Trifle political issues should not take precedence over economic agendas: ICC chairman Shrestha

Chairman of International Chamber of Commerce (ICC), Nepal as well as Nepal China Chamber of commerce and Industry, Rajesh Kaji Shrestha is a familiar name in the business sector of the country. Shrestha, who is also the immediate past president of Nepal Chamber of Commerce, is of opinion that the country's business climate is at its lowest ebb. He argues the failure of the government to perceive crucial economic issues from the correct angle is the chief reason for the depressing business scenario of the country and asks the government to deal with pressing economic issues with high degree of urgency if it wants to see the country's economy to grow at a healthy clip. Shrestha divulges his views on a myriad of issues pertaining to the country's economy in his talks with Nirjal Dhungana of nepalnews.com:

How do you assess the prevailing business climate of the country?

To put it simply, the country's business scenario is passing through a very rough patch. In fact, it is inimical to the much hyped slogan of economic revolution the Maoist-led government hopes to achieve. Trivial political issues continue to stifle the potentials of economic growth. As a result, the confidence level of entrepreneurs has hit rock bottom.

What factors do you think contributed to the gloomy business outlook?

Firstly, the onset of labor disputes in some major industrial units including media houses of the country has made the investors jittery. Not surprisingly, the industrial anarchy created by politically motivated trade unions has deterred potential investors from making foray into any new venture. The crippling obstructions faced sometime back by hotels in Nagarkot due to belligerent trade unions bodes well the fact that even the tourism sector is under threat.

The government officials often make sugar coated speeches in favor of buttressing the tourism industry of the country. But the manner they are exhibiting flippancy towards facilitating the growth of this industry is really disappointing.

The wage dispute between employers and labor organizations has also forced some foreign investors in Nepal to close their business operations.

Secondly, the government has failed to make the existing tax structure more progressive. For instance, even though the finance ministry has unveiled voluntary tax payment scheme, it is not clear as to which particular income group the scheme is targeted at. Rather, the mode of tax related provisions it has introduced seems to have dampened wealth creation.

Nepal has a disappointingly low revenue collection and the reason for this is tax evasion, which has much to do with the high tax rate. The disproportionate tax rate has clearly discouraged those who produce more. Similarly, administrative reforms are not taking place, which, consequently, is forcing the tax payers to bear the cost of a bureaucracy that is already bloated and inefficient.

This fact has also to some extent contributed to the bleak economic climate of the country.

What are other obstructions the business scenario of the country is facing?

The severe lack of sound infrastructural facilities has also impeded the commercial activities. For example, the productivity of domestic enterprises is hit hard by terribly long load-shedding hours. The paralyzing power shortage has further dimmed the prospects of large scale investment in productive venture.

Private sector has been reluctant to invest due to poor infrastructure, weak market institutions and a politically unstable environment. These are some of the chief factors that demand urgent attention. Without scouting viable solutions for the problems dogging the business sector, the slogan of a new and prosperous Nepal will continue to remain elusive.

So, what measures should be taken to expedite the business activities in the country?

First and foremost, the government should ensure that the trifle political issues will not continue to take precedence over the vital economic agendas.

Economic indicators will not look up just because of ambitious arithmetical estimations and allocations. It will be imprudent to predict that the incumbent government will meet its budgetary target of collecting a whopping Rs 142 billion in revenue if the state upsets the big tax payers in the name of broadening the tax net.

The government recently introduced a provision of income disclosure on the purchase of automobile and real estate. This is bound to mar the transaction of automobile and real estate.

What should be noted here is that some time back India came up with economic stimulant package to insulate its real estate and automobile industry, among others, from the impacts of the global economic meltdown.

So, it is also mandatory on the part of Nepal government to shield a sector like real estate from facing a debacle. A dip in real estate prices could hurt the whole financial system because it is overexposed to the land and housing segment.

In your view, what structural steps need to be taken for long-term well-being of Nepali economy?

The government has to chalk out a concrete plan to offer the tax holiday to big investors. This will eventually help to create more employments and expand business activities.

Broadly speaking, Nepal should also carry out extensive reform in the existing trade policy to ensure a dynamic growth in its export business trade as well as to attract FDI and technology.

Nepal also must diversify the range of its exports and expand their output by appropriate investment. Nepal also needs to find a way of accessing the market of its sub-continental neighbors other than India . Nepal's cooperation with regional neighbors is essential for overcoming its disadvantage of being a landlocked country.

Additionally, Nepal should diversify the range of its exports and expand their output by appropriate investment. In order to fruitfully integrate the country's economy with the inter and intra regional trading arrangements including SAFTA, BIMSTEC and WTO, Nepal should also be serious towards completing a lot of processes related to custom duties, infrastructure, opening of the sectors and reforms in law and policies.

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