Nepal Investment Summit of 2019

Nepal Investment Summit of 2019

Siddhi B Ranjitkar

Nepal is set to hold “Nepal Investment Summit of 2019” in Kathmandu on March 29 and 30, 2019. This is not a first such summit probably would not be the last one. As far as I could remember the then Panchayat government also held such a summit in 1980s; the government submitted different development projects including one for building a cable car to the Shivapuri in Kathmandu. Then, we had another such investment summit held in 2015. The then Minister for Industry Nabindra Raj Joshi successfully held it, and he secured the investment commitment of NPR 14 billion. None of these investment summits so successfully held could bring any foreign investment.

Do we need such investment summit, now? If we were to go by the statement of the U.S. embassy in Kathmandu made public recently we did not need it such summits because the statement said that if the policies and laws were made investment friendly then there would be no problem of investment. Obviously, the State policies and laws were the obstacles to the investment.

Why the government instead of amending and making good policies favorable to the investment jumped to the Investment Summit of 2019. First of all, when the communists reached the pinnacle of the power then they would think that they could do everything no matter what the laws and polices could dictate them. They would not care about the history of development and even look back what polices had made fast development.

Immediately after taking office, current finance minister Yubraj Khatiwada sent the stock market downhill, and it could not recover even today. Probably, his policies and programs had hindered than help to the economic development. The economic development of 6.5 percent might be entirely the outcome of the devastating earthquakes of 2015 not of the good policies and programs of the finance minister.

National Planning Commission had projected the economic growth of 10 percent and more over the period of the fifteenth periodic plan. That was what it should be if we were to achieve the doubling of income per capita every five to seven years and achieve the fast economic development.

If anybody were to take the close look at the fast economic development so far happened and happening had been due to the new elected government liberalizing and opening the economy immediately after taking office in the 1990s. The first thing the then government did was to open up the foreign jobs to the Nepalis. Hundreds of thousands of Nepalis went abroad for the employment, and they repatriated millions and then even billions of dollars making its share of more than one-third in the GDP.

The private investment in the businesses and education had increased fantastically creating a large number of jobs and making the Nepalese education prestigious entirely due to the opening of the economy.

For example, tens of medical colleges came up and a few private hospitals were set up providing better health services in the private sector. A large number of private shopping malls were set up in the private sector. Similarly, billions of rupees were invested in the public transport. Poultry industry has been the good example of how Nepalis could make the business flourish. Vegetable growing has been in the fast development process but the instable market has disappointed the farmers. All these things could happen when the government liberalized the economy and opened up the door to the private investment a little bit.

When one communist government after another came to power, each government talked about taking over the private-owned schools or controlling the private schools. They talked about increasing the teaching standard of the State-run community schools but it never happened whereas the private schools maintained their high standard of teaching and prevented the tendency of Nepalese students from going to neighboring schools for the better education.

When Dr Baburam Bhattarai became the prime minister he even talked about stopping the Nepalis to serve in the British Gurkha army, and totally prohibiting the Nepalis to go and work abroad. Such statement hit hard the folks who were ready to shed their blood for other nation, and then the folks concerned with such statement of the chief executive came out openly against such statement and declared that they would vigorously oppose such actions of the State.

Then, the communist cadres sneaked up on the hotel businesses. They even physically fought against the hotel management bringing down the hotel business. They did the same thing to the casino business. They replaced the folks working there with their own cadres, and sent home most of the employees even without paying the gratuity they were legally deserved. Other industries and businesses also suffered from the same ill fate.

The worst things happened were in the implementation of the development projects. Hundreds if not thousands of development projects particularly the construction projects suffered from the interferences of the State officials, who probably abused their authority to rob the contractors. When the contractors needed to pay commissions in millions of rupees if not billions depending on the size of the projects before they could even implement the projects, they had no choice but to receive the initial advance for the initiation of the construction and leave the projects forever. Some contractors initiated the work other did something and even some did half of the construction, and finally some contractors like one who built the Melamchi Project quit the work at the final stage.

The prime minister then the ministers, the secretaries to the ministries, other high officials, project chiefs, and engineers knew that they could hold the contractors accountable for not completing the projects but none of them had taken any actions against the contractors making clear that probably the State mafia had been involved in not making the projects complete in time.

The irony is that the current prime minister who has been repeatedly saying that he has the zero tolerance of corruption, and he would not involve in any graft and would not allow anybody to engage in such things has not taken any actions against any contractors that have defaulted on construction even a year after taking office.

If the State officials including the elected officials were not taking actions against any defaulters means they were abusing their authority. If they were not holding the contractors not doing the job accountable then the officials have been abusing the authority. They have no right to remain in office if they have a bit of human ethics in them.

The State has the constitutional body called Commission on Investigation into Abuse of Authority (CIAA). By its name it needed to hold those State elected and appointed officials that had failed in holding the contractors accountable needed to be charged with the abuse of authority but it had never happened rather CIAA had been going against somebody that collected a few thousands rupees from the service seekers whereas thousands of contractors had been going free causing the loss of thousands of billions of NPR worth of construction work, and CIAA could not do anything.

There had been rumors and even in the media that CIAA deliberately made some corruption cases weak while filing at the Special Court so that the culprits could easily escape from the fraud cases legally. News had been in the media that CIAA officials had collected cash from the officials under investigation for making their cases weak or for not even filing their cases at the Special Court.

Now, the question is what the investors have to face the legal challenges in other words the provisions made in the Nepalese laws.

First, the Labor Act has been the most challenging to any investors to face. Any investors would want to build up a skilled and well-trained labor force. However, the Labor Law did not permit to do so because anybody could hire laborers legally but s/he would find very hard to fire them. So, any investors would not be able to fire any unwanted or surplus laborers. What most of the businesspeople did was not to hire anybody lawfully but let them work and then they pay them on the basis of the number of days they worked. That has been harmful both to the employees and employers, too.

The recent Social Security Act has made any company hiring laborers need to add more than 20 percent of their salary to the social security fund. So, the labor in Nepal would not be so cheap as anybody might think if the Social Security Act were sincerely enforced.

Then, Land Reform Act, Forest Act, Tax Act, Foreign Investment Act, and so many Acts that did not help any investors to invest rather drag them to entangle in the bureaucratic net. Officials had not been accountable to the delay in the decision-making. So, officials could hold any projects or any documents indefinitely without any reasons whatsoever.

So, in this environment not so conducive to investment, holding “Nepal Investment Summit of 2019” would be fruitful or not remains to be seen.

If the immediate history of Nepal Investment Summit held in 2016 were any guide then such an investment summit would be noting but futile exercise, as the foreign investors committed to invest NPR 14 billion had never been materialized. The so-called investment board had never bother to follow up the foreign investors that had committed to invest in Nepal.

Some experts questioned why the government needed to go to the foreigners for investment instead of using the billions of rupees the private finance institutions called cooperatives have collected but had remained unutilized because they were forbidden to invest in the projects other than specified.

So, anybody could conclude that the government instead of finding out what it needed to do for attracting investments in the country it had rather went for holding the investment summit even knowing that the investment summit held in 2016 had not been result-oriented ultimately raising the question whose idea was this to hold again investment summit in 2019.

March 26, 2019