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“FNCCI will be more vocal in the coming two years”
The President, all four Vice Presidents as well as a large number of other members in the executive committee of FNCCI, the apex chamber of the country, were elected unopposed for a two year term starting July 2005, which the new leadership of FNCCI describes as a signal of the growing unity within FNCCI. Soon after this rare feat, New Business Age managed to get the newly elected President Chandi Raj Dhakal (second from right in the photo), and his deputies First Vice President Diwakar Golchha (extreme left), Second Vice President Kush Kumar Joshi (second from left) and Chairman of the Employer’s Council and Ex-Officio Vice President Suraj Vaidya (extreme right) for a joint interview during which they spelled out their agenda and strategies for the new term of office. Excerpts:
What is the main agenda of your team for the next two years?
Chandi Raj Dhakal: Our economy is fighting for survival. While the population growth is 2.4 percent, the economic growth (GDP) is 2.2 percent. As the population growth and economic growth are in the same range , anyone can understand that we, the business-industry sector, are struggling to survive. In this situation, our main strategy is to work together with the government, the trade unions and the civil society to address the ongoing slump in the economy. We will discuss with them, develop a concept addressing the legal and policy issues and jointly implement them in a transparent way.
Peace is today's prerequisite. There can be no two opinions about it. A conducive atmosphere for business is the need of the hour. An effective delivery mechanism is necessary in order to implement the concept to be prepared by FNCCI for the socio-economic development of the country.
Diwakar Golchha: Another challenge faced by FNCCI is to lobby to make the existing laws internationally compatible. Otherwise, neither will there be new foreign investments nor will the Nepali investment have any future. Our laws are contradictory. So, we have considered that it is a big challenge for us to create an investment-friendly environment from the legal framework point of view. In the coming two years, FNCCI will push for speeding up the process to make the legal framework internationally acceptable.
As various Acts are not internationally compatible, we lack the competitive strength as a WTO member. Our transaction cost is high due to legal weaknesses. The decision-making process is difficult as it involves a lot of procedures. This process should be made transparent. The activities of various agencies are also increasingly hampering the business.
Suraj Vaidya: It is necessary to reform the labour law and make it progressive. A win-win situation should be created - both the employers and the workers should benefit. We, along with friends from the Trade Union, are in the process to reform the labour law. Besides this, the Employers' Council is carrying out activities for youth enterprise and youth entrepreneurship development. Various problems in Nepal, including the insurgency, are due largely to youth unemployment. So, youth employment is another area where we will put a lot of thrust.
Kush Kumar Joshi: We will put our agenda in front of experts and consider their views on how we should go ahead. However, peace restoration is our main agenda as without peace no new industries can be set up and even the existing industries cannot run properly. How can the private sector contribute to peace restoration? How can we provide security to the existing industries? What strategies and programmes can be waged to create an investment-friendly environment? Until we address these issues, no industrial or business activities can move ahead properly.
In order to bridge the gap between the 'haves' and 'have-nots' there should be economic development in the rural areas. The lack of infrastructure and basic necessities in the rural areas is one of the main causes of this conflict. In order to increase economic activities in the rural areas, FNCCI has brought forward the "one village, one product" concept. Now the government too has included this in its programme through this year's budget. We want to work with the government in this programme. This is our priority programme and through a public-private partnership approach we are trying to increase economic activities in the villages. Our primary focus, however, will be on peace restoration.
Peace restoration is external to the scope of FNCCI; therefore FNCCI may not be able to play a decisive role in this though its role would be conducive for peace restoration. Assuming that the peace situation remains as it is now, what is FNCCI's new leadership going to do to restore business confidence?
Joshi: It is necessary for us to form a crisis management team or bring forward a crisis management programme. Whatever the extent of conflict in Sri Lanka, business there is going on well. If we can also adopt similar strategic plans, business would run smoothly here despite the conflict.
Vaidya: FNCCI is a non-political organisation. Our interest is national economic development. In today's context, there is a huge communication gap between the groups that are the main players in the political front. Being a federal body, FNCCI needs to voice the people's will. So, FNCCI will be much more vocal during these two years to bring about a national agenda. We will try to awaken the civil society without taking any sides along the political spectrum. FNCCI's strength is its network spread across the districts. Our members range from small teashops to big industrial units. We need to mobilise this muscle. We have to make these three groups know that we are an important part of the peace process.
Golchha: Another important issue is how to develop bilateral relations with major trading partners like India, Bangladesh, Sri Lanka, China, EU and USA. Being in the least developed countries' group, we can benefit from certain provisions in the WTO. The EU too has certain provisions to help us through programmes like Everything But Arms (EBA). The time has come for us to work to avail of these benefits. We are now exporting sugar to EU under EBA. This opportunity was brought to the country purely through the efforts of the private sector. There are still lots of other opportunities from EU that can be brought to the country. After 2006, we might be allowed to export every agro-product without paying any taxes to EU. For that we have to identify the products in which we can have competitive strength. That will directly link the EU market with our farmers. Fortunately, I was personally involved in signing the sugar deal with EU, but our state-agencies could not make a system that would have helped the farmers from this deal. The agencies took all the benefits for themselves. We should not let that happen in other products because the facility granted by EU is meant to benefit Nepali farmers. So, in the coming days, we will go about it strongly to support the farmers.
Your success to pursue the agenda you highlighted depends on a strong unity among the members of the business community and that sort of unity is felt lacking not only within FNCCI but across the entire business community which is divided into various chambers. How do you plan to go about addressing this problem?
Dhakal: We succeeded in electing 67 percent of the executive members including the President and the Vice-Presidents unopposed. So, it's not exactly true that there is no unity. It is an apex organisation with the second largest network after the government and we represent all businesses from east to west, from agro-based business activities to big business houses, from those involved in internal trade to exports. In such a body, small grievances might be present but we cannot address each and everyone's interests. However, FNCCI's opens its door to everybody. We (the newly elected representatives) are especially committed to work as a team. In that regard, anyone who comes to strengthen our capacity as the apex business association is most welcome.
Golchha: In any society or country, there are always people who have different opinions. Difference of opinion or anybody's comment has to be always taken positively. Anybody has the right to speak against us, but our humble request is that criticisms should be in the right perspective.
Vaidya: The beauty of democracy is to be able to express oneself. What is important about FNCCI is its 40 years of history. It has gone through many ups and downs. In two years' time, the foundation of FNCCI is not going to change. This is an organisation of business and industrial units and it has always remained open to all. Difference in opinion will always be there and there should be the differences. As long as we limit these differences within the house and debate about our opinions, it will make us stronger. But once that issue comes out of the house, problems start cropping up and that should be avoided.
Joshi: FNCCI is the umbrella organisation of around 82 chambers of commerce and industry from all the 75 districts. It also represents 59 commodity associations and 400 associates. Thus it represents the entire community of business and industrial units. When the government has to discuss on any issue, FNCCI can send a representative competent enough on the issue concerned. But the government also invites representatives from other associations which is not necessary as they are already associated with the FNCCI. It is often the experience that the voice of these two representatives from FNCCI and the association is divided. If we want the private sector's voice to be strong, we have to come under a single umbrella. The government seems to be inviting representatives from different associations with the intention of dividing and ruling. It knows that the FNCCI representatives and the commodity association can be divided and it would be easier for the government to force its decision on the private sector. To have a common voice, we request all to come under FNCCI. If we can raise a single common voice, the government has to listen to us.
Even within one commodity sector, the business community has a number of associations. Do you think you can encourage them to come under a single association?
Vaidya: We need a chamber law to address that problem. FNCCI has requested the government to formulate it as soon as possible. Democracy doesn't give rights to people to go on breaking what is already there. Business people have to be self-disciplined. There has to be rules and regulations. In Germany, they have a very simple law: Every business unit must register with the local chamber, the local chamber must be affiliated with the regional chamber and the regional chambers together form the national chamber. We too need such a law.
The general people's perception is that while the government bureaucracy is corrupt, the private sector is hands-in-glove with the bureaucracy. What plans are you working on to improve this perception?
Vaidya: You are correct in saying that this is the perception. In this regard let me quote what Rabi Bhakta Shrestha said at a donors' meet at Pokhara when he was the President of the FNCCI: "We are responsible for corruption and we are ready to own up to it. But we cannot clap with one hand." Yes, we are part of the corruption. But at least we are conscious enough to say that this is wrong. Not only that, we ourselves drafted the code of conduct for the business community. We showed that we want to be disciplined. We need to work with our counterparts and find a solution. But the situation is such that businessmen are forced to pay bribes and the government is encouraging this practice. If you take the recent budget as an example, it has vested the power of a policeman in an income tax officer. Now, what do we do when bureaucrats have the power of policemen to lock us up anytime? This is where corruption brews. This is where compromises start. So, as an association, as the federal body, we have made a very strong appeal to the government against it. There should be an area for us to play a fair game. As there is no fair game, businessmen are forced to embrace corruption. We are looking at it very seriously.
Joshi: If the government is committed to stop corruption, it will be stopped automatically. We sat with bureaucrats several times to discuss the matter. They say that they wouldn't take bribes if the businessmen didn't make offers. We said that we wouldn't pay bribes if bureaucrats didn't ask for them. But please note that it is not the case of 'the chicken and the egg'. If those who have decision making power don't take bribes, bribe payers will have neither the motivation nor the power to thrust bribes upon them. Today , it is compulsory for businessmen to pay bribes because one short delay in the procedure can hamper their business a lot. Instead of giving unlimited power to the tax officers, the government can address the problem of tax avoidance by adopting a partnership approach with the chambers. We are trying to monitor tax compliance with a partnership approach. We want to set up a monitoring mechanism with the government at the central and the district levels. If such a mechanism is developed, there will be no need to grant unlimited power to government officers.
Golchha: There is no country where there is no corruption. Japan has it and European countries have it. Corruption is of two types. One is simple corruption that takes place at a lower level. Such a corruption takes place anywhere in the world, in any office or any port. The other type of corruption takes place at the high level. Certain corruption has become a compulsion. There should be separate perspectives to address the different types of corruption.
FNCCI has been raising a number of issues but the follow up on those issues is felt utterly lacking. What are the reasons for this and how are you going to improve on it?
Golchha: I don't think that the follow up is lacking. We form a policy in the format of a draft Act and we hand that over to the government. We interact and give a final shape to that. If the decision-making process is absent, if the government is changing every six months, what can FNCCI do? If you go and check at the ministry, you will find lots of draft Acts that we have finalised. If the government is undisciplined, what can FNCCI do?
Most of the programmes being pursued by FNCCI are donor driven. What are the programmes that are being pursued from FNCCI's own resources? What new programmes are being contemplated?
Vaidya: I disagree with you. Look at Agro Enterprise Centre (AEC). It's true that FNCCI had not entered the agriculture sector though a large part of our population is involved in agriculture. You are correct in saying that we entered this sector with AEC when there was donor support. But the funding from USAID for AEC ended some four or five years ago. However, we are still continuing with AEC. In some areas there may have been some overlaps. As the governments have a life of only nine months, the necessary legislation is delayed. Therefore , there are some programmes that have been discontinued. However, we are carrying on with important issues such as enhancement of women, youths, agricultural policies and tourism issues, energy efficiency, productivity etc. Training programmes are being carried out. Only in very few areas we have not been able to give continuity to our programmes.
Joshi: We want to make these issues demand driven, not donor driven. Whether funds come or cease, we will continue our programmes if our objectives can be fulfilled by it. If only the donors' objectives are to be fulfilled with the programme, we will not go ahead.
One expectation from FNCCI as the apex chamber is a roadmap for the economic development of the country. In this connection, which sectors has FNCCI identified as the lead sectors for economic growth in the country?
Dhakal: The most important issue is the socio-economic development of the country. This might be the first time that a FNCCI President and three Vice-Presidents are sitting together at one table to respond to media queries. There are different issues in different sectors. Unless we bring all the accumulated issues of all these sectors on a common platform and thrash them out, the private sector cannot grow. Some of the issues are related to external (foreign) factors and some others are related to internal (domestic) factors. The banking sector is now acting as if it is not related to the business sector. Therefore, in the coming days, we have to develop a comprehensive private sector concept that will address all these issues. In this concept paper, we will not take the side of any one group or political party but we will make it such that all the groups and parties can work together with this paper as the main policy paper. We will also work together with the organisation and associations of other countries on bi lateral and multilateral trade and transit issues. We will try to convert the WTO and SAFTA challenges into opportunities. We will work towards strengthening the FNCCI-affiliated associations. We will have a decentralisation concept.
FNCCI has often come up with contradictory views on some issues. For example in the case of the economic liberalisation, FNCCI has sometimes supported it and at other times gone against it. What is your comment?
Golchha: We are already a WTO-member and the country is committed to economic liberalisation. But entry to WTO doesn't mean that we should be so open that we allow other countries to make our country the dumping ground. Liberalisation does not mean not protecting your economy. Yes, consumers may be happy when foreign goods are dumped here at cheap prices. But please understand that nothing comes cheap. If you are getting something cheap it is at somebody else's cost. If imported wheat or rice is available cheap, its cost is borne by the farmers who are equally a part of the same country and economy. You must have seen that the countries that became WTO members in the first stage, have bound their rates at as high as 300 percent which means that they can impose up to 300 percent duty on imports if they want to. There has to be a balanced policy to protect the interests of all parts of the economy. We, as an organisation, should be very vibrant, knowledgeable and we should immediately respond to what is happening in the world market which is very volatile. China is imposing an anti-dumping duty. They are raising duties on their imports. America is doing the same. Why not Nepal? But all these laws, all these reforms and the government's responses to the situation here are ridiculous. Once the taxes are imposed through a Finance Bill, it stays for a good 12 months no matter how badly the situation may change. The government is only concerned with raising revenue. But look elsewhere. When the steel prices went down in India by USD 200 recently, the government of India raised the duties on steel within a week. When sugar started being dumped in India, it raised duty to 100 percent. Government should be proactive and if they think that without business the nation can function, I don't know how justified that doctrine is. In short, liberalisation should serve the national interests. If the national economy doesn't grow, what is the use of liberalisation?
Vaidya: All these new rules that are coming up have been introduced because the donors wanted these rules to be introduced. We are always dependent on donors. We make laws and regulations to suit the interest of donors. Should the government please the World Bank or the people working hard in this country?
Joshi: In short, we accept liberalisation for the nation's interest. If any component of liberalisation is against the interest of the nation, we oppose it.
How do you plan to go about addressing the problem of defaulters of bank loans? Do you think that the way FNCCI and the chambers affiliated to the FNCCI went about issuing advertisements in newspapers defending a bank loan defaulter was indeed justifiable?
Golchha: Look at the policy brought out by Nepal Rastra Bank and see for yourself whether it is compatible with the existing Nepali laws, whether it is trying to impose something that breaks the investment environment. Every country has NPA. Even big companies, which were supposed to be managed with a high level of professional calibre, such as Enron, have failed. Business failure is a part of business. Now investment is at a high risk in Nepal as the country is going through an insurgency. But the method of addressing this problem is seriously objectionable. That is a ridiculous and foolish approach of the government. The policy has not addressed the problem of the sick industries. How can the banks expect to recover their dues by keeping the businessmen in jail?
Thousands of people are now unemployed because of this action. There should be a balanced, systematic and business-like approach, which will help in the recovery of money while the industry too can be sustained. We have already given a hundred page suggestions to the government on how to go about it.
Vaidya: Yes, we too say that wilful defaulters should be taken in custody. Action should be taken against people who borrow money and take that out of the country. But the people who are running the industry here and still trying to run it, should be treated differently. Everywhere in the world, the government comes up with a strategy to help the business whenever there is a problem. They do not immediately start penalising the business. When the SARS problem cropped up, the Malaysian government came up with a fantastic incentive to revive the economy. When Thailand suffered from Tsunami, the whole country came up with a different strategy to revive business. But here the mentality seems to be to add fuel to fire.
Joshi: The actions being taken against the businesses are part of what is called as financial reforms. To what purpose are these financial reforms? Is it to help business or to kill them? Without industrial reforms can there be financial reforms? What has been the end result of these reforms? Large companies are closing down. The unemployment problem is heating up. Is that what these financial reforms were aimed at? Along with financial reform policy, there should be industrial reform policy as well. Is this financial reform going to work for national interest when only a few banks benefit while industries are closing down?
Granted that those regarded as wilful defaulters by banks may not be wilful in reality. But with a blanket opposition to the banks' effort, FNCCI is not helping solve the problem. Now, will FNCCI's new leadership help identify the real wilful defaulters and take a stand in taking actions against them?
Joshi: We have suggested criteria to identify wilful defaulters against whom strong actions should be taken. First of all, the government and FNCCI together should make criteria that can really identify the wilful defaulters. Until such criteria are developed, such debate will always be there. Even in this recent budget, the government has exhibited its wrong perception about the business. The budget statement says that a business becomes sick if the owner diverts the bank loan to other business. We say such a case is not a case of industrial sickness; it is a case of wilful default. The government's message is clear: it does not distinguish between sick units and wilful defaulters. It implies that all sick units are wilful defaulters. That sort of attitude cannot be acceptable.
It is said that FNCCI tries to please whoever is in power. How is your leadership going to be different?
Dhakal: As FNCCI is formulating a comprehensive concept paper representing the private sector, in the coming days, we will support any government that brings out policies and rules that are compatible with this concept paper and oppose those that bring the policies and rules that are against this concept paper.
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