jayant and I are personally engaged in at the EPG. It is an eight member group with individuals from both sides. We have made a positive beginning with our first meeting in July which we would like to continue for the next 18-20 months to come up with a report which hopefully will be futuristic and positive. 

Adapted from the speech delivered by Dr Thapa at the 3rd NewBiz Business Conclave & Awards.

 

“New Imperative on Nepal India Economic Relations”

Jayant Prashad Member,  Eminent Persons Group (EPG), India Former Ambassador of India to NepalJayant Prashad
Member, Eminent Persons
Group (EPG), India
Former Ambassador of India to Nepal

When I came here and looked at the participants, I found three former finance ministers and it is maybe more than a coincidence that all three of us smuggled ourselves into the ‘cabinet’ without being a part of the political process. I was more than impressed with the interaction between the young Nepali entrepreneurs. All of us must thank them and the country’s business community for keeping the candle burning even in the darkest days of Nepal’s history. Looking at the faces of the entrepreneurs, I thought of their grandparents and parents who I used to interact with as a young government secretary. I am hopeful that the stability and better governance which the young people want will materialize to make Nepal's future brighter. 

Talking about investments, let me share a personal experience about a friend who was my classmate at University in California. He went into business soon after his graduation and I came back to Nepal for the government job. His love for Nepal was with the mountains. He became prosperous not only by investing in America but also in East Asia. He would come here every year or so for trekking and expeditions. In the process he used to spend some of his fortune on welfare in Nepal, supporting the deprived children and mostly in the health sector. I once asked him why he only invested in East Asia and not in Nepal and why he only came to Nepal for pleasure. He replied that Nepal had too many governments but too little governance. 

What attracts business? What makes investment possible? The simple answer to these questions is political stability. This is where our political leadership has failed to deliver the essentials for change. In the last two decades, Nepal has witnessed an immense struggle for power. We did not succeed even after the peace process brokered by our friends with a sense of goodwill. The first Constituent Assembly failed to draft the constitution even after the extended period. Another election came and we looked upon it with a sense of hope. The CA delivered the constitution, nevertheless, with many questions unanswered. Nonetheless, we have a document and hopefully with further refinement it will garner acceptance at home and among our friends abroad. 

Transition is what we are going through not just in terms of politics but also in social structure. However, the rest of the world is not going to wait for us to move ahead.  Shoulder to shoulder, our two neighbours are prospering rapidly. They have become the centres of global attention. Today the world leaders are meeting less for diplomacy, less for politics and more for economic opportunities for their homelands. Be it G8, G20 or APEC, all are focusing on job creation and economic development and less on security. It is this development that we must keep in mind as we look into the future. Fortunately, we are at the doorstep of a new beginning and change at the moment. Can we turn that into opportunity? Or will we continue with instability pulling the economy further down discouraging the younger generation from staying in the country? The grim prospects are haunting and daunting Nepalis at present. For these reasons, we need to focus more on economic development.

It is no secret in today’s world that it is the business community and the entrepreneurs who move the countries ahead. The government must act not as a doer but as facilitator, a promoter and motivator. We need to convey this message not only within the country but also while dealing with our neighbours and other friends so as to attract foreign investments here. We should enlarge our market and share the prosperity rather than maintaining a narrow outlook. 

When he asked me to speak at this programme, NewBiz Editor-in-Chief Madan Lamsal presented me with an outline with a question regarding any improvements in the Nepal-India relationship. The answer is a “Yes”. There have been difficult patches in the relationship between the two countries over the last 70 years or so since India became independent and Nepal got rid of authoritarian rule. The dawning of democracy has not been easy for Nepal. But we did make progress with some periodic hitches. What we find now is Nepal waking up to the realities and the challenges ahead. We are receiving high priority from our neighbours diplomatically. Indian PM Narendra Modi has repeatedly stated the “Neighbours First” policy since he became the chief executive there.

To make it worthwhile, to make diplomatic exercises mutually beneficial depending on trust rather than suspicion, two special envoys of our prime minister have recently visited our two neighbouring countries. Looking at the past hitches between Nepal and India, a lesson has been drawn which I hope will avoid the repetition of turbulence in the bilateral relationship of the two countries in the future. But for that an environment conducive to communication and enhanced dialogue should be in place. Regarding the problems in the relationship between Nepal and India, three former Nepali prime ministers decided to embark on a search to review and see where things may have gone wrong or where things may have to be altered and to chart a new path if necessary for our future conduct. This is where ambassador Jayant and I are personally engaged in at the EPG. It is an eight member group with individuals from both sides. We have made a positive beginning with our first meeting in July which we would like to continue for the next 18-20 months to come up with a report which hopefully will be futuristic and positive. 

Adapted from the speech delivered by Dr Thapa at the 3rd NewBiz Business Conclave & Awards.

 

“Nepal has huge power trading potential both externally and internally”​

TN Thakur, Former Chairman PTC IndiaTN Thakur
Former Chairman
PTC India

Every problem throws up challenges before individuals and governments. In early 1995 I was persuaded to go to the Power Finance Corporation from the Power Ministry. When I was in the Corporation, one day the Minister for Power late Kumar Mangalam called me and asked about my insistence on the government’s guarantee to provide loans to state electricity boards. Secondly, he also questioned why the Corporation sought a government guarantee to provide loans to private investors. I replied that the buyers of electricity were the government-owned state electricity boards and they were not in good financial health. Therefore, there was a chance that the buyers would default to the generators of the electricity. 

So I said since the government is the owner of the buyers, it has to become the guarantor.  He cited the example of sectors such as cement and steel where there are no government guarantees. Then I reminded him that there are huge markets for cement and steel in India but not for electricity. Back then the government had given guarantees to eight power projects that unfortunately did not see the light of the day. Alongside that, the government was also not in a position to provide guarantees to the private power projects. And therefore, we often had to face the questions. And that is how we started to think about creating a market for electricity in the country. 

That was the challenge India faced two decades back which Nepal is facing today of not getting investment due to the fear over who the buyer of electricity is. Everybody laughed when we thought of starting trading in electricity in 1998-99. People used to ask us how we could start trading in power in a deficit situation. Agreeing on the shortage, we simply used to reply that there are seasonal and location wise surpluses yearly and sometimes on a daily basis which we can transfer 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. This is how we started PTC India. 

While coming to this event, an eminent Nepali personality asked me who will finance a similar initiative in Nepal. PTC India started only with INR 60 million provided by the government. It initiated power trading in 2001. When I left the company in 2012, the net worth of the company had reached INR 20.4 billion. Similarly, the sales turnover of PTC India was USD 2 billion which is equivalent to INR 90 billion at that time. I believe that once you make up your mind, take a decision and put your heads together and go forward, things will happen. That has happened in India and I am very much confident that this will happen here too. 

When we started power trading, we had more generation than demand at several locations. We then brought the surplus to states that were marred by deepening power crisis like Delhi and Haryana. Even without the connection of power grids, we supplied power produced in West Bengal via the ‘Radial Mode’ to Delhi and Haryana. After that, we felt a need for connecting the grids and PTC India began to invest in connecting the grids. India is divided into five regions grid wise and now they are all connected. My point is if you prove yourself, people will get interested in you. The same people, who refused to give money to PTC India when the company was formed, approached offering investments in return for equity in the company after our first successful year of power trading. 

We also had thought of a cross-border power trade with Nepal when we started trading in India. I came to Nepal in 2001 for the purpose and met the minister and high officials at the Ministry of Water Resources (now Ministry of Energy) and Nepal Electricity Authority. Since then I have been interacting with ministers and concerned officials here on a regular basis. During the 15 years of interactions, I have found that everybody here has good intentions. Unfortunately, the good intentions never get converted into actions and that is why things are not progressing. 

While Dr Baburam Bhattarai was the Minister of Finance, he invited me to his office and asked when Nepal will be able to start power trading if an entity like PTC India was established here.  I told him that it will take five years for Nepal to start the power trade. He said that five years is too long for the country. And I replied that “Sir, I am telling you five years from ‘zero date’ not from today.”What my suggestion to the Nepalis will be is to please decide on a ‘zero date’ when you want to develop hydropower in a big way. 

It is ironical in that Nepal has 43,000MW potentially feasible hydroelectricity but is marred with a serious power crisis. Water is pouring from Nepal towards the sea without creating any wealth for the Nepalis. Nepal’s overall development is tied to the development of hydroelectricity. Be it roads and transport infrastructures, tourism and IT, no sector can thrive without energy. Energy security in this country on a larger scale can come only through hydropower while solar and wind can only be supplementary sources.  A decade ago when I came here, I said that Nepal should aim for 10,000 MW by 2020. Everybody raised their eyebrows and expressed their doubts. I am repeating the same appeal to you to target 10,000MW by 2024. What will that mean for the Nepali economy? Hydropower projects generally give 50 percent of Plant Load Factor (PLF) and 10,000MW will generate 44 billion units of electricity. Given the demand in Nepal, 60 percent of that electricity can be exported. Today, India is the biggest potential export market for Nepal. Tomorrow Nepal can export to Bangladesh and some other countries. Even at the average per unit price of INR 3.60 (which is in India today), the revenue generated will be over USD 2 billion on a yearly basis at the current exchange rate. Similarly, the government will not get less than USD 200 million as royalty from the revenue. It is up to us how we progress forward to utilise such an important resource. 

As per my experience, I can say that the government and the regulators need to function as facilitators, not the controllers. Bureaucracy generally has a tendency to control things. While I was the Chairman of PTC India, I was once approached by a former Secretary of the Ministry of Power. He asked me for help in a private project where he had become an advisor. He expressed his dissatisfaction over the guidelines and regulations saying that the rules severely hindered private investments in the energy sector. I smiled and reminded him that most of the policies were issued when he was the secretary.  He answered that he did not foresee the problems the private investors would face while formulating the regulations and guidelines. I remarked that wisdom only comes to the bureaucrats at the age of 60 after their retirement from their jobs. 

The reformation of the Indian power sector was not an easy job for us. We reformed the sector through the power trading. The optimum utilisation of the resources across the country was the first thing we did. After the first six months of power trading, the PLF of projects at West Bengal went up by six percent which clearly indicated the optimum utilisation of resources. Secondly, PTC India became a credible buyer of energy as it proved that it can sell electricity and collect revenue. It became a facilitator in the Indian energy market to attract investors. Thirdly, PTC India has become an important energy entity regionally. It has established cross-border trading mechanisms with Bhutan and Nepal. It buys all surplus power from Bhutan paying INR 10 billion annually which makes up 45 percent of their budget. 

At PTC, we converted electricity into a service first which was earlier considered as a favour to consumers. From a service we changed it to a commodity. We brought surplus power even from Delhi at lower rates and supplied it to the agricultural areas such as Assam and Haryana where farmers work late till night time. Nepal has huge hydro resources. During the rainy season, Nepal can export power and import it back during the dry seasons when the production is low. There is potential here for both internal and external energy markets.  The greatest intentions are no better than even a small good beginning. Despite having troubles, Nepalis have shown excellent levels of resilience and patience to face the problems boldly. Nevertheless, if there is too much patience, it will lead to lethargy and inaction. When it comes to economic development, you need to be impatient sometimes and create situations where policy makers have to take proper decisions.  

Adapted from the speech delivered by Thakur at the 3rd NewBiz Business Conclave & Awards.

 

“Nepali insurers need to focus on simple products to get more people insured”​

KB Vijaya Srinivas, General Manager, National Insurance Company LimitedKB Vijaya Srinivas
General Manager,
National Insurance
Company Limited

We are happy to be a part of the 3rd NewBiz Conclave and Awards. Listening to the panel of speakers I came up with a feeling that as far as insurance is concerned in both India and Nepal, the broad issues are almost the same. And naturally, the solutions are more or less the same. I represent a sector which is perhaps well known but is considered not very important. Most of us would be thinking about insurance when we use our vehicles as there is a mandatory vehicle insurance. Business leaders, however, think differently about insurance because they are more aware of the benefits. 

I will therefore focus on the whole aspect of insurance with a few different perspectives. Insurance offers financial security to the insured. For affected persons, insurance restores their financial position after fire, flood, calamity or accident claims. It provides relief to unrelated persons, for instance, third party insurance, where someone who is not related but is affected by the acts of someone else. Had there been no insurance, the affected persons would not have ways to get relief. It supports risk taking for entrepreneurs and businesses as well. The moment there is insurance, they have confidence to take risks.

Secondly, it is also the repository of funds and acts as the provider of funds for the entire infrastructure development, financing it, which was discussed in the earlier session. Generally, the premium collections are huge and the investments in surpluses are looked at for providing funds for infrastructure development and long term investments. 

Thirdly, the insurance sector offers employment opportunities that was also talked about in the panel discussion. In Nepal, more than 60 percent of the population is less than 32 years in age and they seek good job opportunities. More than two million people in India today are employed directly or indirectly in the insurance sector. The same thing can happen in Nepal. However, if you asked pass outs from B-schools, they would express their interests in the banking sector rather than insurance. But insurance is a sunrise industry which possesses a lot of potential and opportunities. Highly trained professionals such as chartered accountants and IT experts to individuals with little or no education can make good careers in the insurance sector. 

There are certain reasons why this sector has not received the prominence which it should. This is true in all developing nations except advanced countries where the sector is well developed. It is due to the spending capacity of the people in developing nations. Food, clothing and shelter come first in the priority list of the people in these countries while insurance comes much later. The second reason is the fatalistic attitude among the people. They think whatever happens god is there to take care of them. Third is the social security system. There is a traditional cultural social security system in our societies in the form of joint families and villages as communities to take care of people that provides relief. It is very uncommon in western societies that are very individualistic. This traditional social security is fallout for the insurance industry here. It is basically an industry of high needs but gets low priority. As per the insurance market in Nepal, some of the features I could observe are very attractive. The first one is ‘cash and carry.’ You have to pay cash in advance to get into an insurance policy which does not depend on the credit. Second is the tariff. So there is stability and certainty. 

Now the latest mantra flowing across the globe is a free market for everything. Believe me, when it comes to insurance it affects the insurers as well as the insured. There is less certainty and more difficulties in getting insurance across. These two things are of great advantage and lend a lot of stability. The only thing is tariff should be reasonable and should not be used in cross-subsidy. We have certain indicators for the insurance industry here such as the insurance penetration and density. The retention rate of the businesses that have retained in Nepal and have not reinsured is also very low here. The combination of all these things makes Nepal an interesting and lucrative market for insurers. 

As far as the issues are concerned, there are limited industries here. Industries are a natural source of insurance. Because of the aggregation at one place, industries all over the world are the major source of insurance premiums. The Nepali economy is still quite agrarian and dispersed. So it obviously requires more effort to sell insurance policies here. Similarly, the low level of awareness about insurance is also an inhibiting factor. We need some intense awareness campaigns in Nepal to attract people to insurance. The industry body of the insurers, regulator and the companies themselves could spread the importance and benefits of insurance among the people. I see an ongoing radio and print media campaign to raise the awareness of insurance among Nepalis which is a very positive development. 

I would suggest Nepali insurers to focus on simple products in order to attract more people. Claim procedures of Cattle Insurance in India which was very hefty earlier, for instance, were simplified and the policy has become a major success there. Insurers, meanwhile, need to keep associated costs in their minds as costs are the major factors for retail and rural insurances. 

Government initiatives are also imperative for attracting the masses into insurance. I think in all developing economies government has a role to play to get the people into insurance. The Indian government initiative of ‘Pradhanmantri Surakshya Beema Yojana’, for example, has become a major success.  It is a very simple and personalised scheme where an individual paying Rs one per day could get coverage of Rs 200,000 in case of accidental death. It was even made simpler to operate by using the banking network where the people are required to submit a small application slip to the banks to get enrolled into the policy. This has become a game changer for the entire insurance sector of India as 120 million people have enrolled over the last one year. Likewise, the recently launched ‘Pradhan Mantri Fasal Beema Yojana’ is another important policy where the government has partly subsidised the insurance of crops. 

The insurance industry in Nepal has lots of potential. With simple and effective products and focused efforts, I am hopeful you will have a winner in your hands which will attract large amounts of money and generate employment in the country.

Adapted from the speech delivered by Srinivas at the 3rd NewBiz Business Conclave & Awards.

 

“Optimistic approach towards the future necessary to achieve economic prosperity”​

Shanker Prasad Koirala, Former Minister of Finance, Former Secretary, Ministry of FinanceShanker Prasad Koirala
Former Minister of Finance,
Former Secretary,
Ministry of Finance

I would like to congratulate the entire team of New Business Age for organising this mega event. It is a meaningful programme at a time when the entire nation is striving simultaneously towards resolving the two long term issues of political stability and economic prosperity. I recall with pleasure that I was also associated with this event when it was initiated for the first time three years ago and which has now become the largest and most prestigious awards ceremony established by the country’s media for the business community. I congratulate those business leaders who have been awarded and honoured today for their business excellence. 

The theme of today's conclave- changing the investment scenario is very relevant. All prominent speakers of the event have made very thoughtful presentations. They have clearly spelt out their message. Similarly, I found the interaction between the Nepali young entrepreneurs to be equally vibrant. I appreciate their optimistic outlook.

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. We need to focus on these areas as they are the silver linings for our economy. 

The other distinguished guests have earlier shed light vividly on the different aspects of the conclave. However, I would like to add that the implementation of the new constitution, establishing good governance and achieving economic development and prosperity are three major challenges our nation is currently facing. 

Though the situation right now may appear murky, per se,I am quite optimistic that our political leaders will demonstrate their political wisdom to face these challenges in the days to come like our young business leaders who have meaningfully participated in this event. On this positive note, I would like to extend my thanks to the organisers once again for giving me the opportunity to be a part of this wonderful celebration.

Adapted from the speech delivered by Koirala at the 3rd NewBiz Business Conclave & Awards.


#  
No comments yet. Be the first one to comment.
A Country For Sale

A Country For Sale

By Madan Lamsal

There is a country in this world which has been on sale for the past few years. As there is not a single buyer who can buy this country in one go, the country is being cut into pieces and sold in . . . read more »