ARE WE CATCHING UP
WITH THE WORLD
Nepali Business Houses in New Economy
--BY MADAN LAMSAL / SANJEEV SHARMA
Almost all Nepali big business houses have evolved from small trading families over a period of time. Once engaged in agro-pastoralist and small trading activities, these business houses have moved into modern sectors like banking, health, housing, hydropower, tourism related ventures and manufacturing ranging from the production of FMCG products to construction materials and medicines. But one of the characteristics of Nepali business houses is that they like to be omnipresent, in every sector, in all parts of the country and even may be abroad.
The Jyoti Group, for example, is one of the oldest business families in the country running for four generations. It started from trade in copper utensils and clothes with Tibet. The Khetan family started business during the Rana regime, 140 years ago. Like other old family owned businesses it moved from simple trading, to transportation and now to representing foreign companies. The Chaudhary Group basically began from 1935 in trade. Similarly, the Golchha Organisation started back in 1931 dealing in the jute business and the Kedia Organisation started in the 1920s. So, most of them have a similar story to tell.
The dominance of the Marwaris and Newars has always been apparent in Nepal’s business houses.
In fact, the Marwaris are regarded as the most dedicated business community dominating large-scale and medium-scale trading and industrial activities. They are very influential in various business associations like FNCCI, CNI, NCC, NICCI, NFTA and the local chambers in Terai.
Till now, most of the big houses have been run by families with the entire decision making process controlled by the family members. “People generally want to have things under their control and try to minimise or avoid any risky business,” opines Padma Jyoti, Chairman of Jyoti Group.
This practice, however, is changing gradually. Professional managers are creeping in replacing the family members especially at the mid-managerial positions. With the proliferation of business schools, the children of the business families, too, have advanced managerial education giving the managerial positions a professional look.
Regarding the call for corporatisation, the business houses are not seen putting in the effort to go public except in some cases. Jyoti Group, for example, is considered among the first business houses to initiate the participation of public shareholders in its business ventures. The Group started the Jyoti Spinning Mills with a large participation of public shareholders. Shiv Ratan Sharda, Chairman of Sharda Group views that there is a lack of interest and trust among the general public for companies except the ones from sectors such as BFIs, insurance and hydropower to some extent which are mandatorily required to go public. “A few private companies tried in the past but they couldn’t create good impressions,” he says.
Nature of Investments
The big business houses have traditionally been and are involved in a host of industrial and business activities ranging from common food processing to heavy ones like iron and steel, cement, sugar, and paper industries. The food processing industries include rice, oil, flourmills, vegetable ghee, noodles, biscuits and confectioneries, and fast food. In the services sector, their involvement is quite diverse ranging from banking and insurance to airlines and hotels.
Many are now venturing into educational institutions, medical colleges and even hydropower development.
Manufacturing vs other businesses
Manufacturing has been elemental for the growth of the business houses. Almost all groups started from trading activities and then entered the manufacturing business which they generally regard as the turning point in their history. Nonetheless, times are changing. Almost all group heads admit that it is becoming increasingly difficult to operate manufacturing businesses given the unstable political scenario which becomes volatile at times. “There is no favourable environment for the existing industries to grow and new players to enter the manufacturing sector,” says Chiranji Lal Agrawal, Chairman of MC Group. Hiralal Kedia, Chairman of Kedia Organisation, agrees. “The over politicisation has resulted in a degrading industrial and business environment,” he says. Shiv Ratan Sharda, Chairman of Sharda Group thinks that the Group should have focused on trading rather than manufacturing over the years. “Given the present scenario, I regret a bit in that we should have focused on the import business as considerably fewer difficulties are associated with it compared to manufacturing,” he expresses.
Agreeing with the difficulties the country’s industrial sector is facing currently, Padma Jyoti sees things with a different perspective. “When globalisation sped up, the competitiveness of import substitution-based manufacturing declined in the country due to the changes in duty structures and various other factors,” he mentions.
He sees a grim future for those industries that cannot add value and rely only on the difference in customs duty. “In the modern world manufacturing does not mean you have to start from scratch. Value addition by manufacturing companies is related to all aspects of production ranging from packaging to market design,” he shares.
The degrading environment for manufacturing has increasingly led many groups to take up the agencies of foreign brands in Nepal. It is also due to the rising consumption pattern as the average income of Nepalis has been steadily moving upwards mainly aided by the remittance inflows.
There is a long list of demands of Nepali industrialists and businessmen to ease the difficulties created by the prolonged instability. One of the major demands is the endorsement of laws that are stuck in the parliament for a long time. Due to the mounting pressure, the legislature, though slowly, seems to have started the process of addressing the grievances of the country's private sector. The endorsement of the Industrial Entreprises Act by the legislature-parliament is one such example which has been long demanded by the business community.
FDI & Nepali Business Houses
The first well-known FDI came in commercial banking with the engagement of Nepali business houses. The JVs in commercial banking are mainly from India, Bangladesh, Sri Lanka and Pakistan. Similarly, Nepali groups partnered with foreign investors in other areas too, after foreign investment was fully permitted in many sectors of the economy since the early 1990s.
Nepal encouraged foreign investment as 100 per cent foreign owned enterprises were allowed in broad areas including manufacturing, energy, tourism, mineral resource based, agro-based and service industries.
However, the joint ventures of Nepali business houses with foreign investors are rather limited and not very encouraging (of course with few exception). No large business house has entered into a substantial partnership with a large multinational. The main reason seems to be that very few large companies have ventured into Nepal and the working style seems to be different. The decision making in the large foreign companies is vested on professionals whereas in the case of our business houses, as mentioned earlier, it is mostly the family members who make the decision.
Nevertheless, some heads of business houses point to the unfavourable business environment as hindering any partnership with foreign companies. “The prestige that we have earned over the years is attracting foreign companies to start businesses here as joint ventures. But the country's present situation has been problematic for us,” says Prem Bahadur Shrestha, Chairman of Panchakanya Group.
The new Industrial Enterprises Act has removed protectionism in industry and foreign investment is permitted in most of the sectors freely. Multi-National corporations especially Indian Joint venture companies that entered after the 90s are doing very well. For example, Unilever Nepal, Dabur Nepal, Surya Nepal, Asian Paints, Berger, etc.
Export and Import
The business houses in Nepal have been very much import oriented. Apart from a few businesses which specialise in exporting to India, the export to a third country is dominated by small and medium enterprises. The lack of involvement of large and resourceful business houses in the export business has meant that the country has not been able to develop export items and export industries of large scale. Forays into the export business by some of the business houses has been rather short lived.
Even promising areas like IT have not achieved any degree of success and there still seems to be a sense of unwillingness, or even unease.
Free Market and Protectionism
When it comes to competition arising out of globalisation and liberalisation many of them see it as a threat and often end up supporting strong interference of the government.
They even resort to nationalistic and patriotic fervour to curb competition coming from outside.
The business community asks for protection against easy imports of those goods which they produce themselves within the country. At the same time, they argue for 'no tariffs' on the import of those goods, which they trade, but do not produce. Though formally the business community endorses a free market economy, argument for protectionism is common in their statements.
Investment in manufacturing is, however, going towards a stagnant position, if viewed from the angle of the big houses. The export and import position of Nepal shows chronic trade deficits. Nepal has huge trade imbalances with India, China and many other countries. The big business houses seem to be involved in either importing or exporting to India mainly.
Politics and Big Business Houses in Nepal
Until a couple of decades ago, business used to stay away from politics, by and large keeping out of it. Things changed after 1991, especially after the Maoist insurgency and the popular movement of the early years of this millennium.
The business houses seem to have realised that they can influence the policy and laws by getting directly involved in politics. Many businessmen have become members of parliament representing various political parties. The businessmen once in parliament are found trying to bring in legislation in their favour, leading to a general rise of influence of business in the state power.
The business class, basically the big house bosses, has high influence on state power now. With the emphasis on privatisation after 1991, the lobbying activities of big houses have increased manifolds.
Effects of Globalisation
Globalisation has provided Nepali business houses opportunities to go into joint ventures and enjoy the fruits of advanced technology through collaboration with multinationals. But the industrial climate has yet to improve and industries lack sufficient manpower both skilled and unskilled. New industries are not being established in sufficiently large numbers and the job creation is not taking place.
Observers say that in the agriculture sector also, Indian labourers have increasingly been replacing Nepali workers. So not only the industry but the agriculture sector,too, is also suffering from labour shortages.
Separating the Business to Achieve More Success
Some of business houses have gone for separation, while some others are leaving the fields of their earlier involvement, thus shrinking the size of their family business.
The failure to separate the ownership and management and thus keeping the business excessively under the control of the family is cited as the main reason why in India the Birlas are presently far behind the Tatas. Now the Birla family has been separated and the new families so formed have realised the need for keeping the business ownership and management separate.
The experience was similar with one of the old business houses in Nepal -the Dugars, who are now three separate groups – HC Dugar, KL Dugar and
Chaudharies had followed a practice of cross shareholding– each of the Chaudhary brothers had some shares in major companies being managed by the other two brothers. But now they have been managing business separately.
On a brighter note, many Nepali business houses have business footholds in India, Vietnam, Japan, and Singapore as well. Chaudhary Group, Khetan Group, Vishal Group and IEG Group are some of the examples.
“Industrial sector is marginalised and industrialists are not recognised as contributors to the economy”
How did Sharda Group evolve into what it is today?
It all started with my father and grandfather who began by trading in gold, silver, food items, clothes and other assorted goods in Lahan. Our first industrial venture started with a rice mill in 2015 BS. Its success led us to establish around a dozen rice mills in districts including Siraha, Janakpur, Rajbiraj and other areas. The mills also aided the local economy and spurred a rice market in the areas which earlier were on the other side of the Nepal-India border. After that, we entered the sugar business. When we established the industry, there was only one sugar mill in Nepal in Biratnagar. We started another sugar mill in Lahan, but it was not successful. The mill was unable to give an adequate output. After realising that there was no further possibility of more industries in Lahan due to the small market scope, we shifted to Biratnagar. Then we started the Everest Rolling Mill partnering with Indra Bhakt Shrestha, Brijlal Agrawal, Atmaram Murarka and Khemchand Chorodiya. Unfortunately, it did not work out for any length of time due to the lack of raw materials and other problems. After the rolling mill we setup industries one by one in Biratnagar, as it is a very industrial friendly place.
What was your turning point?
We started with in rice mills. But the new generation of our family ventured into new areas. We came to Biratnagar, started new industries there and later came to Kathmandu to explore new possibilities. We came in contact with many people having experiences across many businesses. That was the turning point for us.
What is the present area of focus for your group?
We are primarily focusing on adding products to FMCG lineups. Our existing industries are facing problems due to transportation costs. So for this, we are planning to open a few industries in different areas particularly the western part of the country to overcome the swelling transportation expenses. We have joined hands with our Chinese partner Hongshi Holdings Group for Shivam Cement Industry which we will be extending. Hydropower is another area of focus for us. We have invested in Balefi Hydropower Project, Ridi Hydropower, Rairang Hydro, Project and Joshi Hydropower Project. Out of the projects, two are under construction.
Despite the setbacks to the manufacturing business in Nepal, how did Sharda Group sustain itself?
Sharda Group has always focused on manufacturing from the beginning. We started to produce our own products and supplied them to the market. However, given the present scenario, I regret a bit in that we should have focused on the import business as considerably fewer difficulties are associated with it compared to manufacturing. Manufacturing is supposed to be the major contributor in any economy. But unfortunately, industrial sector is marginalised and the people engaged in such businesses are not recognised as contributors in our context. Political instability alongside bureaucratic hurdles increases the problems for industrialists. Despite the government claiming to ease the problems, our files are not processed for a long time. Ideally the files should not remain for more than 24 hours in any government office.
What policies should the government introduce to improve the overall industrial environment of the country?
Firstly, the parliament needs to endorse the Industrial Enterprises Act without further delay. Another is the creation of a proper industrial climate. Establishing industries has become difficult due to various environment related issues. It can be agreed that the protection of the environment is necessary. Nevertheless, hindering the industrial development in the name of environmental protection will harm the country’s economy in the long run. If we cannot overcome such problems, there is no scope for new industries coming here in the near future.
As an industrialist what are your guiding principles?
I never procrastinate. What I need to do today, I always do it right off. If we never keep boundaries, the work is never ending. In Nepal, we have not been able to work on time. If we work on time and do the production on time, we will become more productive.
The new generation of Shardas has come to the forefront of business. How are they performing?
Definitely, the new generation is more dynamic, more educated and they are more fit in today’s business environment. We believe that they will take care of our family business well. They can do better than what we are doing. They take help from elders in the family in case and if they need it. Otherwise, they are working independently.
There is a debate about making Nepali business houses more corporate and most are family-owned. How is Sharda Group handling the corporatization process?
There are partnership businesses besides family businesses in Nepal. If I open a cement industry and don’t have an idea about the business, I will need to partner with someone who has knowledge about it. For people like us to make our businesses public is difficult. There is a lack of interest and trust among the general public for companies except the ones from sectors such as BFIs, insurance and hydropower to some extent which are mandatorily required to go public. A few private companies tried in the past but they couldn’t create good impressions.
Some of our business ventures, like in the hydropower sector, are publicly listed. And, we have received a good response from the public. So, for the coming days, we believe that it is not possible for us to do all our work out of our own capital. I think the new generation of our family will be undertaking the task of corporatisation in the near future.
“We want to invest in more in manufacturing business but the situation is not favourable”
How did MC Group come into existence?
MC Group started initially from a small business in Dharan. We used to buy Cardamom and Pipla and sell it to Kolkata and in turn buy clothes from there. We also had a garment retail business in Dharan. Afterwards we started trading in grains. But after some time we entered the construction business. Our whole family got involved in this area. The first big project that we handled was the construction of the Koshi Bridge. After that we constructed Gorkha Camp located in Dharan. We then did many projects and after a while we shifted to Biratnagar and got involved in trade and industries. After that, we entered the manufacturing sector by establishing various industries.
What were the turning points for the Group?
The turning point for our group came when we decided to prioritise our industrial business. We took over first the spinning and knitwear industry from Golchhas and operated it smoothly. After that we started bottling Star Beer.
What triggered the Group’s growth?
Our entry into the industrial sector over five decades back was elemental to the Group’s growth. We invested in an industry and slowly one after another we got established. So, prioritising the manufacturing sector rather than trade was the major trigger for the expansion of the Group.
How you view the present state of the manufacturing sector in the country?
Lack of political stability is a major concern for all industrialists. Due to the unstable scenario, there are problems in implementing policies. There is no favourable environment for the existing industries to grow and new players to enter the manufacturing sector. We need peace and stability and a free environment in order to improve the industrial sector.
It is an irony that consumption in our country relies on money generated by remittance. We need to understand that remittance inflows have limitations and are not long-term solutions for the nation’s economy.
Many laws and policies have grown old and are not at all effective in today's context. Many Acts related to industries are taking a considerable amount of time to get implemented. The government needs to provide facilities to increase the export to neighbouring countries like India and China. Only then can the industrial sector develop. For industrial development, the government should solve the labour problem and address the issue of insufficient electricity.
What challenges did MC Group face initially? How is the Group dealing with the challenges at present?
When MC Group came into existence 35 years ago, the market was very small and the purchasing capacity of average Nepalis was considerably low. Transportation was also a major challenge for us to expand our businesses. Nevertheless, we managed the problems and moved forward.
Like other businesses, we are coping with the electricity shortage at present. We are using diesel generators to produce the required energy which significantly increases the cost of production thus reducing the profits. We are looking into the alternatives to reduce the cost of production.
What are the major areas of focus for your group?
Looking at the present context our core areas of focus are steel and cement. We have two cement factories, one in Bhairahawa and another in Birgunj. We also have a paper mill that manufactures cartons in Bhairahawa. We have another packaging industry Super Lamicoats, a non-ferrous metal factory and Vinayak Agro which is among the largest Kattha mills in the country in Birgunj.
Are there any further expansion plans?
We want to invest more in the manufacturing business but right now the situation is not favourable.
MC Group has investments in banks and finance companies as well. How do you evaluate the situation of the BFI sector?
Banks and finance companies are doing very good at present. Inflow of remittance has been a huge source to increase the deposits of BFIs. With the rising BFI sector, other activities in the market are directly or indirectly affected.
Why do you think CSR is important for businesses? What are the major social works that Mc group has done?
Our personal and professional successes are integrally tied to our societies. Every businessman needs to contribute equally to the society through social work. My brothers used to do a lot of CSR activities and after they passed away I continued the legacy. We have constructed a hospital ward in Biratnagar and a hospital in Dharan. We have engaged in many other social initiatives though we haven't thought about doing them in particular sectors. We conduct the activities as per the needs of the people.
You introduced Pepsi for the first time in Nepal. Why did you back off from Pepsi?
When we introduced Pepsi into the Nepali market, we had a small stake in the venture. Afterwards we started increasing our share. But after some years, we started facing losses on an annual basis. As we were suffering, Pepsico increased its stake to 50 percent in the venture. But we were unable to recover the losses even after that. The competition with Coca-Cola was very high back then. So we decided to withdraw from Pepsi and invest the money in other sectors.
“Future is grim for industries that don't add value and rely only on difference in customs duty”
With a long history across many sectors, how do you evaluate the evolution of Jyoti Group?
We have been trading for a long time. We used to produce various products and supply retailers with such goods. We used to produce items from copper and bronze in Kel Tol of Ason. Similarly, we also had a clothing business too. Afterwards, my father started trading in Lhasa which continued till the political changes in Tibet. Trade flourished and he became famous as a trader ‘Syamukapu’ (White Cap in Tibetan). Then he went to Kolkata and ventured into iron mining and exported iron later which was very rare at that time. Started in the 1940s, our undertakings in India lasted until the 1960s after which we decided to establish industries here. Following the call by politicians to start businesses in the country, my father came back and established the first steel and cement industry in Nepal.
Manufacturing versus trading. Which would you prioritise more?
Theoretically and ideally manufacturing can be of long-term significance in terms of value addition to the country’s economy. Trading, meanwhile, may or may not be long-term. Nevertheless, we have been successful across many trading platforms over the years. We are celebrating 50 years of trading such as the dealership of Honda vehicles in Nepal which is in its 48th year.
The nature of manufacturing in Nepal is changing. During the Panchayat era, import substitution used to be the slogan of the governments. Nepali business houses were focused on manufacturing products here rather than importing from other countries for a few decades. Gradually, when globalisation sped up, the competitiveness of import substitution-based manufacturing declined in the country due to the changes in duty structures and various other factors. With the changing scenario, I think that such manufacturing activities may not be viable for Nepal in today’s world compared to 30-40 years back. However, there still are industries that can do well as they can get leverage aided by elements such as the proximity and size of the market.
What kinds of industries are viable in terms of manufacturing at present?
Looking at the present scenario, the future is grim for those industries that cannot add value and rely only on the difference in customs duty. In the modern world manufacturing does not mean you have to start from scratch. Value addition by manufacturing companies is related to all aspects of production ranging from packaging to market design. Germany, for instance, is the world’s largest coffee exporter but does not produce a single bean of coffee. Many African, Latin American and Asian countries are actually the biggest producers. Nevertheless, economies such as Germany and Switzerland have their hold on finalising and the sales of the coffee products. They have mastered the art of buying coffee beans from across the world, processing the raw products and exporting the final products.
In Nepal, the agriculture-based businesses can be sustainable. The service industries such as tourism, IT and financial services can also do well in Nepal. Similarly, there is a huge scope in constructing physical infrastructures here. There is a big gap between what we need and what we have. For that, if we can change our way of thinking about infrastructure development as only being the responsibility of the government, then there will be immense possibilities for the private sector as well.
How have the manufacturing units of Jyoti Group performed over the years?
We have had a very difficult period over the past few years due to various reasons related to the political instability and the earthquake later. But I must say that we are on the path of recovery lately though it is not satisfactory.
As an industrialist, how do you view the politics of the country affecting the country’s economy?
The fundamental problem here is the prevailing confusion regarding what kind of country we are going to be. We have been stuck in a political trap for a long time. Unless and until the political issues are settled, our economic development cannot take the right track. Just by saying let’s forget about the politics and introduce proper policies is like sweeping the problems under the carpet. Now-a-days it has become a comfortable proposition to demand industrial and business policies without focusing on the political aspects of the problems. Even if the policies are introduced or implemented, we don’t know if they will last till the next government, next constitutional amendment or the implementation of the federal structure.
What areas should Jyoti Group focus on?
We should focus on sustaining and consolidating our businesses across the different sectors. Consolidation is the way of adapting or being prepared with the changes in society such as lifestyle and the way people think. Today is not the same society as the one we were born in. We need to prepare ourselves with the changes happening in our surroundings.
Where did the Group not achieve relative success despite its best efforts?
There are many business areas in which we could not achieve success. One such example is in greenhouse farming. After starting the venture, we realised that what we lacked was power (electricity) which is the basic requirement for any greenhouse farming system. We thought of operating the farm with diesel generators but the cost of production would have been too high. So, we came back to general farming. It was a mistake due to lack of experience on our part.
Like most of the business houses in Nepal, Jyoti Group is also a family-owned business. Are there any corporatisation plans?
We have a number of publicly listed companies in areas such as hydropower and insurance. We have also tried to venture into the medical sector collaborating with a bigger number of shareholders. Similarly, our spinning mill started with a large number of shareholders from the public. We initiated the corporatisation of businesses much earlier than others.
However, I must admit that it is not an easy task to undertake. People generally want to have things under their control and try to minimise or avoid any risky business.
Family businesses in our country are contributing a lot to the economy. Family-owned businesses relatively do ethical business practices. Making money is one part but it is about keeping the legacy of the family. I think that family-owned businesses should persuade individuals to become entrepreneurs. We have a tradition where we provide shares to our staff and make them directors. Though our business is family-owned, we have directors from our senior staffs who have contributed a lot to the Group.
Are there any business diversification plans?
We will be investing in the medical and technological sectors. We will probably be entering big hydropower projects too. We will go through the Butwal Power Company (BPC) where I am the Chairman. In BPC, we have had a good partnership for so many years.
How is the new generation of Jyotis doing in the Group? Are they going out independently or following in the footsteps of their parents and grandparents?
We are relatively fortunate because they received a good education studying abroad. We do not expect a lot from them initially, as they do not know much about Nepal. But by now, what I can say, is that they are capable of taking decisions independently. Nevertheless, like other young people they also become rash and impatient if they do not get the expected results.
In places like Nepal, one must have a lot of patience for things to happen. So, elders in our family have a role to calm them down and to guide them.
“Trading is becoming better than manufacturing in the recent years”
How did the Saakha Group become a prominent business house in the country?
My father was engaged in trading business since 1990 BS when the Ranas were the rulers of the country. When we grew up, we diversified the business. I got involved in the trade from 2008 BS i.e. after one year of ending the Rana rule. My father used to import a lot of raw materials from India and I helped him to diversify the business. In Nepal, the provision of providing direct import licenses started from 2016 BS onwards. I joined the Nepal Chamber of Commerce in 2014 BS as the Honorary Joint Secretary. Similarly, I joined the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) in 2022 BS. During the establishment of the FNCCI, I participated in the first election and worked as a member of the Executive Committee. The committee was mostly made up of industrialist and only a few of us were traders. So I decided to start in the industry in 2031 BS.
My life as an industrialist actually started in 2041 BS when I ventured into large scale industries with Nepal Paint Industries and Saakha Metal Industries and Unisa Polychem Industries. After starting big industries, I reduced trading activities. Afterwards, I opened an instant noodles factory and pharmaceuticals industry as well. In the 1980s we were also engaged in manufacturing of readymade garments which was one of our major businesses. We left the garment business 10 years ago after the United States removed the import quota, electricity problem increased and labour problems intensified.
Meanwhile, we established the Saakha Steel Industries in 2051 BS but it took around four years to commence production since the steel industry takes time to get started. The starting of the steel industry was the major turning point for our Group. It has been our major investment and area of focus.
What were the challenges?
Before 2047, there were limits to importing raw materials from foreign countries. There was the system of importing raw materials in intervals of one month. Shortage of raw materials was a major problem. In 2047 BS, the import restriction was removed and it became easier for us to import raw materials from foreign markets. Similarly, political instability has also been a challenge for us as it has deteriorated the country’s overall industrial environment. This has led to the trading business becoming better than manufacturing in recent years.
How are the businesses of Saakha Group performing at present? What businesses have not been successful?
The paint industry is going well. The business of Saakha Metal Industries (copper, brass, and aluminum) fluctuates due to the fluctuation in the rate of the US Dollar. But, comparatively our steel business is performing well.
Our adhesive production industry is not doing well relatively. It is one of our first industries. Now, I am personally looking into the industry to speed it up commercially. The garment business was also a notable earner for us but unfortunately we came out of it due to multiple reasons.
How do you evaluate the market scenario for construction materials and steel products?
Comparatively, the market for both industries is good. According to my estimation, the overall market growth will be around 30 percent this year. The reconstruction drive after the earthquake has increased the demand for construction materials. Nevertheless, if such products are imported from India, the Nepali construction materials business will slow down. So, the government needs to adopt anti-dumping measures.
What types of policies and government support are essentials to solve the existing problems?
We do not have complaints on customs and VAT provisions. Our major problem is that the concerned authorities do not assess our balance sheets immediately after we submit them. They take around three years to assess our financial reports. Besides this, the government should provide certain facilities to the industries so that they can increase productivity. Industrial production won’t increase without providing these facilities. Similarly, lack of political stability and the prevailing energy crisis are the major impediments to the development of the industrial sector.
Along with this, the difficulty in transferring imported machineries is also creating problems. Once the machineries enter Nepal, they cannot be transferred to another country. If a particular machine is damaged or defective or needs repairing, we cannot return that machine. So, the government should focus on this matter too.
How is Saakha Group diversifying its business?
With our existing businesses, we will be focusing on the construction sector with prefab projects. Prabal (Prabal Saakha) is currently handling the projects. Since we produce various types of construction materials, this business will be easier for us to operate.
“We are capable of inviting foreign investors to work with us here in the country”
How has the panchakanya group evolved over the years?
When I was 17, I dropped a government job offer to start a business of my own. I started a potato farm in Fikkal of Ilam. Since I was inexperienced in business, I faced losses. But I did not lose hope. I came to the Terai and began trading in rice and other items gradually becoming successful. After that, I started a timber business with a partner in 2024 BS. But after sometime I left the partnership and started trading on my own. I got strong support from my brothers and the business turned out to become quite successful.
In 2030 BS I thought of establishing a rice mill. At that time the East-West highway was constructed passing through Birtamode of Jhapa from where paddy was supplied to Bhadrapur to produce rice destined for the market in Kakkadvitta. I examined if I could establish an automated mill along the highway which would save transportation costs for rice traders. I came to Kathmandu and after some bureaucratic red tape, I acquired the license to open the rice mill which I started in 2030 BS.
How was the journey into the construction materials business?
After running the mill for 5-7 years, I came to Kathmandu handing over the business responsibilities to my brothers. I came to Kathmandu and settled here. Various construction activities ranging from individual homes to building large infrastructures were taking place across the country at that time. After observing the scene, I decided to start an iron company. After sometime, I found out that there was one rolling mill in Biratnagar. Another was Himal Iron and Steel. I was sure that I could not compete with big companies. So, I opened a mill in Bhairahawa in 2038 BS targeting the western part of the country as the market. At that time my sons also came back from abroad after finishing their studies. While running the company, we partnered with people outside our family. Gradually, we learned more about the industry and business. Afterwards we went into the production of pipes and expanded our business ventures across multiple areas.
Panchakanya Group has been diversifying its investments in recent years with the notable sectors being hydropower and housing. How are the projects progressing?
The 10MW Upper Mai Hydropower Project has already started commercial production and its capacity has been upgraded to 12MW. We are in the process of obtaining the license for the upgraded project. Meanwhile, the construction of the 6MW Upper Mai- C (Cascade) is progressing fast as 90 percent of the project’s work has been completed.
What are the new projects of Panchakanya Group?
We are interested in establishing a cement factory. Nevertheless, the limitations on land ownership have slowed us a bit. For establishing the factory, we need more land than what is permitted. However, we are trying to start the cement factory as soon as possible. If the government eases the way, then we will be starting our industry within a year.
What factors have come in the way of your various initiatives?
We are doing well in all areas including manufacturing, construction, hydropower and trade. We can make improvements after observing what the situation of the country is like. We are also capable of inviting foreign investors to work with us here in the country. The prestige that we have earned over the years is attracting foreign companies to start businesses here as joint-ventures. But the country's present situation has been problematic for us.
“Changing dimensions of challenges need to be tackled with new ideas”
Ranging from manufacturing to banking and various types of trading, Kedia Organisation has an extended investment portfolio. How do you assess the evolution of the Group?
Our ancestors arrived in Nepal from Rajasthan in India around 125 years ago. My father, uncle and grandfather were the first to arrive here and initially they started a retail business in Birgunj. At first we had a textile business. After the retail business, they moved into the wholesale business and started trading grains. During the trading of food items 60 years ago, they established a food industry to produce wheat flour, rice and edible oil. At that time we operated almost half a dozen rice mills. We got a good grip on the production of rice in Nepal. With the rising businesses, the Kedia family gradually expanded. Our industries and businesses grew with new dimensions after family members came in with higher education degrees. Now our organisation runs two dozen industries and other businesses as well.
What was the turning point for the Organisation?
Initially we were into textiles. The shift of business from textiles to food items was very rapid. This was the major turning point for us. The shift from trading of grains to the processing of grains was another turning point. Businessmen are like bees. As bees are attracted towards something sweet, businessmen are attracted towards anything they see a profit in. A good businessman should have the quality to search for new techniques to generate profit.
It must have been quite challenging to come all this way. How do you view those challenges?
Challenges are always there. We have faced many obstacles in the past and are also facing them at present. With the changing times, the types of challenges have changed accordingly. So, the changing challenges need to be tackled with new ideas. One must have the capacity to face the prevailing challenges. Without such a capacity, businesses won't grow. But we have been able to face and overcome the challenges very well. This is one of the main reasons for our success.
What challenges do you identify at present?
The government does not have supportive and clear policies for the development of the industrial sector. The over politicisation has resulted in a degrading industrial and business environment. There are so many examples of industries and businesses shut down due to over politicisation. Initially, the industries and businesses in Biratnagar were doing very well. Later, the industrialisation drive shifted towards Birgunj. But, in recent years, the industrial and business climate in Birgunj has been degrading. Many industries have already closed. Many industries are slowly disappearing due to the unfavourable environment created by political strikes. And new industries are not being established. The older industries are running somehow. However, new industries are being established at Bhairahawa and Nepalgunj which is not a positive sign for Birgunj.
How can we have a positive industrial environment?
Policies must be clear and effective. There are many labour related problems as the laws and policies are not appropriate. Employers cannot remove the labourers once employed which is very inappropriate and not pragmatic. When the output of the invested input is not permanent, how can labour be permanent? There are several instances of ambiguity in the existing law and policies. For example, there is the provision of collective bargaining but the government sets a minimum wage for labourers.
A ‘hire and fire’ provision needs to be incorporated in the Labour Act. We can increase the facilities of the labourers if such a provision is introduced. Similarly, policies can be introduced to bar the employment of non-Nepali citizens. Politicians leading the concerned ministries without having any knowledge about industries and business is the main problem here. We need to sort out these issues but the politics of ‘bhagbanda’ (earmark) is an obstacle in this regard.
What guiding principles do you follow as a businessman?
Honesty and passion towards work is the main principle for any good businessman. Without these qualities no person will be successful in their work. It was this devotion to hard work that eventually led us to become a prominent business group in the country.
What new projects are in the pipeline?
We are planning to invest in the mining-based industry if the business environment is favourable. If there are opportunities and a suitable business environment, then we will move on to other projects as well.