Suresh Kumar Basnet is the President of the Nepal Chamber of Commerce (NCC). The business leader says that the completion of the peace and constitution drafting processes will open up doors for the country’s economic development.
He suggests that the political parties should reach a new understanding on the economic agendas. Basnet talked to Laxman Kafle of The Rising Nepal on various current issues related to the Nepalese business sector.
How do you view the country’s present business situation?
The entire economic sector is passing through a critical phase. This sector is almost paralyzed by the power outage, unrest and labour disputes. This field has failed to attract new investors. Because of lack of an investment-friendly environment in the country, the businessmen are not in a position to invest in new businesses. Productivity of the industries has gone down by about 60 per cent due to a perennial energy crisis. The recent scarcity of the petroleum products has also hit this sector.
Closure of some industries has sent a negative message to potential investors both at home and abroad.
Similarly, frequent strikes called by the various groups, political parties and their sister wings and workers have also adversely affected the industrial sector. With a significant reduction in production, the country’s export trade has become stagnated. However, the business environment in the country is gradually improving. The government has tried to attract both domestic and foreign investments.
I think, the country’s economic development will be possible only after the conclusion of the peace and constitution writing processes. The recent progress made in the peace process and the government’s efforts to lure foreign investments have helped in creating a ray of hope for us.
The Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between Nepal and India is a positive tool to attract more foreign investments to the country and motivate the domestic investors. This has the provisions of securing investments. Another encouraging aspect is that the government has declared Nepal Investment Year-2012/2013. We hope that this event will be helpful for bringing in more foreign investments. Foreign Direct Investment (FDI) is a must for Nepal’s development.
For making the investment campaign a success, the government has created an Investment Board, which will play a vital role for bringing in investments. The progress of resolving labour problems is also supportive.
What should the government do to improve the country’s business climate?
The government should ensure security of investments, supply energies, and facilitate the business community. The government should also join hands with the private sector as an economic development partners for making all of its economic plans a success.
I think, the energy crisis is the number one problem in Nepal. So, the government needs to come up with an immediate plan to address the current demand for energy. It also needs to bring in programmes to resolve the issue in long-term. We must take energy as possible product with which could balance our foreign trade.
The political parties should forge a consensus on economic agendas and the government has to offer subsidies and facilities in priority sectors such as agriculture, tourism, hydropower, mine, infrastructure, alternative energy, health, education and among others. This alone will help bring in investments.
There is also an urgent need for reforming and amending impractical Acts and laws related to commerce, revenue forestry, agriculture, excise duty, value added tax, etc. The governments should end the labor problems through declaring this sector as a zone of peace. For this, it must hold extensive discussions with relevant stakeholders. With such initiatives, the government could take investors in confidence.
The government, in close coordination with the private sector, could promote our potential projects abroad. Foreign investors are showing their interest in potential sectors like tourism, agriculture, hydropower, mine, infrastructure. They, however, are waiting for durable peace and more conducive business climate in Nepal.
The government has planned to bring in more than Rs. 80 billion in the various potential projects during NIY. I think, it could attract more than this. But what is needed is the security of investments. The hydropower projects are capital-intensive ones. More than Rs.15 billion is required just for 100-MW hydropower project. The Investment Board has remained effortful in attracting more investments for more than 50 mega projects during the NIY.
What will be the roles of the private sector to make the Nepal Investment Year a success?
The roles of the private sector are very important for achieving the targets set by the government. The NIY was declared as per the request from the private sector. Now, with the support of the private sector, the government is carrying out the 50 mega projects. The government has enhanced its relations with us. This is very positive.
We have more responsibilities of increasing investments along with preserving the existing ones. When we add investments, this will send a positive message to the international community that the country’s investment climate is changing for the better.
We are lobbying hard for luring more foreign investments. We also ask them to invest in joint venture. We will organize B2B discussions with potential foreign investors.
We fully support the government for making the NIY a success at a time when the country’s economic growth is only about 4 per cent.
What are the major investment sectors with comparative advantages in the country?
The agriculture, hydropower, infrastructure, tourism, education, health, industrial and business sectors and mega projects like mine and cement are the main sectors having comparative advantages. The country could achieve a double-digit economic growth through developing such sectors.
First of al, we need to focus on the energy and agriculture sectors. Our export trade has been declining every year due the decreasing in agricultural production.
We could not commercialize the agriculture as per its necessity. We have not used modern technologies for increasing agricultural productivity. Our production covers only 40 per cent of total our consumption. We are forced to import the remaining 60 per cent from abroad.
Developing hydropower is essential to fulfill the growing demand and enhance the industrial production. Similarly, tourism is another highly potential sector. The development of infrastructure should also be a top priority for sustainable economic development as well as attracting foreign investments.
How important is FDI for Nepal?
FDI is a must for developing countries like Nepal. This form of investment is essential as the domestic investment is insufficient for the country’s economic development.
Although we have made a lot of domestic investments, the return is nominal. So, the investments could not increase the capital. The return of the national investments could construct only 50-MW hydropower project annually. This is not enough for achieving the double-digit economic growth.
India and China, our immediate neighbours, have achieved double-digit economic growth. But our economic growth is less than 4 per cent.
If we can generate more electricity, we can the surplus energy to India easily. We can generate more electricity during the rainy season when we need not import it despite an increase in the demand for power. So, we should focus on developing hydropower projects.
After the Government of Nepal and the China Three Gorges Corporation (CTGC) signed an agreement regarding the construction of the West Seti Hydropower Project. How have you taken this debate?
The agreement on the West Seti Hydropower Project was needed for the development of the hydropower sector considering the current power crisis in the country. This is not a matter of debate. The agreement must not be cancelled. The concerned authorities and bodies hold discussions and resolve the problem. The CTGC is the most renowned and experienced power generating company. This will complete the construction of the project within the stipulated timeframe if a congenial working atmosphere is created.
As the 750-MW project is of storage type, it will generate power throughout the year. The political parties must pay due attention towards materializing such an important project.