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June 2017 Interview

Published on: 2017-06-14 09:04:04     1013 times read    0  Comments
“Radical change needed in the mindset of government and politicians”

Satya Narayan Keyal
Chairman
Keyal Group

Satya Narayan Keyal, Chairman of the Birjung-based industrial conglomerate Keyal Group has been active for the past three decades in the country’s industrial and business sectors. This group which has a special focus on manufacturing construction materials has lately been more engaged in other new industrial areas and trading. There are now more than a dozen industries and businesses under the umbrella of Keyal Group. Started in 1951 with a saw mill and rice mill, Keyal Group later ventured into the paints and hardware business eventually moving to manufacturing of construction material in 1994. Despite the economic problems created by the prolonged political instability, the group has weathered the difficulties and has emerged as a major business house of the country. Keyal views that the pace of industrial and business development has not taken up the expected momentum due to the protracted political transition that has been fueling the sense of instability in the country. Talking to Om Prakash Khanal of New Business Age, Keyal stresses that the Nepali business sector can grow exponentially if the present day problems related to investment and trade are promptly resolved. Excerpts: 

How do you assess the present day eco-political situation as a business person who is leading an industrial and business house?
There is no shortage of possibilities as well as problems for our industrial and business sectors to flourish. Harnessing the potential will only be possible when the pertinent issues are resolved. We hoped for political stability so that the country could move towards the path of economic development after the promulgation of the new constitution. This is yet to materialise. The Nepali private sector is still reeling from the difficulties caused by the political events after the promulgation of the constitution. 

But the political leadership has stated that economic development is the main objective from now onwards…
It is a good sign that the political parties have started to make economic development into an agenda. We have been hearing slogans that, we should now focus on economic development as the struggle for political causes is over. And all the major political parties have highlighted economic development in their election manifestos. This is positive. But there are contradictions in terms of the commitments from the politicians’ side and the implementation side of things.  For instance, the new Industrial Enterprises Act has been enacted, but doubts still remain in terms of the implementation and effectiveness of the provisions of the Act. On the other hand, due to the lengthening of the political transition, the agenda of economic development has not received appropriate attention. There is no proper guarantee of physical and legal security for industries and businesses. Some crucial legal frameworks are yet to be created to ensure a safer environment for investment. The existing labour law is not pragmatic at all. There has already been a significant delay in amending the law. 

There are no noticeable signs that the new laws that are in the pipeline will address the reforms. The government has been calling for investment in productive sectors for speedy economic development. The Nepal Investment Summit 2017 was held recently, and there were more commitments than we expected. Nonetheless, investment-friendly infrastructures are a prerequisite to bring in the investments committed by foreign investors during the summit. Activities for arranging the urgently needed legal and physical infrastructures are going in a slow pace.

What do you think are the ways to meet the expected pace of economic development?
Political stability is elemental in this regard. Irrespective of whatever is being said at present, the pace of economic development is integrally tied to the administration and politics.  The government policies need to be investment-friendly to accelerate the growth of industry and trade. Policies, regulations and legal arrangements in paper alone won’t change the situation. Only effective implementation can yield meaningful results. The environment is not conducive for investment. Whatever has been achieved is due to the private sector being compelled to work. 

Let’s take the example of the Indian state of Bihar where the government provides grants up to 40 percent to private sector investors to establish industries. The authorities there make sure that industries and business get uninterrupted supply of electricity round the clock. Industries also get electricity in subsidised rates. We are largely deprived of such facilities. Ample arrangements for security and a level of guaranteed income are the main preconditions for investment. The governments in our country have failed to provide this so far. 

But the new Industrial Enterprises Act has included incentives specifying the areas for the industrial and business sectors…
We need to think how laws can be effective. The government has announced that it will provide concessions in income tax to industries set up in remote areas and to industries that provide employment to large number of people. But is it possible to invest in a place where there are no basic industrial infrastructures just because the income tax concession is promised? 

Energy, labour, road and transport must be easily available for investors to set up industries.  The supply of these essentials is problematic at present even in the easily accessible areas of the country. The rebate on taxes and other charges should be effectively available, not only on paper, to encourage the businesses. Similarly, there should be arrangements so that industries can get land easily in places where there is proper infrastructures. 

The government has been saying it wants to join hands with the private sector for economic development. But why has the private sector not been more liberal, as expected, about this?
To make new announcements and to make visible changes on the ground are two different things. In reality, the way the government and politicians view industrialists and businessmen is not correct. The Nepali private sector is always ready to take on its role regarding the country’s economic development. It is up to the government to create an environment conducive for investment by introducing appropriate policies and effectively implementing them. What the private sector can do is to raise its voice on the requirements in planning, policy and legal levels. The private sector’s initiatives have led to many achievements. All we can do is to put pressure on the authorities concerned to make things happen.

The private sector is always viewed with suspicion. Nevertheless, meaningful economic development is not possible without the active participation of the private sector. This is a truth proven time and again by the eco-political practices around the world. Nepali politics has lately started to express commitment towards this. But the implementation and practice side is yet to be tested. It is wrong for the political parties to see the private sector only as a donor or taxpayer. This attitude has been a factor stopping the pace of economic development. Therefore, there is a clear need for a radical change in the mindset of the government and politicians.

Why has this particular mindset among the politicos not changed despite the increasing participation of the private sector in politics in recent years? 
The private sector is the base for economic development of any country. Therefore, its participation at the policy making level should be taken as something positive. But there is no meaning in superficial participation. Participation of the private sector at the policy making level can be useful. The experience of entrepreneurs should be utilised when it comes to formulating and implementing policies. However, the participation of the private sector in politics has been only symbolic. The dimension of private sector partnership in governance needs to be results-oriented. 

How do you think the private sector’s active participation can contribute to the campaign of economic development? 
The agenda of economic development has always lagged behind due to the lack of an effective private sector presence at the policy making level. Such participation is comparatively effective as the private sector is more accustomed to issues and potentials in industry and trade. 

How do you expect the politics of the country to be from now onwards?
Development needs to be the area of focus for politics now onwards. Economic development should be a common agenda for all players in the political arena despite agreements and disagreements based on their political faiths. It won’t take much time for the country to move towards the path of economic prosperity if this happens. 

How do you view the increasing problem of unemployment?
Unemployment is a result of the lack of a favourable climate for investment in the country. Opportunities for employment have shrunk and a large number of youths currently are out of the country looking for jobs. This has led to a situation where the industries have to operate with an inadequate workforce. 

There is unnecessary politicisation in the manufacturing sector. The provisions in the Labour Act are not pragmatic.  The Industrial Enterprises Act has included the ‘no work no pay’ concept. But it won’t be implemented unless it is also in the labour law. We need to resolve contradictions in the policies. The existing Labour Act is neither beneficial to the workers nor is it easy on the employers. Factories have become places to produce workers for political parties rather than industrial products. Activities like these need to be stopped immediately to foster a good environment for investment and employment. 

Keyal Group has focused its industrial investments in the Bara and Parsa districts only. What are the reasons behind this? 
Geographical and physical ease of this region is the main reason. Being located in the mid-region of the country, it is easy for us to control transport cost to reach the customers. Another reason is that these districts are near the country’s main border point of Birgunj. We are hopeful that the industrial and trade potential in the region will increase further in the future with the railway connected dry-port along with the construction of infrastructures including the Nepal-India Integrated Check Point, fast track road, Special Economic Zone as well as the international airport project in Nijgadh. The Kathmandu-Kulekhani- Hetauda tunnel road is in the process of construction and it can also be instrumental in increasing the business and trade potential of this region. The arrangement of all these infrastructures will eventually add to the importance of Birgunj. The completion of the projects is important for industrial and commercial reasons. The pace of construction is very slow at present. The government needs to prioritise the completion of economically important infrastructures. 

What significance do Birgunj’s special qualities have in the overall economic development of the country?
The demand to make Birgunj the economic capital of Nepal by integrating all existing infrastructures that exist in and around the city area, that are under-construction or are in the process of construction has not come without reason. This is because of the infrastructures in the Birgunj area and its geographical location. The government too has accepted this. 

Nonetheless, there has been an unexpected delay in recognising Birgunj as the country’s “Economic Capital”.  Policy reforms and proper legal arrangements are necessary to establish Birgunj as the economic centre and to utilise the potential it has in industry and trade.


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