Expectations Of The Private Sector
Shanker Man Singh
Nepal is committed to the Fifteenth National Development plan and the Sustainable Development Goals (SDGs) for humanity and of planet - plan of action for people, planet and prosperity that also seek to strengthen universal peace through partnership. Article 50 of the Constitution of Nepal states it shall be the economic objective of the State to make national economy self-reliant, independent with maximum utilisation of resources through participation of public, private and cooperative sectors.
Nepal is striving to graduate from Least Developed Country (LDC) to developing country status by 2022. With the formation of the new government, there are new opportunities to pave way for achieving the dream of “Sambridhha Nepal sukhi Nepali”. Natural resources and demographic dividend, favorable external economic environment, threshold for LDC graduation achieved in two indicators out of three, resilient economy, poverty reduction and achievements in social sectors are some of the indicative positive development precursor for the development of Nepal in recent years.
The forthcoming budget needs to inspire and inject sense of confidence in all sectors of national life. It should be realistic, not ambitious. During the budget discussions held at the State level and the federal level it has been made clear by the government authorities that the budget would attempt to provide vision for three years with focus on equity, justice and stability. The poverty ridden people, woodcutter, street children, the rag picker, the dalits, the street vendors and the rural people will all be wondering what this budget is all about.
The economic growth has not been showing a satisfactory trend. As per the latest figure, the government revenue collection- which is far below the target- has increased below the inflation rate. The market is not expanding. Industries are finding it harder to market their outputs. Export in terms of hard currency is showing a declining trend. The widening trade deficit is matter of concern and the trade adjustment programmes and policies under the Crash progarmme is a must.
Revenue collection increased by 21.1 per cent to Rs. 520.79 billion which had increased by 21.4 percent to Rs.430.06 billion in the corresponding period previous year. The tax revenue was estimated at 12 per cent of the GDP. In the coming decade, the target of the tax to GDP is to reach 17 per cent. Tax policy and tax administration should go side by side. Private sector is of the opinion that fixation of the revenue collection target should be abolished. As regards the government employees in the Revenue group there should be the provision of exit policy. This policy is currently in the joint secretary level only. The government should provide tax holiday, incentives on the production of new products, value added products. In order to develop VAT as the backbone of revenue collection, the government should give authentication to the transaction value.
The importance of small and medium enterprises is significant in the Nepali context, given the socio –economic condition that is dominated by agriculture. Employment generation is an important responsibility of the Nepalese SMEs. The budget should focus on SMEs to alleviate poverty and create employment.
If a country like Nepal wants to achieve faster agricultural and economic growth, it should stop taxing agriculture relative to other sectors. Poverty alleviation through the SDG and ushering in private sector-led economic growth should be the twin pillar of the forthcoming budget.
Due to a stable government in place and the policy of attracting 2 million tourist in 2020 tourism sector has shown a promising picture. The recent Nepal Investment Summit 2019 has put further impetus in attracting FDI in Nepal. Provision should be made for the promotion package of internal tourism and adventure tourism. The government should spend some fund in the development and upgrading of tourism related infrastructure.
The money received from the remittance should be used in the productive sector and the government should initiate to use the banking channel for the remittance. The government should also explore new vistas for the foreign employment for the technical and some professional manpower from Nepal. The act related to the guarantee of the security of the money earned through remittance should be enacted.
Since Nepal has the economically potential of exploiting 42,000 MW of electricity and there are demands in the Northern Grid market, this opportunity should be tapped fully for the development of Nepal. Nepal should seek to provide cheap electricity for the industrial use and for the overall development of the country as well.
The undefined and uncategorised by any Act, the private sector is a partner in development of Nepal. As it is not clear in any policies and act what does private sector really means however, in the recent plan document it indicates that 55 per cent resources will come from the private sector which is mired with lack of good governance.
In Nepal, we can see examples of private sector development ventures in aviation, banking, telecom, insurance and so on. The government should focus on regulation, governance, welfare and compliance to law. A broad based approach towards privatisation should be the cornerstone of our economic approach. The key areas across utilities, transport, infrastructure, need to be brought into the private sector fold.
When we look at the budget interaction held in Nepal recently, entrepreneurs, industrialist and businessmen are in no mood to welcome any new addition or hike in the existing tax rate. The private sectors have advised the government, time and again, to widen the tax base and refrain from hiking the rate. Nepali entrepreneurs are also demanding the policies and building infrastructure like SEZ, Industrial Clusters, Industrial districts in each Province, Garment Processing Zone (GPZ) and help the ailing industries.
Effective government as well as economic reform depends on the government’s policy focus, and it will need to work hard to recapture that. While the people’s expectations are high and the implementation of the last year’s budget also reveals a dismal picture, the government should place special emphasis of effective implementation of the budget of the upcoming FY.
(Former General Manager of NEPSE and former Executive Director of SEZ Development Authority, Singh is now a freelance writer)