Investment Prospects Bleak: Thapaliya
VOL. 06, NO. 01, June 08, 2012 (Jestha 26, 2069)
ROHINI THAPALIYA, managing director of Padmashree, is a well known industrialist having a long involvement in trading and industries. As the country has been passing through a very critical time, Thapaliya spoke to NEW SPOTLIGHT on various issues. Excerpts:
As a businessman how do you look at the country’s present state?
We waited for past four years hoping that the Constituent Assembly would promulgate the new constitution. All our hope was shattered following the expiry of the CA deadline. Foreign investors, who were eagerly watching the situation, now flee the country. This political uncertainty will affect Nepal’s economic sector badly.
We expected that the new constitution would bring political stability in the country. Everyone was waiting. Announcement of the dissolution of the Constituent Assembly and holding the new elections within six months created further confusions. Now our position is like that of four years back. This political instability discourages the national and international investors.
The present global economy is in a very critical stage. Euro-zone is financially difficult time. Similarly, the Indian economy is also facing difficulty from the devaluation of the Indian currency. This has added difficulty in India. American market is also not too good. Although Japanese currency is getting stronger, it reduced the Japanese exports. In a context when the global economy is heading towards recession and Nepal’s internal political instability is likely to continue for some time to come, there is less possibility to see foreign investment coming to Nepal.
Since one and a half years, Nepal’s banking sector has been facing a difficult situation. Earlier, the banking sector suffered from cash crunch and now banks have difficulty to find the lenders. In the context of political instability, Nepal’s economy will see more difficult times ahead.
How do you assess the present state of Nepalese economy?
Nepal’s share market is down, real estate business, including housing, is not performing well. Both are unstable. According to information available in the market, 6000-8000 flats are yet to sell. In the investment in land, it is not faring well. We were hoping that promulgation of the new constitution would create conducive investment climate and would bring industry friendly labor law. Besides that we were also expecting good performance of the service sector. It is unfortunate that the general strike called by various forces just before the promulgation of the new constitution badly damaged the tourism sector. The hate statements made by various ethnic groups further deteriorated the situation.
How do you view the tourism sector?
In tourism sector, 60-70 percent market has already gone down. Tourism entrepreneurs have already made it clear that it will take a long time to recover the present state. As there is insatiability, it will have effects in the whole year. Looking at the high demands, many hoteliers increased the number of rooms in various hotels and some were planning to increase the rooms, the sudden decline in the number of tourists places them in difficult situaiton.
Do you see any possibility of stabilizing power supply in Nepal?
In the power sector, the situation is getting much worse. Severe load shedding started after Kosi floods and now it is gradually heading towards a more difficult phase. There is a massive power crisis. The government announced that it will import power from India and also said that it will install thermal plants to meet the requirements. However, nothing has moved forward. The load shedding is worsening the situation. Load shedding is normally there from November to April. We still face 10 hours of load shedding. If things continue like this, there is no sign for any new hydropower project coming soon. For instance, Upper Tamakoshi seems to be going late. Arun III, Upper Karnali and West Seti projects are delayed.
What do you say about the NEA’s performance?
The financial state of Nepal Electricity Authority is getting worse. According to a report, it incurred a huge loss. At a time when NEA is not in a position to pay the bill to the private sector, no one will come to invest in Nepal. NEA has been demanding increase in current tariff but it is yet to be permitted as it is selling the electricity at the same price as it was a decade ago. Although the prices of every commodity have gone up, electricity is still in the same price. Tariff needs to be revised from time to time. How long can a government continue to keep unrealistic prices?
Don’t you think hike in power tariff will increase the prices of products?
Industrialists are by paying Rs. 38-40 per unit of electricity. If the government is ready to provide electricity by Rs. 20.00, every industry will be willing to pay. If we want to make the country, we must be realistic and need to say a spade is a spade. We are paying Rs.90.00 per dollar but we don’t want to pay real price of petroleum products. I am not saying that everyone can afford it. Those people living below the poverty line or those who cannot afford it should be given subsidy. The government must have clear cut policy on business and social reform sector.